Understanding your prospective Indian partner
( i) Keep in mind that he looks at a business horizon of 3-5 years to measure the returns on investment unlike the Japanese feasibility analysis of 15-20 years.
( ii) He may be keen on quick return on investment instead of continuously ploughing back profits.
( iii) The Indian partner will aim for faster turnaround in negotiations. Since India works on‘ top-down’ management approach, the Indian partner is ready to take a decision immediately and cannot comprehend the‘ down-up’ approach of the Japanese side.
( iv) Discuss in detail management control issues viz. appointment to the board of directors and chairman of board, appointment of CEO, MD and CFO, issues arising from future change of control, non-compete, etc.
Figure 10
3.1.4 Limited Liability Partnership( LLP)
The recently introduced concept of LLP provides an alternate mode of investment i. e. a corporate business entity along with the benefits o f limited liability. At the same time, it allows the members the flexibility of organising their internal structure as a partnership based on mutually agreed terms. Like a private limited company, LLP is a body corporate having a distinct legal entity. The LLPs are governed by Limited Liability Partnership Act 2008. However, appropriate changes need to be made in the exchange control regulations to include foreign LLPs as an eligible organizational structure for investing into India.
3.1.5 Set-up Process – Private Company The set-up process for a private limited company can essentially be divided into 4 stages.
3.1.5.1 Exchange Control
After deciding to set up a company in India, the immediate question which has a bearing is the proposed investment in a restricted industry or sector or subject to sectoral caps?
Most industrial activities now fall within the automatic route whereby only an intimation is to be made to the RBI post incorporating the company. In case the above issues have a bearing on the proposed investment, it will require clearance from the FIPB which normally takes 4-6 weeks.
3.1.5.2 Industrial License
With progressive liberalization and deregulation of the economy, the requirement of industrial licensing has been substantially reduced. At present, industrial license is required only for industries retained under compulsory licensing( e. g. liquor), manufacture of items reserved for small scale sector( e. g. textiles) and where the proposed location faces any restriction.
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