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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