India’s thriving economy and expanding market base offers multitude of opportunities for businesses, both Indian and foreign. The country’s economic landscape presents immense potential for growth and financial success. However, this journey is fraught with regulatory hurdles and legal technicalities that can be extremely daunting for a new business which is not familiar with the local dynamics. A General Counsel’s expertise can be of immense help to such businesses. Securing approvals and licenses from government bodies, navigating the tedious process of registrations, productive engagement with all authorities for ease of operations, a General Counsel offers not just convenience but expertise to foreign businesses. They catalyse the expansion process, allow smooth market entry and legal operations by ensuring adherence to all regulations, giving the business the opportunity to capture opportunities and settle well into the Indian market, laying the foundation of a strong and sustainable business. The comprehensive support of a General Counsel is crucial to minimise legal risks, avoid losses and operational disruptions and maintain an impeccable image in the market. We explore below how a General Counsel can aid the process of simplification and management of regulatory approvals and licensing in India for foreign businesses.
A BRIEF UNDERSTANDING OF THE REGULATORY LANDSCAPE
The Indian market is regulated at different levels of governance such as the central, state, and local levels. This makes the process of entering the Indian economy very difficult navigate especially for a foreign business. There are general compliance requirements for all foreign businesses and then each sector has its own compliance requirements. Regulations vary significantly across different states when the subject of a legislation is within the state’s scope. Unfamiliarity with this system and its complexities can be overwhelming. A General Counsel helps foreign businesses become aware of the regulatory landscape, identify the necessary approvals and licenses required, simplifying the process to apply for and obtain them effectively. Their scope of work includes:
1.Structure of business: Foreign companies can operate from India through various ways. Whether it be through a subsidiary, a joint venture, a branch office or others. Strategising the business setup in a beneficial way is imperative. This decision may be dependent on various factors including the legal and regulatory implications and cost. A General Counsel with his expertise can assist in informed strategy.
2. FDI Policy and Approvals: A foreign business planning to enter the Indian market must first determine if the industry they wish to penetrate is open to foreign investments. India’s FDI policy categorizes all foreign investments into different levels of regulations. While foreign investment falling in one category may be allowed and even encouraged with government policies, others might be limited with strict regulations or even completely barred.
Investment in some sectors is free from FDI regulations, allowing companies to directly apply for industry-specific licenses and approvals. But other sectors require government approval according to the FDI policy, in which case that approval must be secured first.
3.Sector-Specific Licenses: Some sectors have regulations imposed by specific regulatory bodies working under different ministries. These bodies have their own respective set of compliances that all businesses must adhere to.
For instance, businesses in the pharmaceutical sector must obtain licenses for drug manufacturing, import, and distribution. Additionally, they must adhere to Good Manufacturing Practices and navigate issues related to intellectual property rights and clinical trials with care. The industry is regulated by the Drug Controller General of India (DCGI) along with the Central Drugs Standard Control Organization (CDSCO).
Companies in the banking industry must obtain licenses for banking operations, capital market transactions, and financial services from the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).
A Unified License must be obtained by companies in the telecommunication industry. It allows companies to offer a wide range of services to their customers, including internet services, mobile services, and national long-distance services.
4.Business Licenses and Registrations: A foreign business planning to operate in India must obtain business licenses of different nature. These licenses and registration requirements differ from business to business and also vary for different industries.
- Industrial License: For some strictly regulated industries, licenses are required from the Ministry of Commerce and Industry. These include defence, aerospace, and explosives etc.
- Shop and Establishment Registration: Businesses operating in commercial establishments such as offices, retail stores, restaurants, whether Indian or foreign are regulated by the state-specific Shop and Establishment Act and are required to get this registration.
- Pollution Control Board Clearances: Businesses operating in industries with potential environmental impact must obtain clearances from the State Pollution Control Board (SPCB).
- GST Registration: A comprehensive indirect tax, GST is levied on the supply of goods and services. All businesses whether domestic or foreign are required to comply with GST registration and must comply with the periodic filing requirements.
- Professional Tax Registration: State governments levy professional tax on individuals earning an income and businesses are required to register for it.
- Import Export Code (IEC): All Businesses involved in import and export of goods in India must obtain the IEC. The Directorate General of Foreign Trade (DGFT) is the regulatory body responsible for its issuance.
SIMPLIFYING REGULAOTRY APPROVALS AND LICENSING: ROLE OF A GENERAL COUNSEL
The services offered by a General Counsel can be of great help to foreign companies who are new to India’s regulations. Foreign companies can easily set up their business in India with a General Counsel’s help. A General Counsel ensures that foreign companies entering India can focus on the operational aspects of the business and leave the legal and regulatory worries to the expert. Their scope of responsibilities include:
- Assistance in setting up: A General Counsel can help in setting up of the business by taking over the process of business registration or incorporation. They can prepare and file the necessary documents including drafting of the Memorandum of Association and Articles of Association, obtaining Digital Signatures, and applying for the Director Identification Number. They ensure that all statutory requirements are fulfilled, making the incorporation or registration process smooth and efficient.
- Understanding FDI policy: A General Counsel can assist foreign businesses in understanding the FDI policy, identifying flexible investment routes, and securing the necessary approvals from regulatory bodies like the Reserve Bank of India (RBI) and Department for Promotion of Industry and Internal Trade (DPIIT).
- Communicating with Regulatory Authorities: A General Counsel acts as an agent engaging with regulatory authorities and ensuring effective communication. They work to ensure that the approval process is completed timely, to allow the company to begin operations and maintain profitability.
- Registrations and Licenses: A General Counsel helps foreign companies in obtaining sector specific approvals, licenses and registrations as discussed in the above paragraphs.
- Ongoing compliance: A General Counsel ensures ongoing compliances through audits. This process also helps them in identifying potential issues, which they can rectify by enforcing corrective actions. This way they help the businesses maintain a strong compliance record and mitigate legal risks.
- Regulatory Monitoring: A General Counsel actively monitors any changes in the regulatory landscape, informing and updating the business of the changes in the compliance requirements. Their proactive approach helps the company in staying ahead of the regulatory changes and avoid legal penalties for non-compliance.