Legal Structure of India
India is a democratic country with a common law and a written constitution. The judicial system is of single hierarchy and is independent from the government. Though liberal in its policies for foreign investments, the Government of India has some rules and regulations that have to be strictly observed. To carryout business in India, foreign investors have the options of entering as a liaison office or representative office, a branch office or a project office by registering themselves with Registrar of Companies within first 30 days of setting up a place of business in India or as an Indian company in the form of a Joint Venture and wholly owned subsidiary. For opening of the foreign company specific approval of Reserve Bank of India is an imperative requirement as well (DIPP, 2011).
The main laws monitoring foreign investments are the Foreign Exchange management Act of 1999 (“FEMA”), the Companies Act of 1956, the Industries Act of 1951, the Monopolies and Restrictive Trade Practices Act of 1969 and the New Industrial Policy of 1991. Foreign collaboration and equity participation in India is regulated by the Foreign Exchange management Act of 1999. The Industries (Development Regulation) Act of 1951 governs industrial regulation. The Companies Act of 1956 regulates corporations and their management in India. The Monopolies and Restrictive Trade Practices Act of 1969 (“MRTP”) governs restrictive and fair trade practices. The New Industrial Policy of 1991 (“NIP”) which lays down the policy and procedure for foreign investment has liberalized and simplified the investment procedures (Madaan, 2011).