Setting up Office, Branch or Business Abroad

(Also covered the aspects of Globalization)

MIM – 2010 Batch

Abhay Pednekar – 34

Amit Shah – 46

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INDEX

Why go abroad?

From the nations point of view From the companies / individuals point of view

Which are the avenues you look at trying to setup a business abroad?

Importing and Exporting Licensing Franchising Foreign Direct Investment Joint Ventures and Strategic Alliances

A Global Industry

Global strategy

Comparison of the two strategies Four drivers determine the extent and nature of globalisation in an industry:

Strategies when setting up / expanding overseas

Case: Breaking Bread At Home And Abroad: It’s Not Just Talk

Knowledge of culture & basic etiquette is essential on setting up a business abroad

Example: Mexico is a nation where affluence, poverty, natural splendour and urban blight rub shoulders.

Legal & other basic coverage of points to setting up business abroad

Establishment of overseas offices by Indian firms/companies. Joint venture and wholly owned subsidiary in foreign country by Indian party Central sales tax State sales tax

Growing Business

Opening Branch Offices

C.V.O. Chartered & Cost Accountants' Association

Setting up a Branch or Office outside India

How to set up offshore Web Businesses

The PayPal guide to selling overseas

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Step-By-Step Guide to Global Company Setup

6 tips for launching a business overseas

Doing Business in EuropeDoing Business in Europe - An Etiquette Primer for Americans

10 Steps to Starting a Business in China

Things to learn from how the USA sees the market abroad

Do you need a legal entity for the conduct of your Business in the United States?

Most and least friendly countries to small biz

Top 10 Countries Doing Outsourcing

The World's Most Corrupt Countries

World Business Culture

Example: PhilippinesTop 10 Global Consulting Firms

Boston Consulting Group

International Business Transactions Checklist developed by: International Tax Practice Group

I. Geography, culture and society

Ii. Investment environment

Iii. Investment incentives

Iv. Financial facilites

V. Exchange controls

Vi. Import/export regulations

Vii. Structures for doing business

Viii. Requirements for the establishment of a business

Ix. Operation of the business

X. Cessation or termination of business

Xi. Labor legislation, relation and supply

Xii. Tax on corporations

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Xiii. Tax on individuals

Xiv. Tax on other legal bodies

Xv. General tax considerations

Xvi. Immigration requirements

Xvii. Expatriate employees

Setting your International Legal Priorities for 2011

Business Startup Checklist

BBC News: Building your business abroad

Doing business abroad and growing internationally (a different perspective)

Overseas Investment Insurance

Circulars and Guidelines

Investment Routes and Procedures

Overseas Investment Trends

Legal Aspects

Financing Overseas Investment Financing Overseas Investment Financial Support by Banks Overseas Business Opportunities Taxation

Indian Investments Abroad

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Why go abroad?

From the nations point of view

Pros of Globalization

Increased free trade between nations Increased liquidity of capital allowing investors in developed nations to invest in developing nations

Corporations have greater flexibility to operate across borders

Global mass media ties the world together

Increased flow of communications allows vital information to be shared between individuals and corporations around the world

Greater ease and speed of transportation for goods and people

Reduction of cultural barriers increases the global village effect

Spread of democratic ideals to developed nations

Greater interdependence of nation-states

Reduction of likelihood of war between developed nations

Increases in environmental protection in developed nations

Cons of Globalization

Increased flow of skilled and non-skilled jobs from developed to developing nations as corporations seek out the cheapest labor

Increased likelihood of economic disruptions in one nation effecting all nations

Corporate influence of nation-states far exceeds that of civil society organizations and average individuals

Threat that control of world media by a handful of corporations will limit cultural expression

Greater chance of reactions for globalization being violent in an attempt to preserve cultural heritage

Greater risk of diseases being transported unintentionally between nations

Spread of a materialistic lifestyle and attitude that sees consumption as the path to prosperity

International bodies like the World Trade Organization infringe on national and individual sovereignty

Increase in the chances of civil war within developing countries and open war between developing countries as they vie for resources

Decreases in environmental integrity as polluting corporations take advantage of weak regulatory rules in developing countries

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From the companies / individuals point of view

Pros of Globalization

With globalization, there is a global market for companies to trade their products and a wider range of options for people, to choose from among the products of different nations.

Developing countries benefit a lot from globalization, as there is a sound flow of money and thus, a decrease in the currency difference.

To meet the increasing demands that follow globalization, there is an increase in the production sector. This gives loads of options to the manufacturers as well.

Competition keeps prices relatively low, and as a result, inflation is less likely to occur. The focus is diverted and segregated among all the nations. No country remains the single power

head; instead there are compartmentalized power sectors. The decisions at higher levels are meant for the people at large.

Communication among the countries is on the rise, which allows for better understanding and broader vision.

As communication increases amongst two countries, there is interchange of cultures as well. We get to know more about the other's cultural preferences.

As we feed to each other's financial needs, the ecological imbalance is also meted out. Governments of countries show concern about each other.

Cons of Globalization

Globalization is causing Europeans to lose their jobs as work is being outsourced to the Asian countries. The cost of labor in the Asian countries is low as compared to other countries.

The high rate of profit for the companies, in Asia, has resulted in a pressure on the employed Europeans, who are always under the threat of the business being outsourced.

Companies are as opening their counterparts in other countries. This results in transferring the

quality of their product to other countries, thereby increasing the chances of depreciation in terms

of quality.

There are experts who believe that globalization is the cause for the invasion of communicable

diseases and social degeneration in countries.

The threat that the corporate would rule the world is on high, as there is a lot of money invested by

them.

It is often argued that poor countries are exploited by the richer countries where the work force is

taken advantage of and low wages are implemented.

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Which are the avenues you look at trying to setup a business abroad?

Importing and Exporting Licensing

Franchising

Foreign Direct Investment

Joint Ventures and Strategic Alliances

Importing and Exporting

Importing and exporting are often the simplest ways a business may go global.

Importing is the purchasing abroad, either directly from target suppliers or indirectly through sales agents and distributors.

Exporting is the selling abroad, either directly to target customers or indirectly by retaining foreign sales agents and distributors.

Products that are made or grown abroad but sold domestically are called imports and products made or grown domestically and shipped for sale abroad are exports. People who engage in this type of international trade are called importers or exporters.

There are innumerable sources of information about exporting and importing. You may wish to consult the following websites for further information:

Export – Import International Business to Business Help Center http://www.importexporthelp.com/

Exportall: The International Business Gateway http://www.exportall.nl/exportall/about_exportall.htm

ExportGov http://www.export.gov/cs

Financing U.S. Exports and Imports http://www.exim.gov/

Rules of Trade Between Nations http://www.wto.org/

U.S. Central Intelligence Agency http://www.cia.gov/

A good question is why a country imports or exports certain products. It may be simply that they do not have that resource internally or that it has an excess of that product. It could also be more complex than this simple answer. A country may have an absolute or competitive advantage.

Absolute advantage: when a country can produce something more cheaply than any other country. For example, Saudi Arabia, due to its natural resources, has an absolute advantage in oil.

Comparative advantage: when a country can make certain items more cheaply or better than other items relative to other countries. For example, Japan, due to its manufacturing efficiencies, has a comparative advantage in automobiles.

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Licensing

Licensing does not have to be an international arrangement. Licensing may take place completely within one country. But, it is also a convenient way for a company to spread its products abroad with minimal risk.

Licensing is an arrangement whereby a firm (the licensor) grants a foreign firm (the licensee) the right to use intangible property such as a patent, logo, formula, process, etc. The licensee pays a royalty or percent of the profits to the licensor. Licensing allows a business to go global relatively rapidly and simply. Rather than trying to export a product directly, incurring shipping costs and delays, among other barriers, a company can license their methods of doing business to a foreign organization. For example, rather than blend and bottle a soft drink here and then ship overseas, a company may license a foreign bottler who produces the soft drink locally using the licensed formula. This may also allow some adaptation to local tastes and customs.

Information about international licensing can be obtained by visiting the following websites. International Licensing show

http://www.licensingshow.com/licensingshow/V33/index.cvn

The Licensing Executives Society International http://www.lesi.org/

International Trademark Association http://www.inta.org/info/basics_licensing.html

Franchising

Franchising also does not have to be an international arrangement. Franchising may take place completely within one country. There are many examples of nationally-based franchises with which we are sure you are familiar. It is also another convenient way for a company to introduce its products abroad with minimal risk.

Franchising is a form of licensing in which the parent company (franchisor) offers some combination of trademark, equipment, materials, managerial guidelines, consulting advice, and cooperative advertising to the investor (franchisee) for a fee and/or percentage of revenues (royalties). As with licensing, franchising allows a business to go global relatively rapidly and simply, however, franchising generally requires a greater commitment, financially and otherwise, than licensing by both parties. The most obvious example is the ubiquitous McDonald’s franchise. Some other examples are Starbucks or hotel chains such as Hilton. Franchising may also allow some adaptation to local tastes and customs.

For international franchising opportunities see the following organizations.

The International Franchise Association http://www.franchise.org/default-flash.asp

The International Franchise News http://www.franchise-chat.com/

Franchise International http://www.franchise-international.net/

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Foreign Direct Investment

Foreign direct investment occurs when a company invests resources and personnel to build or purchase an operation in another country. This turns the firm into a multinational company (MNC).

A wholly owned subsidiary is a firm that is owned 100% by a foreign firm

This is a major decision for an organization because costs and risks of direct investment are greater than with franchising or licensing. Although governments usually welcome foreign direct investment, they are also often concerned about this type of investment for several reasons. Due to their size, MNCs may influence the host country’s economic and political systems. Control of a country’s important resources may pass into the hands of foreign corporations and, perhaps, then governments. Some countries enact programs to counteract these concerns.

To learn about negotiations and market opportunities between nations see the following.

World Trade Organization http://www.wto.org/

World Bank http://worldbank.org

Development Gateway http://developmentgateway.org

Joint Ventures and Strategic Alliances

Joint ventures and strategic alliances are somewhat different from foreign direct investment in that we are not talking about creating wholly owned subsidiaries. Yet, they can be excellent, strategic ways to penetrate different global markets around the world while limiting exposure at the entry phase.

A joint venture is an organization created by two or more companies or a company and a foreign government in which each party contributes assets, owns the entity to some degree, and shares risk. A joint venture allows a company to partner with a firm from another country thus learning about business practices, cultural differences, etc. This is particularly popular among manufacturing concerns. For example, Ford Motor Company (U.S.) entered into a joint venture with the Mazda Company (Japan) and France's PSA Peugeot Citroen has joined with China’s Dongfeng Motor Corp.

Information on joint ventures may be found at the following sites.

Joint Venture Home Page http://home.earthlink.net/~fpearce/Jointventure.html

International Joint Venture Agreements http://www.fedpubseminars.com/seminar/intljv.html

Financing joint ventures from the CIT Group Inc. http://www.cit.com

International joint venture agreements http://pachome1.pacific.net.sg/~chanpal/article5.htm

A strategic alliance is an agreement between potential or actual competitors to achieve common objectives. Unlike a joint venture they do not actually form a new entity but work cooperatively while maintaining their independence. It allows participants to share costs and risks and to take advantages of each other strengths. Because strategic alliances are built on trust, this type of arrangement should be undertaken with care. A good example of international strategic alliance is the code sharing done by airlines. For example, you may purchase a ticket in the U.S. on Delta airlines for a flight to Italy and find yourself actually on an Alitalia flight carrying a Delta flight number.

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A global industry

http://tutor2u.net/business/strategy/global-business-global-strategy.html

A global industry can be defined as:

An industry in which firms must compete in all world markets of that product in order to survive An industry in which a firm’s competitive advantage depends on economies of scale and economies

of scope gained across markets

Global markets are international markets where products are largely standardised.

Michael Porter argued that industries are either multi-domestic or global.

Global industries: competition is global. The same firms compete with each other everywhere.

Multi-domestic industries: firms compete in each national market independently of other national markets.

In general businesses adopt a global strategy in global markets and a multi-local strategy in multi domestic markets.

Global strategy

Companies such as Sony and Panasonic pursue a global strategy which involves:

Competing everywhere Appreciating that success demands a presence in almost every part of the world in order to

compete effectively

Making the product the same for each market

Centralised control

Taking advantage of customer needs and wants across international borders

Locating their value adding activities where they can achieve the greatest competitive advantage

Integrating and co-ordinating activities across borders

A global strategy is effective when differences between countries are small and competition is global. It has advantages in terms of

o Economies of scaleLower costsCo-ordination of activitiesFaster product development

However, many regret the growing standardisation across the world.

Multi domestic strategy

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A multi-domestic strategy involves products tailored to individual countriesInnovation comes from local R&D

There is decentralisation of decision making with in the organisation

One result of decentralisation is local sourcing

Responding to local needs is desirable but there are disadvantages: for example high costs due to tailored products and duplication across countries

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Comparison of the two strategies

Four drivers determine the extent and nature of globalisation in an industry:

(1) Market drivers

Degree of homogeneity of customer needs Existence global distribution networks

Transferable marketing

(2) Cost drivers

Potential for economies of scale Transportation cost

Product development costs

Economies of scope

(3) Government drivers

Favour trade policies e.g. market liberalisation Compatible technical standards and common marketing regulations

Privatisation

(4) Competitive drivers

The greater the strength of the competitive drivers the greater the tendency for an industry to globalise

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Strategies when setting up / expanding overseas

The key is to remain flexible and choose what will be most effective for your needs.

Overview Joint Ventures

Distribution Channels

Franchising

Licensing Branch

Offices & Subsidiaries

Overview

It is important to have a sound market entry strategy that organises your entry and exit plans, and communicates your plans to other key parties like your investors.

A good market entry strategy should look at items such as:

o potential markets by geography and industry

o distribution channels

o positioning and branding

o costs and benefits of market entry options

o operational support

o potential candidates for management, partners and agents

Joint Ventures (JVs)

You can enter a foreign market by forming a JV with a foreign company. A JV is a strategic alliance. Usually, all parties contribute equity and share in the profits, losses and control of the JV.

JVs can be for one specific project or for an ongoing business relationship (e.g. the Sony-Ericsson partnership).

Advantages

Forming JVs is a popular strategy when venturing abroad because it combines the expertise of the foreign company and the market of the local company.

A JV also shares the costs and risks of venturing into a new country. In fact, JVs are sometimes the only permitted way to penetrate a market, as some countries impose having a local partner as a market-entry criterion.

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See: Case Story: TechnoFibre (S) Pte Ltd

How TechnoFibre Ventured Abroad

Adopted different strategies at different stages in different markets, from franchising to joint ventures and, in the future, setting up subsidiaries.

Used franchising to expand quickly into overseas markets.

Set up joint ventures with overseas partners who had better knowledge of the overseas market. Practical Tips

Find local partners who can help to overcome cultural differences and local business practices.

Choose your partners carefully, even if it means having to work with many potential partners first.

Be prepared to fail but never accept failure.

Distribution Channels

In distribution, instead of setting up offices overseas, owners extend the reach of their brand by using distribution channels to deliver their products and services to customers overseas.

There are different types of distributions channels. You may:

o sell your products and services through a retailer

o distribute your products and services through a wholesaler

o use a combination of channels

In distribution, you need to consider important factors, including:

o whether the distribution is exclusive, selective or extensive

o number of members in the channel and level of control of each member

o physical distribution and logistics (e.g. storage of products)

o availability of product or service

o how costs are shared among members (e.g. advertising)

Advantages

Distribution is one of the simpler ways of venturing abroad. You export your goods through retailers, wholesalers and agents.

There is no need to set up a presence in the foreign company although some companies do set up branch or representative offices to increase their presence in the market or offer support and services.

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Franchising

You can also franchise your business to a foreign company. In franchising, you (the franchisor) sell the rights to use the business name, brand and method of doing business to a franchisee in exchange for a fee.

There is usually a franchise contract that states what the franchisee is allowed to use, what support the franchisor will provide, the fees, and terms and conditions.

Advantages

Franchising is a quick and often profitable way to expand a business. You can build your brand overseas without having to handle the day-to-day operations of each outlet. Through franchising, you can also increase your distribution with minimal financial commitment.

However, the downside for franchisors is the lack of control over operational matters. A franchisee that provides sub-standard goods and services or fails to promote the brand correctly could weaken your brand name.

Some local household names that have successfully expanded overseas in a short period of time using franchising are BreadTalk, Osim, Bee Cheng Hiang and Kinderland.

See: The Franchising and Licensing Association (FLA)

Case Story: BreadTalk Group Ltd

http://www.business.gov.sg/EN/CaseStories/case_overseas_breadtalk.htm

Breaking Bread At Home And Abroad: It’s Not Just Talk

Investing in their brand through trademarks and franchising, BreadTalk has 68 outlets all over the region and is looking to expand further.

Famous for its pork-floss buns that made waves in 2000, home-grown bakery BreadTalk now has over 200 products and can be found in 8 countries.

A Mix Of Strategies

Five-year-old BreadTalk opts for franchising when venturing abroad. This allows optimization of resources. The company focuses on branding while the local partners focus on the network and operations.

In more familiar markets like China and Singapore, BreadTalk prefers to own-and-operate. In total, the company has 42 wholly owned outlets and 26 franchised outlets in the region.

Making The Dough

Head of Brand Development, Joyce Koh, says: “We opened shop in 2000. In our first year, we had a lot of enquires, especially from Indonesia. But we felt we were not ready operationally.”

BreadTalk waited until it had built up its business development and resources to support a partner before setting up its first outlet in Indonesia in 2003.

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“It was a brand new game for us so we decided to engage professional expertise to help us develop the franchise,” Joyce recalls. BreadTalk also works closely with Government agencies such as IE Singapore which provides networking opportunities, intelligence, research and groundwork.

Choosing PartnersWe have been blessed with partners who are proactive. They approach us so we do not need to source for them. We look for partners who are dedicated and have the drive and passion to build the business,” says Joyce, adding that BreadTalk has rejected big conglomerates, as they did not fulfil BreadTalk’s requirements.

Fees And RoyaltiesBreadTalk’s Master Franchise fee is USD$600,000 to USD$800,000. Franchisees will also have to pay royalties each month. Bi-annual trips are made to the franchise outlets to ensure that franchisees are following the guidelines and doing well.

Intellectual CreationsAt the top of BreadTalk’s agenda is creative innovation. They maintain this through training and constant performance reviews.

Being innovative and adaptable helps BreadTalk succeed in overseas markets. It maintains 80% of its product range and adapts 20% to the local palate. For example, BreadTalk used halal mixes and created new recipes at its Kuwait outlet. “Kuwaitis have a sweet tooth. So, we created a range of mini pastries and packed them in a specially designed gift box. It has proven to be very successful,” Joyce says.

The company is diligent in protecting intellectual creations. For instance, the BreadTalk brand is a trademark in 30 countries and is a pending trademark in about 60.

Brand RecognitionIn the most recent Singapore Promising Brand Awards (2005), BreadTalk clinched the overall Most Popular Brand Award. There were more than 150 brands who were vying for the accolade.

Winning such awards helps to strengthen BreadTalk's brand both locally and internationally. And will, undoubtedly, help the company to continue to franchise its way into global markets.

How BreadTalk Ventured Abroad

Built a winning concept in Singapore before venturing abroad.

Ensured that the company was operationally ready before taking on overseas markets.

Chose own-and-operate and franchising as complementary strategies.

Moved into new markets only after getting professional advice and help from Government agencies.

Practical Tips

Be prepared to adapt your products to local tastes.

Protect your trade mark and other intellectual property in local and overseas markets.

Seek professional advice and help when entering new markets.

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When franchising, choose partners with strong network and operations so you can focus on building the brand.

Licensing

You can licence your Intellectual Property Rights (IPR) to companies in overseas markets. IPRs include patents, copyright and trademarks.

Licensing is giving someone the right to use your IPRs for certain purposes. For instance, if you have developed a software programme, you can licence it to foreign companies to use, sell and market.

The different types of licensing include:

o General Intellectual Property Licensinge.g. Disney cartoon characters on apparel, watches and confectionary

o Technology Licensinge.g. transfer of high-tech expertise and operating techniques, and software licensing

Advantages

As a licensor, this is an effective method to venture overseas because:

o it requires little or no financial commitment from you

o it helps you extend the usage of your technology or IPR to more applications

o it helps you establish your technology as the accepted standard and leader in other markets

To ensure that you can adopt licensing as your strategy, you need to consider many factors. Some of them are:

o ensure your IPR is properly registered and protected

o decide which products or parts of products should be licensed

o engage professional help in structuring your licence agreements, especially when it involves international tax laws and licence territories

Branch Offices and Subsidiaries

You can also set up a branch office or offshore subsidiary in a foreign market.

The difference between the two is that the branch office forms part of the main company. The offshore subsidiary is a legal entity in its own right, with its own management, costs, and profits and losses.

Advantages

Branch offices and subsidiaries require a lot of financial investment as it involves the setting up of a new office overseas.

Businesses usually choose this method when they want to make a big impact on the market. By

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setting up an office, they are able to offer a full range of products and services including sales, marketing and product development.

Unlike the other methods of entering a market, setting up a presence gives you full control over your products, services and brand.

Most businesses start with branch offices and later convert them into subsidiaries for tax purposes. To understand this better, please consult your tax advisor.

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Knowledge of culture & basic etiquette is essential on setting up a business abroad

GLOBAL BUSINESS ETIQUETTE

Handshakes are common greetings in international business meetings.

International business opportunities increase each year as the world become more globally connected. You may travel to an associate's country, or they may come to yours. If you are going to another country, it is important to know its customs and rules of etiquette, but it is equally important to know the customs of visitors to your country. You will likely want to show them your culture, but you also must respect theirs. Showing you have made an effort to learn about their country and lifestyle makes a favorable impression.

1. Impressionso First impressions can set the tone for all business dealings, regardless of the culture. To

make a good first impression, be familiar with the way men and women greet each other in their culture. The proper greeting method may vary between genders or be determined by the hierarchy of your group or theirs. Dressing conservatively is another way to make a solid first impression, especially if you are unfamiliar with the fashions of the country.

Details

o Attention to detail matters. Try to determine who is in charge of the group with whom you are meeting. Business etiquette expert Lydia Ramsey suggests deferring to the oldest male in the group if you cannot determine who is in charge. This may not work in all cultures, though. For example, younger people tend to have higher rank than older workers in Japanese businesses.

Handshakes

o A handshake is the most common international business greeting, even in countries where other greetings, like a bow, are traditional. This is especially true if your associates are accustomed to international business. However, it is important to know the etiquette for the firmness and duration of a handshake. For example, Germans tend to use a quick, firm handshake, while Middle Eastern business people may shake hands continuously throughout oral introductions, and many Asians will likely offer a softer, shorter handshake.

Gifts

o An article written by Kimberley Roberts and published by the International Business Center suggests giving or exchanging gifts with your potential clients or partners, as long as it is

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appropriate to the cultures involved. In some countries, gift-giving is a sign of mutual respect, particularly if the gift is thoughtful and relevant to either the business or the culture.

Other countries, like Singapore, forbid federal employees to accept gifts, and many corporations follow suit. In some cultures, expensive gifts that could be construed as bribes are unacceptable, but less expensive items are appropriate. The center's article emphasizes the importance of knowing about a culture's outlook on gifts before deciding if, and what, you will present to your associates.

Common Courtesy

o A good way to follow proper global etiquette is to take the cue from your hosts if you are visiting their country. It is important to know the basics of everyday etiquette, like dining, but also of meeting etiquette. For example, Russian associates would expect a wide selection of beverages and snacks at meetings. At dinner meetings in China, it would be rude to clean your plate, because it implies your host did not provide enough food to satisfy your appetite.

Regardless of cultural differences, people can generally determine whether you are sincere. A respectful attitude and polite demeanor will go a long way toward making up for any mistakes you might make.

Read more: Global Business Etiquette | eHow.com http://www.ehow.com/about_6701849_global-business-etiquette.html#ixzz1N0V9VlqY

http://news.bbc.co.uk/2/hi/country_profiles/default.stm

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Full profiles provide an instant guide to history, politics and economic background of countries and territories, and background on key institutions. They also include audio and video clips from BBC archives. Select a country, territory or international organisation from the menus

Example: Mexico

Mexico is a nation where affluence, poverty, natural splendour and urban blight rub shoulders.

Its politics were dominated for 70 years by the Institutional Revolutionary Party, or PRI. But elections in 1997 saw a resurgent opposition break what was in effect a one-party system with a democratic facade.

Elections in 2000 confirmed the trend when Vicente Fox became the first president to come from the opposition.

Overview

Mexico has the second-largest economy in Latin America and is a major oil producer and exporter. Though production has fallen in the last few years, about one-third of government revenue still comes from the industry. Much of the crude is bought by the US.

But prosperity remains a dream for many Mexicans, and the socio-economic gap remains wide. Rural areas are often neglected and huge shanty towns ring the cities.

Many poor Mexicans try to cross the 3,000-km border with the US in search of a job, and more than a million are arrested every year.

Economic recovery

The Mexican economy is heavily dependent on the money sent home by the millions of migrant workers in the US, and was hit hard by the downturn in its neighbour's economy in the wake of the credit crunch of 2008.

On a more positive note, Mexico has recently been emerging from its deepest economic slump since the 1930s, with foreign companies pouring billions of dollars of fresh investment into the country. Foreign direct investment climbed nearly 30 per cent in the first six months of 2010 from a year earlier.

Violent crime though remains a major concern; Mexico has one of the highest rates of kidnappings in the world, and some 28,000 people have died in drugs-related violence since 2006.

Powerful cartels control the trafficking of drugs from South America to the US, a business that is worth an estimated $13bn (£9bn) a year.

Mexico's northern border towns are experiencing the worst of the violence. Ciudad Juarez (just across from El Paso in Texas) is the city suffering the most. There are also high levels of violence in Michoacan and Guerrero states.

However, Mexico is a large country, and there are still many areas which do not experience high levels of serious crime. The overall murder rate is lower than several other countries in the region, including El Salvador and Honduras.

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Native rights

Another persistent issue has been the pressure for greater rights for Mexico's indigenous people. A law passed in 2001 fell short of giving Mexico's Indians political autonomy.

However, demands for indigenous rights have been largely peaceful since 1994, when at least 150 people died during an uprising in the southern state of Chiapas, led by the Zapatista rebel movement.

Writers such as Octavio Paz and Carlos Fuentes, the mural-painter Diego Rivera, and popular ranchero and mariachi music mean that Mexican culture is known throughout the Spanish-speaking world and beyond.

Facts

Full name: United Mexican States Population: 110.6 million (UN, 2010)

Capital: Mexico City

Area: 1.96 million sq km (758,449 sq miles)

Major language: Spanish

Major religion: Christianity

Life expectancy: 75 years (men), 80 years (women) (UN)

Monetary unit: 1 peso = 100 centavos

Main exports: Machinery and transport equipment, mineral fuels and lubricants, food and live animals

GNI per capita: US $8,920 (World Bank, 2009)

Internet domain: .mx

International dialling code: +52

Leaders

President: Felipe Calderon

Felipe Calderon, from the governing, conservative National Action Party, was declared winner of the bitterly-fought July 2006 presidential election with a lead of less than a percentage point over his left-wing rival, Andres Manuel Lopez Obrador.

His win was confirmed after weeks of legal wrangling and street protests.

One of the defining features of his presidency has been his war on drugs.

More than 28,000 people died in drug violence in the four years after he began his campaign, which involved launching an army assault on drug gangs.

He insists his fight against drug cartels is working.

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Mr Calderon has also pledged to tackle tax evasion, corruption and poverty. He has promised to create jobs, in an effort to stem outward migration, and to pursue major infrastructure projects, including roads, airports, bridges and dams.

However, Mexico's economy was hard hit by the 2008 downturn in global demand, pushing down the president's approval ratings.

In the 2009 mid-term elections, voters punished Mr Calderon and his National Action Party by making the formerly all-powerful Institutional Revolutionary Party (PRI) the biggest force in the Chamber of Deputies.

Born in 1962, in Morelia in Michoacan state, he is married and has three children. A lawyer and an economist by profession, he resigned as energy minister in 2004 to pursue his presidential ambitions.

His predecessor, Vicente Fox, took office in December 2000 and was unable by law to run in the 2006 poll.

Media

Mexico's media were traditionally dominated by the Televisa group, which had firm links with the PRI. But the loosening of the PRI's hold led to greater editorial independence and the emergence of competitors.

Televisa once had a virtual monopoly in Mexican TV and it is still a major global supplier of programmes in Spanish. New players - such as the Azteca group and foreign satellite and cable operators - have mounted an assault on Televisa's dominance.

The radio market is very large, with around 1,400 local and regional stations and several major station-owning groups. Some high-powered stations on Mexico's northern border beam their signals into lucrative US markets.

Mexican newspapers reflect different political views; sensationalism characterises the biggest-selling dailies.

The media watchdog Reporters Without Borders said in 2008 that Mexico was the most deadly country in the Americas for journalists.

The press

Excelsior - established daily La Jornada - daily

Reforma - influential daily

El Universal - established Mexico City daily

El Sol de Mexico - daily

El Financiero - business daily

Siempre! - political weekly

Proceso - political weekly

Television

Televisa - Mexico's TV giant, operates four networks and has many local affiliates TV Azteca - main competitor of Televisa, operates two networks and local stations

Once TV - Canal 11 - public, educational, cultural

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Television Metropolitana - Canal 22 - government-owned cultural network

Radio

Grupo ACIR - has stations in Mexico City and across the country MVS Radio - operates in the capital and elsewhere

Nucleo Radio Mil - operates several mediumwave (AM) and FM stations in Mexico City

Grupo Radio Centro - operates large network of stations

W Radio - news, talk network; part of Televisa group

Instituto Mexicano de la Radio (IMER) - state-run, operates domestic services and external service

News agencies

Notimex - state-run El Universal - private

Story from BBC NEWS:http://news.bbc.co.uk/go/pr/fr/-/2/hi/americas/country_profiles/1205074.stm

Published: 2011/04/02 19:02:41 GMT

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Legal & other basic coverage of points to setting up business abroad

ESTABLISHMENT OF OVERSEAS OFFICES BY INDIAN FIRMS/COMPANIES. JOINT VENTURE AND WHOLLY OWNED SUBSIDIARY IN FOREIGN COUNTRY BY INDIAN PARTY

CENTRAL SALES TAX

STATE SALES TAX

ESTABLISHMENT OF OVERSEAS OFFICES BY INDIAN FIRMS/COMPANIES.

The phenomenal success of Indian software companies into export and other projects abroad for other export businesses have created a need for Indian firms and companies to open offices in a foreign country. Such offices can be doing trading activities or non-trading activities such as liaison work, marketing etc. The Indian firms and companies may post a representative abroad for promotion of their exports business.

Such companies have to comply with the laws of the foreign country where they are opening offices.

Since opening office abroad involves by an Indian company the use of foreign exchange outside India, such Indian companies have to follow procedures prescribed by the Reserve Bank of India.

We will in this article discuss the guidelines issued by the Reserve Bank of India.

The Indian companies can also participate in overseas Joint Ventures (J/V). "Joint Venture (JV)" means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country in which the Indian party makes a direct investment.

They can also set up wholly owned subsidiaries (WOS) abroad. "Wholly Owned Subsidiary (WOS) " means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country, whose entire capital is held by the Indian party.

We will cover the process and formalities for setting up J/V or WOS in subsequent articles.

No prior permission of Reserve Bank is required to open offices (trading or non-trading) abroad or post representatives abroad by Indian firms/companies.

The Indian firm/companies should submit applications to their bankers (authorised dealers) in form OBR along with the particulars of their turnover duly certified by their auditors and also a declaration to the effect that they have not approached/would not approach any other authorised dealer for the facility being applied for. The application form OBR needs to be filled in with necessary details along with supporting documents. After which the foreign exchange is released by the authorised dealer (bank).

FOREIGN EXCHANGE RELEASED BY THE BANK

Authorised dealers may release exchange towards initial expenditure as also for recurring expenses of the office as under, provided the applicant fulfils the following conditions:

Category Initial Expenditure Recurring Expenditure (per annum)

(a) EEFC Account (Exchange Earners’ Foreign Currency account)

No limit for remittances out of EEFC funds.

No limit for holders remittances out Of EEFC funds.

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(b) Firms/companies not having EEFC accounts or not having sufficient funds EEFC accouts.

Up to 2% of their average annual sales/income turnover during last two years.

Up to 1% of their average annual sales/income turnover during last two years.

In the case of newly established 100% EOUs or Units in EPZs and Hardware/Software Technology Parks, exchange may be released as per their estimated requirements for initial as well as recurring expenses on verification of suitable documentary evidence during the first two years of their operation. From third year onwards, exchange may be released as per item (a) or (b) above. Thus for first two years such units can get more foreign exchange released than the limits for other Indian companies.

The recurring (expenditure) remittance facilities are allowed initially for a period of two years only, after obtaining confirmation form the applicant that they have completed all legal and other formalities in India and abroad in connection with the opening of trading/non-trading office or for posting a representative abroad. The renewal of remittance facility after two years may be granted, provided proper accounts of utilisation of foreign exchange released are furnished to the authorised dealer.

The general terms and conditions for opening the offices abroad normally are:

a. The overseas office should not create any financial liabilities contingent or otherwise for the head Office in India.

b. Exchange released by the authorised dealer should be strictly utilised for the purpose(s) for which it is released. They unused exchange may be repatriated to India under advice to the authorised dealer.

c. The details of bank account opened in the overseas countries should be promptly reported to authorised dealer.

d. The approval granted for the purpose should be made valid for 6 months from the date thereof, within which time the applicant should open its overseas office or post representative abroad. In case the overseas office is not opened or the representative is not posted abroad within this period, intimation in writing to the effect should be sent to the authorised dealer immediately after expiry of 6 months period. Fresh application for release of exchange should be submitted to the authorised dealer as and when the overseas office is desired to be opened.

e. Profits, if any, earned by the overseas office/s should be repatriated to India.

f. The following statements should be submitted by the applicant to the authorised dealer:

A. A statement showing details of initial expenses incurred together with suitable documentary evidence, wherever possible, within three months from the date of release of exchange for that purpose.

B. Annual account of trading/non-trading office abroad duly certified by statutory Auditors/Chartered Accountants.

Temporary Site/Project Offices Abroad

Indian firms/companies executing contracts/projects abroad with the approval of the appropriate authority are permitted under a general permission granted by Reserve Bank to set up site/project offices abroad provided that such offices are maintained out of project receipts and remittances from India are not required. These offices are required to be closed down and surplus foreign exchange earnings repatriated to India after completion of the project.

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Credit facilities for overseas trading offices of Indian companies

Reserve Bank considers, on merits, request from Export Houses/Trading Houses/Star Trading Houses/Super Star Trading Houses to avail of fund based/non-fund based facilities for their trading offices abroad from overseas banks. Application in such cases should be made to the Chief General Manager, Reserve Bank of India, Exchange Control Department (Export Division), Mumbai together with full particulars of the exchange facilities availed of for maintenance of the overseas office concerned, full details of terms and conditions subject to which the facilities are being extended by the overseas bank and the need for availing of the credit facilities by the overseas trading office.

Application for permission to post a representative

Establish office/branch overseas

The application is to be made in form OBR to the Bank with supporting documents.

The estimates of foreign exchange expenditure should be given in units of foreign currency and the appropriate rupee equivalent furnishing the exchange rate applied.

Documents to be submitted along with the Form OBR.

Correspondence, if any, in original together with photocopies regarding the arrangement made in foreign country for posting of representative/establishment of branch/office.

Bank certificates, in form BCX (certificate of export),together with photocopies thereof for the immediately preceding four calendar half years in support of export realisations.

In the case of a trading branch, cashflow statement in the proforma attached indicating the value of stock to be held, percentage of marked-up price and projected income and expected profit margin should be furnished.

SOME OF THE DETAILS TO BE PROVIDED IN THE APPLICATION

Exporter's Code Number allotted by Reserve Bank

Nature of the applicant's business in India

Particulars of foreign currency balances/securities, if any, held by the applicant

Present arrangements for applicant’s representation in the country/territory concerned if any. If there is any agency arrangement, its full details including the number and date of Reserve Bank's approval and commission paid during the past three years.

Details of export realisations for the past two years

Commodity-wise/country-wise break up of exports realised in the last two years.

Application is for appointing An agent (on fixed remuneration basis), or

For opening a trading branch, or

for A representative liaison office/non-trading branch

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Place and country of posting of agent/representative office/branch

Territories/countries to be covered by the proposed agent/representative office/branch

Details of business to be conducted abroad by the agent/representative office/branch

Initial Establishment Expenses

Recurring expenses per month

JOINT VENTURE AND WHOLLY OWNED SUBSIDIARY IN FOREIGN COUNTRY BY INDIAN PARTY

The success of Indian companies in software exports as also in other businesses have opened up the possibilities of Indian companies entering into joint venture (J/V) and also open wholly owned subsidiary (WOS) in foreign countries. For J/V and WOS the Indian companies have to make investment in foreign currency. As the foreign exchange goes out of India the Reserve Bank of India comes into picture.

The provisions related to J/V and WOS are governed by the Foreign Exchange Management Act (FEMA) and The Foreign Exchange Management (Transfer or issue of any foreign security) Regulations, 2000. (Said regulations).

Before we discuss in detail we see how some of the important terms are defined.

"American Depository Receipt" (ADR) means a security issued by a bank or a depository in United States of America (USA) against underlying rupee shares of a company incorporated in India;

`Core Activity’ means activity carried on by an Indian entity which constitutes at least 50% of its average turnover in the previous accounting year;

"Global Depository Receipt"(GDR) means a security issued by a bank or a depository outside India against underlying rupee shares of a company incorporated in India;

"Direct investment outside India" means investment by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity, but does not include portfolio investment or investment through stock exchange or by private placement in that entity;

"Indian party" means a company incorporated in India or body created under an Act of Parliament, making investment in a Joint Venture or Wholly Owned Subsidiary abroad, and includes any other entity in India as may be notified by Reserve Bank

"Joint Venture (JV)" means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country in which the Indian party makes a direct investment;

"Wholly Owned Subsidiary (WOS) " means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country, whose entire capital is held by the Indian party;

"Real estate business’ means buying and selling of real estate or trading in transferable development rights (TDRs) but does not include development of townships, construction of residential/commercial premises, roads or bridges;

SOME IMPORTANT POINTS

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Only (a) Public Ltd. Company, (b) Private Limited Company are allowed to invest for J/V and WOS called Indian party.

Individual, partnership firms etc are not allowed to invest.

Investment in banking business and real estate business are not allowed.

Investment can be by way of equity, debentures, loans, and guarantees.

Remittance can be by way of cash, or export of goods and services.

Dividends, royalties, etc. due to Indian investor should be repatriated to India .

We shall now look at the various ways of investments by Indian party in detail.

CATEGORY OF INVESMENT

AMONT OF INVESTMENT

NOT TO EXCEED

CRITERIA FOR PERMISSION MODE OF INVESTMENT HOW TO APPLY

Investment in J/V or WOS outside India except Nepal & Bhutan

 US $ 50 million or its equivalent in a block of three financial years

The direct investment is made in a foreign entity engaged in the same core activity carried on by the Indian party;

The Indian Party has earned net profit during the preceding three accounting years;

.

Investment can be made by way of equity or loan or by way of giving guarantee.

Investment can be made out of EEFC account funds or by drawing Foreign Exchange from the Authorised Dealer.

Investment by way of capitalisation of exports of goods and services towards equity contribution and any other dues can be also be made as prescribed under the regulations.

 To submit form ODA, duly completed, to the designated branch of an authorised dealer (Bank) for onward transmission to Reserve Bank.

Investment in J/V or WOS in Nepal & Bhutan

 Rs. 120 crores in a block of three financial years

Same as above Same as above Same as above

Investment out of ADR/GDR issues

 50% of amount raised by ADR / GDR issue

The ADR/GDR issue has been made in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme 1993 and the guidelines issued thereunder

Same as above To file with Reserve Bank, in form ODA full details of the investment made, within 30 days of such investment.

Investment in Financial Service Sector

US $ 50 million or its equivalent in a block of three financial years

Only Indian party engaged in financial service activities can make investment in entity engaged in financial services activities – If

Investor company has earned net profit in 3 preceding financial years and has minimum net worth of Rs. 15 Cr. as on last audited Balance Sheet

Same as above To submit form ODA, duly completed, to the designated branch of an authorised dealer (Bank) for onward transmission to Reserve Bank.

Investment in foreign security by way of Swap or exchange of shares.

US$ 100 million or 10 times of export earning of Indian party in preceding financial year

Only those Indian party engaged in, Information Technology and entertainment Software, Pharmaceutical sector, biotech [Specified activity] may acquire shares of foreign company in

ADR / GDR issue of Indian party is listed outside India

80% of average turnover of Indian party in 3 previous financial year - is from activity included in schedule or

To submit a report in form ODG to the Reserve Bank

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including all investment in same financial year

exchange of ADR / GDR

Indian party has annual average export earning of at least Rs. 100 Cr. in previous 3 financial year from it’s activities.

ADR / GDR issue is backed by fresh equity shares by Indian party.

Acquisition of a foreign Company through bidding or tender

Same as first category

Same as first category Acquisition of the foreign company To fill form ODA and ODI as prescribed to Reserve Bank

Investment proposal, not falling under General Permission Category

As per the permission of Reserve Bank

Prima facie viability of J/V or WOS Contribution to external trade by proposed investment Financial position & business track record of Indian party & foreign entity. Experience & expertise of Indian party in related line of activity

Direct investment File form ODI

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Obligations of the Indian Party

An Indian Party which has acquired foreign security as above shall –

(i) receive share certificates or any other document as an evidence of investment in the foreign entity to the satisfaction of the Reserve Bank within six months

(ii) repatriate to India, all dues receivable from the foreign entity, like dividend, royalty, technical fees etc., within 60 days of its falling due, or such further period as the Reserve Bank may permit;

(iii) submit to the Reserve Bank every year an annual performance report in form APR in respect of J/V or WOS outside India set up or acquired by the Indian Party and other reports or documents as may be stipulated by the Reserve Bank.

Transfer by way of sale of shares of a JV/WOS not allowed without the permission of Reserve Bank or as provided in the Act or rules or regulations made or directions issued there under.

Pledge of Shares of J/V and WOS as a security for availing of fund based or non-fund based facilities for itself or for the J/V WOS from an authorised dealer (Bank) or a public financial institution in India is allowed.

CENTRAL SALES TAX

Many enterprises in India are in the business of selling, reselling of computers, various computer parts and software. Some of them are also providing various services such as installation and maintenance. These enterprises need to know about sales tax.

Basically sales tax is a tax on sale of goods. The liability to pay sales tax arises on making sales of goods. In India, the law for levying sales tax is provided in the Central Sales Tax Act. This act applies to the whole of India. Also each state in India has it’s own state sales Tax Act which applies to sales made in that particular state. For example in Maharastra; Bombay Sales Tax, 1959 is in effect.

The Central Sales Tax (CST) applies only to inter-state sales (say between Maharastra and Karnataka). It does not apply to intra-state sales (within the state of Maharastra) or import or export sales from India. In this article we will discuss some of the important provisions of CST Act.

Some important definitions under CST are:

S/2(aa) "business" includes - (i) any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern; and

(ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern;

S/2(b). Dealer means any person who carries on, whether regularly or otherwise, the business of buying, selling, supplying or distributing goods, directly or indirectly, for cash or for deferred payment or for commission, remuneration or for other valuable consideration and includes: -

A local authority, body corporate, company, co-operative society or other society, club, firm, Hindu Undivided Family (HUF) or other Association of Persons (AOP) which carries on such business.

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A broker, commission agent or any other mercantile agent, by whatever name called and whether of the same description as herein before mentioned or not, who carries on the business of buying, selling, supplying or distributing goods belonging to any principal, whether disclosed or not. An auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not and whether offer of the intending purchaser is accepted by him or by the principal or by the nominee of the principal.

A government, whether or not in the course of business buys, sells or supplies or distributes goods, directly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration shall except in relation to any sale, supply or distribution of surplus, unserviceable or old stores or materials or waste products or absolute or discarded machinery or parts or accessories thereof is deemed to be a dealer for the purposes of this Act.

S/2(d) "goods" includes all materials, articles, commodities and all other kinds of movable property, but does not include newspapers, actionable claims, stocks, shares and securities;

S/2(g). Sale means any transfer of any property or goods from one person to another for cash or for deferred payment or for any other valuable consideration and includes the transfer of goods on hire-purchase or other system of payment by installments but does not include a mortgage or hypothecation or charge or pledge on goods.

S/2(h). Sale Price means an amount payable to a dealer as consideration for the sale of any good less any sum allowed as cash discount according to the practices normally prevailing in the trade but inclusive of any sum charged for anything done by the dealer in respect of goods at the time of or before the delivery thereof. However, it does not include freight or delivery cost or cost of installation where such cost is separately charged.

REGISTRATION AS A DEALER UNDER CST

A single interstate sale of any amount effected by a dealer attracts tax liability under the CST and hence then the dealer needs to apply for registration. The application has to be made within 30 days from the date of first interstate sale. The dealers who have registered themselves under the State Sales Tax Act can get registered under CST even without having any interstate sale.

S/9A. COLLECTION OF TAX TO BE ONLY BY REGISTERED DEALERS. - No person who is not a registered dealer shall collect in respect of any sale by him of goods in the course of inter-State trade or commerce any amount by way of tax under CST Act.

TAX WHEN PAYABLE U/S 6 OF CST ACT

Section 6 creates a liability for a dealer to pay Sales Tax on all sales of goods other than sale of electrical energy effected by him in the course of inter-state trade or commerce during any financial year.

But no sales tax can be levied under the CST Act in respect of the following: -

1. Inter-state sale of electrical energy.

2. Sales in the course of Import & Export.

3. Intra-state sale of goods

4.Sales made in respect of goods on which sales tax is exempted by a notification in the Official Gazette, provided all conditions prescribed under the notification are fulfilled.

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5. Subsequent Sale of goods, which are exempted from sales tax under the laws of the relevant State or chargeable to tax at a lower rate, if sold within the state.

6. Subsequent sale of goods by transfer of documents.

Subsequent sales

Subsequent sale refer to all sales of a goods after the first time it has been sold. Under the CST Act, sales tax is levied at a single point only (first sale) and no sales tax is payable on subsequent sales. Subsequent sale shall be exempted from the levy of Central Sales Tax, if the following conditions are satisfied: -

Sales should be either to the government or a registered dealer.

Sale should be of the same goods during their movement from one state to another i.e. the goods do not undergo a change in the course of transport.

Sale should be effected by transfer of documents of title to the goods such as railway receipt, lorry receipt etc. which are freely transferable from one dealer to another by endorsement.

Subsequent dealers are required to obtain necessary certificates in the prescribed form from their vendors. e.g. Form C from non government dealer and Form D from government.

Where subsequent sale is to a registered dealer other than the government, the sale should be only of those goods, which are mentioned in the certificate of the registration of dealer.

Rates of Tax under CST

S. No. Type of Sale of goods Against issue of form type RATE OF CST

1. to Registered Dealer C 4%

2. To Government or Govt. Department D 4%

3. Declared Goods Without C/D form Twice the rate applicable to Local Sale4. Schedule ‘C’ goods Without C/D form

(a) Where Schedule Rate of Sales Tax isi) Less than 4% Such rate as applicableii) Equal 4% 4%

iii) Above 4% 10% or Local Rate whichever is higher plus Turnover Tax and surcharge

(b) Where by notification u/s 41 rate of Tax including Surcharge and Turnover Tax if any is

Without C/D form

Upto 4% Above 4%Such rate as applicable 10% or local rate whichever is higher plus Turn Over Tax (TOT) and Surcharge

Filing of Returns and payment of taxes.

The sales tax has to be collected by the registered dealer, who sells the goods in interstate transaction. The tax has to be paid to the Government treasury, along with a return within the time as may be prescribed by the State Government in the State sales tax Act.

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STATE SALES TAX

Many enterprises in India are in the business of selling, reselling of computers, various computer parts and software. Some of them are also providing various services such as installation and maintenance. These enterprises need to know about sales tax and Works Contract.

Last time we covered basics of Central Sales Tax, which covers Sales Tax on goods, sold between two states in India.

In this article we will look at the Sales Tax, which is on goods sold in one particular state.

Here we will discuss in general the principles and basics of State Sales Tax and in particular of Bombay Sales Tax (BST) which is the effective legislation in Maharastra.

Basically sales tax is a tax on sale of goods. The liability to pay sales tax arises on making sales of goods. No state can levy sales tax on any sale or purchase where such sale or purchase takes place (a) outside the state and (b) in the course of import of goods into or export of goods outside India.

Some important definitions under BST are:

BUSINESS:

It includes any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether carried on with or without profit motive or whether actual profit is earned or not. Further it also includes any transaction, which is incidental, or ancillary to such trade, commerce, manufacture, adventure or concern and it also includes any transaction which is incidental or ancillary to commencement or closure of such trade, commerce.

DEALER:

The definition of dealer is very important, as most of the provisions of the Act are applicable to only dealer. Dealer includes any person who carries on the business of buying or selling of goods, in the state whether for commission, remuneration or otherwise. It also includes any State or Central Government who carries on such business and societies, clubs or other associations of persons are also included, when they buy from or sell goods to their members.

GOODS:

Means every kind of moveable property not being newspapers, money, actionable claims, stocks, shares and securities;

Sale Price means the amount payable to a dealer as consideration for the sale of any good less any sum allowed as cash discount according to the practices normally prevailing in the trade but inclusive of any sum charged for anything done by the dealer in respect of goods at the time of or before the delivery thereof. However, it does not include freight or delivery cost or cost of installation where such cost is separately charged.

REGISTRATION AS A DEALER

Under the provisions of some state laws the dealers are divided into several categories such as anufacturer, importer, reseller etc. and such as dealer is required to obtain a registration certificate to that effect.

Registration, under the Bombay Sales Tax Act, can be obtained only by that dealer who has effected a certain minimum turnover. A dealer is compulsorily required to obtain registration if his turnover of sales or

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purchases exceeds relevant limits during any year commencing on the 1st day of April. For the liability to pay tax there are three categories of dealers, namely:

Importer: Importers are those who are engaged in import of goods in the State of Maharashtra.

Manufacturer: Manufacturers are those who are engaged in the manufacture of goods in the State of Maharashtra.

Reseller: Resellers are those who are resellers of goods in the State.

Application be made within 30 days of exceeding the prescribed turnover of the sales or purchases in any financial year.

Prescribed Limits of the turnover after which the dealer must apply are as under:

Category of dealer Total turnover (Total sales/purchases) shall exceed

Total turnover of taxable goods shall exceed

Other conditions

Manufacturer Rs. 1,00,000/- Rs. 10,000/- Value of any goods manufactured by him shall exceed Rs.10,000/-

Importer Rs. 1,00,000/- Rs. 10,000/- Value of any goods brought by him into the state shall exceed Rs. . 10,000/-

All other dealers Rs. 2,50,000/- Rs. 10,000/-

Voluntary Registration

No limits No limits Advance of Rs. 30,000/-is required to be paid which is adjustable towards dealers Liability of tax, Interest, Penalties

RATES OF TAXES UNDER BST

SHEDULE UNDER BST ACT which lists various goods

TYPES OF GOODS RATE OF TAX

A Goods of prime importance Nil

B Declared goods Up to 4%

CI Other goods ½% to 4%

CII Other goods 4% and more

Sales tax on Software packages is at present 4% in Maharastra.

TAX WHEN PAYBLE UNDER BST

The Sales tax will be payable at the time of first sale. All subsequent sales of same goods will be allowed as re sales and no tax is attracted on the such subsequent sale in Maharastra.

Filing of Returns and payment of taxes.

The sales tax has to be collected by the registered dealer. The tax has to be paid to the Government treasury, along with a return within the time as may be prescribed by the State Government in the State sales tax Act.

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The dealer is required to furnish the return in the prescribed form. At the time of assessment, the dealer has to furnish all the documentary evidence.

ADVANTAGES OF REGISTRATION UNDER BST

Dealer will be entitled to collect Sales Tax payable by the purchaser of goods. An unregistered dealer cannot collect tax, even though tax is payable by him.

Set off of the taxes paid on purchases is available only to a Registered dealer.

Incentive in the form of Sales Tax exemption / deferral etc. are available only to registered dealers.

If registered under Central Sales Tax Act also, dealer are entitled to purchase from outside the State of Maharashtra at a concessional rate of Tax @ 4 per cent on C form declaration.

Works Contract tax

Works contract tax is levied on the transfer of property in goods in the course of execution of a works contract. Generally, the term "works contract" means a contract for executing works -, a contract which, in addition to services rendered, involves the transfer of property in goods.

A contract, which does not result in transfer of property in goods, would not attract works contract tax.

Some of the States in India charge works contract tax on Annual Mainetance Contract say of computers, networks etc which may be comprehensive or non-comprehensive.

In Maharashtra, works contract tax is governed by the Maharashtra Sales Tax on Works Contracts (Re-enacted) Act 1989. As per the Act, works contract tax is levied on the turnover of sales, in respect of goods transferred in the execution of the contract. For the purposes of the computation of turnover of sales of a seller, sale price has been defined to mean the purchase price/value of the goods transferred in the execution of the works contract.

Under the Act, the rates of works contract tax have been specified for various types of works contracts falling under the schedule to the Act. Where certain contracts are not covered by the schedule, works contract tax would be levied on each of the goods transferred, at rates specified under the schedule to the Act. Therefore, works contract tax would be payable at applicable rates depending on the classification of the goods. However, the Act also provides for the payment of a lump sum by way of composition at the prescribed rate in lieu of the works contract tax payable, with the prior approval of the Commissioner of Sales Tax.

The Act provides for registration under the Act and rate of taxes and payment of taxes.

In the following instance it is held that replacement of free parts under the Annual Maintenance Contract is not a transaction of sale within the meaning of section 2(1)(L) of the Maharastra Works Contract Act. The contract is a service contract and not a works contract.(M/s. Tata Infotech Ltd. Order No. WC- 2000/DDQ-5/Adm-12/B-740 Mumbai dated 03.70.2000).

Extract taken from website & queries can be sent to © Zarana Khona 2001 email: zarana@indiaitlaw.com

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Opening Branch Offices

A company expands its business by opening up its branch offices in various parts of the domestic country as well as in other countries. A branch office refers to an establishment which carries on substantially the same business and activity as is carried out by its Head Office. Such offices help the company in:-

i. Spreading its business to diverse locations and thus increasing the customer baseii. Bringing its product closer to the customers by increasing their accessibility to it

iii. Making the distribution and marketing of its goods and services easier and more effective.

In other words, branch offices help in expanding the size of the market for a company's product by attracting more customers; widening the scope of its trading and manufacturing activities as well as bringing more opportunities and opening unexplored avenues for it. Thus, these offices help to fuel the growth of the company and enhance its profitability on a sustained basis.

Procedure for opening branch offices by a domestic company

It is provided under the Companies Act,1956, according to which:-

In order to open new branch offices in India, a domestic company must pass a resolution in its Board meeting specifying:-

The business to be carried out at that particular branch office The appointment of somebody to look after the day-to-day business of the branch and operate the bank

account of that branch

The provision for authorising somebody to make arrangement for accommodation,establishment and other requirements which are necessary to run that branch office

The person so authorised in the Board meeting may also be delegated certain powers, on behalf of the company, which are as follows:-

The power to make calls on shareholders in respect of money unpaid on their shares; The power to issue debentures;

The power to borrow money otherwise than on debentures;

The power to invest the funds of the company;

The power to make loans.

However, the business to be transacted at the new proposed branch is covered by the Memorandum of Association of the company. The Memorandum of Association is the charter of the company which defines the objective of its formation, the scope of its operations as well as informs its stake holders about the permitted range of the enterprise. It is ultra vires for a company to act beyond the scope of its memorandum and any departure cannot be validated even if assented to by all the members of the company. It is the principal document of a company without which it cannot be registered. It regulates the procedures relating to the expansion of business of the company through opening new branches.

But if a company wants to commence new business at the proposed branch office, which is not incidental to its

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existing business, then it has to pass a special resolution. Thereafter, it has to file a declaration in e-Form No.20A with the concerned Registrar of Companies (ROC) within thirty days of passing the resolution and also the special resolution in e-Form No.23, after paying requisite fee as prescribed under the Act.

Procedure for opening branch offices by a foreign company

The opening up of branch offices is one of the options by which a foreign company can set up its business operations in India. It needs to obtain a prior permission from Reserve Bank of India (RBI) for setting up such offices in India. As per the guidelines issued by RBI, these branch offices are subjected to the following conditions:-

The branch office cannot expand its activities or undertake any new trading, commercial or industrial activity other than those which are expressly approved by the RBI

The entire expense of the branch office in India will be met either out of the funds received by it from abroad through normal banking channels or through income generated by it in India

The branch office cannot accept any deposits in India;

The commission earned by the branch office from parties abroad for any agency business will be repatriated to India through normal banking channels.

Also, the foreign companies engaged in manufacturing and trading activities abroad are allowed to set up branch offices in India for the following purposes:

Undertaking export or import of goods Rendering professional or consultancy services

Carrying out research work, in which the parent company is engaged (provided that the results of the research work are made available to the Indian Companies)

Promoting technical or financial collaborations between Indian companies and the parent or overseas group company

Representing the parent company in India and acting as buying/selling agents in India

Rendering services in information technology and development of software in India

Rendering technical support to the products supplied by the parent/ overseas group companies

Foreign airlines or shipping companies are also permitted to open their branch offices in India.

But, branch offices can undertake only trading activities and are not permitted to carry out manufacturing activities on its own, though it is permitted to sub contract these to Indian manufacturers. Such offices are a part of the foreign company and are not treated as a separate legal entity.

For opening a branch office, the foreign company needs to submit its formal application to the Chief General Manager, Exchange Control Department (Foreign Investment Division), RBI Central Office, Mumbai in the form FNC-1. These applications are considered on a case-to-case basis. The RBI generally gives permission in a time span of about 2 to 4 weeks. The application must include the following details:-

Operating history of the company worldwide Proposed interests and activities in India

Reasons for wanting to open a branch office and

Any foreign exchange implications for such matters.

The branch offices may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines. They need not retain any profits as reserves in India. But in certain cases, where income is deemed to have originated in India and such income includes royalties, fees for technical services, interest and capital gains

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including capital gains from share of capital in India, branch offices may repatriate profits to their Head Office without obtaining prior approval from RBI.

http://business.gov.in/growing_business/opening_branch.php

http://www.asanjokutch.com/cvo/janpage01.asp

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C.V.O. Chartered & Cost Accountants' Association

Setting up a Branch or Office Outside India

Contributed by Shri Kirit P. DedhiaShri Manoj C. Shah

Deciding on the appropriate legal structure for setting up overseas presence is the first step in any outbound investment proposal and requires careful consideration and evaluation of various commercial and tax considerations. The overseas presence can be broadly in either of the following two ways:

Setting up a 'Branch' abroad; or Setting up of a 'Wholly Owned Subsidiary' company ('WOS') / Joint Venture Company ('JV Co.').

We shall be discussing in the following paragraphs FEMA provisions as are applicable to setting up a branch outside India.

1. FEMA PROVISIONS:

1.1 Residential Status of the Overseas Branch under FEMA:As per definition given in Section 2 clause (iv) of Foreign Exchange Management Act, Person Resident in India includes "any office, branch or agency outside India owned or controlled by a person resident in India". And because of its residential status as Resident In India, overseas branch is subject to all FEMA restrictions as are applicable to Person Resident in India.

1.2 Whether setting up an Overseas Branch is a Capital Account transaction or Current Account transaction?It is generally seen that all capital Account transactions are prohibited unless they are specifically permitted. For setting up a branch outside India, an Indian entity is required to open foreign currency bank account outside India. The opening up of bank account outside India by a person resident in India is considered as capital account transaction and is regulated by Notification No.10. (as amended by Notification No.47). Therefore, setting up branch outside India, per se may not amount to capital account transaction but the opening up of a bank account outside India, is a regulated capital account transaction. The said Notification No. 10 provides for rules relating to opening up of a bank account for offices set up outside India.

Even acquisition or purchase of office equipments and furniture and acquiring immovable properties are also capital account transactions. However, the explanation to the Notification provides that acquisition of furniture and office equipment required for normal business operations will not be regarded as capital account transaction.

RBI gives general permission for following capital account transactions.

To Open Foreign Currency Bank Account (subject to cap on remittance from India To Purchase office equipments and other assets for normal business operation

Recently, Indian corporates who have setup overseas office can acquire immovable property outside India for their business and also for staff residential purposes with the prior permission of Reserve Bank of India. Necessary application be made in a prescribed form to RBI. [AP Dir Circular No.71 dt.13.01.2003]

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1.3 Who can open branch outside India i.e. Indian Entity:As per sub-regulation No. (4A) of Regulation 7 of Notification No.10, a firm or a company or a body corporate registered or incorporated in India (hereinafter referred to as 'the Indian entity') may open, hold and maintain in the name of its office (trading or non-trading) or its branch set up outside India or its representative posted outside India, a foreign currency account with a bank outside India by making remittances from India for the purpose of normal business operations of the office/branch or representative.

As per Notification, firms, companies or body corporates registered or incorporated in India can open branch or office outside India. In notification there is no mention of "Proprietary concern". However if one refers to FORM OBR, there is a mention of "Proprietary concern" in clause 1(b) of Part I of the said form. The said form was issued under the regime of FERA however, still, Authorised dealers are relying on this form as a procedural measure. In our opinion, to avoid any ambiguity one shall write to RBI for clarification or for seeking permission for opening branch by proprietary concern.

1.4 Form to be filled up & submitted:

Form OBR with full details and supporting to be submitted to concerned Authorized Dealer who, in turn, submits the same to RBI and permits Indian entity for setting up an overseas branch.

1.5 Permitted Remittance For Setting Up Overseas Branch /Office or Posting Representatives

For Setting up Branch/Office outside IndiaIndian entity can remit foreign exchange up to 2 % of Average Annual Turnover of last 2 Accounting Years of Indian entity for meeting initial expenses of setting up of Branch / Office or posting Representative.

For Recurring ExpensesIndian entity can remit foreign exchange up to 1 % of Average Annual Turnover of last 2 Accounting Years of Indian Entity for meeting recurring expenses of branch/office or representative per year.

No restriction of above 2 % and 1 % of Annual Average Turnover of Indian Entity shall be applicable provided

i) Remittances are made out of EEFC A/c of Indian Entity. Or

ii) Overseas Branch or Office is set up or Representative is posted by 100 % EOU or a unit in EPZ, HTP or STP within 2 years of the establishment of the unit.

Even an Indian Entity without Turnover Track Record is also entitled to setup an overseas branch if he is an exporter and has got balance in EEFC A/c.

1.6 Closure of the Overseas Branch/Office Bank A/c.:The account so opened, held and maintained shall be closed

i) If Overseas branch / office is not setup within 6 months of opening the Bank A/c. Or

ii) Within 1 month of the closure of the overseas branch / office. Or

iii) Where no representative is posted within 6 months of opening of the Bank A/c. and the balance held in the account shall be repatriated to India.

1.7 Prohibitions on the Operation of Overseas Branch /Office / Representative:

1) The Overseas Branch / Office / Representative shall not enter into any contract or agreement in contravention of the Act, Rules or Regulations of FEMA.

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2) The Overseas Branch / Office / Representative shall not create any financial or contingent liabilities for Head Office in India.

3) The Overseas Branch / Office / Representative should not invest surplus fund abroad without RBI's prior approval but such surplus fund should be repatriated to Head Office in India.

4) The details of bank account opened outside India should be promptly reported to concerned Authorized Dealer.

1.8 Special RBI Permission for establishing Warehouse:

The special RBI permission is required to be obtained for establishing a warehouse outside India.

As per regulation 9 of the Notification No.23 on "Export of Goods and services" , where goods are exported to a warehouse established outside India with RBI permission sales consideration is to be brought (repatriated) to India as soon as it is realized or if not realized - latest within a period of 15 months from the date of shipment of goods or within period further extended by RBI.

2. OVERSEAS BRANCH FROM TAXATION ANGLE

2.1 The Head Office (The Indian entity) in India is entitled for claiming credit for the tax paid by the overseas branch to avoid double taxation under Tax Treaties. In absence of Tax Treaty with any country, the Indian entity can claim tax credit U/s. 91 of the Income Tax Act which provides for unilateral tax credit in absence of a tax treaty.

2.2 Export Profit deduction U/s. 80 HHC is available to Head Office for sale of Goods to an Overseas Branch. (Export realization to be repatriated to Head Office in India within 6 months of the date of export)

2.3 Indian Transfer Pricing Law is not applicable to Head Office (India) for export of goods to overseas branch but Transfer Pricing Law, if any; in the host country shall be applicable to overseas branch.

2.4 No Capital Gain Tax is levied to Head Office on transfer of Assets to the Overseas Branch.

2.5 Loss of overseas branch can be adjusted with profit of HO in India reducing overall tax burden of HO and again such Overseas Branch can carry forward the same loss to be set off in subsequent years.

2.6 In countries like US, France, Canada there is a tax, charged to the Overseas Branch, called BPT (Branch Profit Tax) at the time of remittance of Branch Profit to H.O. (i.e. to resident country). But as per Indian

Income Tax Act, Branch profit is clubbed with Head Office profit on accrual basis and credit for BPT paid by the concerned Branch is available against tax payable by HO in the year in which the Branch has paid tax. This system can create practical difficulties in getting credit for branch profit taxes due to time mismatch (Time Difference) & hence due care needs to be taken for timely remittance of branch profit to HO to enable HO to get the tax credit for BPT.

- The working group for "Study of Non resident taxation" which was constituted under the chairmanship of Shri Vijay Mathur gave their report in January 2003 wherein following recommendations to the Government are made.

- The credit for taxes paid overseas shall be allowed in the year in which the foreign taxed income is assessable in India.

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- That liability towards advance tax shall be computed after taking into account the overseas taxes paid.

MEMBERSHIP & PUBLICATION COMMITTEE

BUDGET BOOKLET IN GUJARATI

As an annual feature of our association, the Budget booklet in Gujarati will be realesed after presentation of budget proposals on 28th February. The sale price is Rs. 20/- for set of 5 booklet & Rs. 5/- for single copy. Please book your copies with any of the following.

Dilip GosarMulesh SavlaChetan KakkaRajesh Chheda

25652400 / 2564569325139932 / 2513924722884701 / 2288470223426511 / 23428173

C.V.O. CA's News & Views Vol.5 No. 3Jan - Feb 2003

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How to Set Up Offshore Web Businesses

Setting up your offshore website properly can protect you from fines or illegal activity with your local government. Establishing a web business offshore allows you many benefits including lower to zero taxes, and regulations that may be enforced in your home country, but not required in the country you choose to operate. If your business includes high-risk services or goods such as replica clothing, adult websites, or online gaming, an offshore website is necessary.

Instructions

Building the Business

o Select a domain name for your business. A domain name is any name of your choosing followed by a .net,.com, .org, and other extensions. If possible, attempt to find a company that provides domain names that is also based offshore. Domain names can be set up within 24 hours. Their cost can be less than 20 dollars. Godaddy.com would be an example of a domain provider.

o Research and select an offshore web host. Your web host is defined as the actual company that it is providing the server and space for your customers to visit your site. Ensure the company you select is based outside of your home country. You can locate offshore hosts by performing an online search. Ccihosting.com, for example, is based out of Panama.

o Hire a web designer for your website. You can locate a web designer using Elance.com and Getafreelancer.com. These sites allow you to hire web designers that will bid on your project. You can then choose which web designer has the expertise to build your site within your budget.

o Determine if any licenses are required based upon the country you choose to operate your website from. Typically, your offshore web host will have resources for starting online businesses in various countries and will specify if any licenses are required.

o Determine what form of payments you want to accept from your customers. If you plan on accepting credit cards, you will need to get a merchant account processor. Be sure to select a merchant processor that is located out the country as well. Sometimes your web host will also have resources for merchant account processors; otherwise you can perform a search online for offshore merchant account processors. Unfortunately, it is not wise to contact your local bank or utilize any banks in your home country. Instabill.com is an example of an offshore merchant processor.

Tips & Warnings

Offshore merchant accounts will charge a higher transaction fee and discount rate than if you had a local merchant account.

Offshore web hosts will have a higher monthly rate for web hosting as opposed to a local web host in your home country.

http://www.ehow.com/how_5807148_set-up-offshore-businesses.html

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The PayPal guide to selling overseas

https://www.paypal.com/cgi-bin/webscr?cmd=xpt/Marketing/general/CrossBorderHowToPrintable-outside

Financing

Check out governmental agencies that support and finance exporters, including: International Trade Administration Trade Information Center

Small Business Administration – Office of International Trade

Setup

The internet has no boundaries, and it is not complicated to reach out to international buyers. Some tips to make your website more appealing:

Highlight your ability to accept international orders Make sure your website has a multi-language toggle

List your products in local currency

Offer clear information on shipping, costs, and countries served

Marketing/Sales

Look to expand your existing domestic marketing to a global audience. There are many ways to attract international buyers. Local search tools and direct mail are possible options.

Payments

With 190 countries, 17 currencies and 150 million accounts worldwide, PayPal allows your business to: Accept a wide variety of global payment methods Receive payments worldwide

Sell globally with 17 currencies

With PayPal, your business has access to local funding methods worldwide, without the hassle of having to open multiple merchant accounts overseas. With a single PayPal account, you have access to all the worldwide benefits that can grow your business.

Shipping

For global shipping services, evaluate the shipping carriers servicing your area. The larger shipping companies offer packages and all-in-one solutions. These solutions may include handling, customs and excise documentation, and shipping calculators. For more information on your options, visit USPS Global Shipping, DHL International Shipping, FedEx International Shipping, and UPS International Shipping.

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Customer service

Language can be a barrier for international customer service. Most buyers ordering from your site will understand English. Make sure that return policies are clear for international transactions. Skype can help your international customer service with free member-to-member calls. If your company intends to set up a website overseas, it is important to provide customer service in the local language.

Regulations

Customs and documentation

All shipments must clear customs, the agency that regulates shipments entering a country or region. To help customs officials understand the contents, value, and purpose of your shipment, you must attach customs forms to the outside of your package so that they can be examined easily. Some shipping companies will handle this for you as a service.

As a general rule, you should not declare your package’s contents as a “gift.” It is against the law to misrepresent an item to avoid custom fees.

You can get information on key customs forms at USPS.com. Visit the World Customs Organization at www.wcoomd.org for more information about customs regulations around the world.

Duties and taxes

Duties and taxes may be charged to the buyer on certain items and vary by country. Make sure that your customers are aware that duties and taxes are their responsibility. Some general guidelines:

Items less than $200 USD. Buyers should not have trouble importing these items, but check customs rules for possible restrictions that vary by country.

Items more than $200 USD. Buyers importing higher-dollar-value items for personal use may have to pay a duty or tax. The amount of the duty, if any, depends on the type of item and its value. Some items can be imported without paying any duty at all.

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Step-By-Step Guide to Global Company Setup

http://www.articlesbase.com/ask-an-expert-articles/step-by-step-guide-to-global-company-setup-4448323.html Posted: Mar 21, 2011

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So, you've decided to go offshore. You've done your research, you know the risks, you're covering the costs.

This how-to guide for offshore company formation will help you run a smooth business setup. These rules apply to first-time global entrepreneurs and well-seasoned business professionals alike.

Setting up offshore, going global, incorporating overseas can be a daunting prospect. For every country in the world, the company incorporation requirements differ. Company law, tax laws, even company name registration – no two experiences are alike; but the process is actually quite straightforward and different jurisdictions will have common aspects.

1. Get connected.

Retaining a reputable business consultant is the first, and an important, step to starting your company abroad. The guidance of a corporate services firm will help to ensure smooth offshore company formation and also provides the strategic advice for successful business operation.

In many cases, there are pre-approval processes, or extraneous organisations that need to be consulted. In these cases, it is best to have a reputable consultant that already have the appropriate experience, connections and clearance to expedite the process and get government approvals. A consultant will file your paper work, ensure your fees are paid, open a bank account – all with little hassle.

2. Choose your location.

An offshore company – any company that conducts business outside the country of its incorporation – can be an optimum business solution for different business objectives: whether it's to save taxes, achieve greater business freedom, protect assets, minimize reporting, or maintain privacy. It is important to choose a respectable jurisdiction that is free of any negative stigma of illegal activities, such as money laundering and tax evasion. An offshore company in Singapore, or a Hong Kong offshore company, are investor-friendly business vehicles in economically and politically stable environments.

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3. Create your business plan.

An experienced consultant will first determine your basic business needs and discuss your options with you for offshore company incorporation. Upon agreeing upon a suitable location, structure, and detailed business plans, your consultant will collect all due diligence paperwork and proceed to create a detailed project plan, with timeline, services and fees.

4. Sit back and incorporate!

At this stage, your client involvement is minimal. Your company incorporation agents will register your offshore company with the appropriate government bureaus and registries. Upon completion, a reputable consultant will provide you a complete company kit including: your original Certificate of Incorporation; a copy of government-approved memos and articles; original share certificates; an extract from the Public Register with company details available for public viewing (if applicable in your chosen jurisdiction); and an original government receipt as evidence of payment of the annual offshore company registration license fees.

5. Get the most out of your incorporation.

Offshore company support services can also be provided if required. These may include a virtual office that offers a reputable international business address, telephone and fax line. Consider other ways your corporate services firm can help your offshore company to prosper after you have incorporated. For instance, opening bank accounts, finding an office, hiring staff, applying for employment visas, filing corporate taxes, designing a website, marketing your business… It's important to hire a consultant that can help you set up once you're on the ground.

Setting up an offshore company can be a rewarding strategy for entrepreneurs. However, the process requires planning to maximise effectiveness and avoid any issues. Engaging the services of a reputable company formation agent will help to ensure you're best interests are served.

Read more: http://www.articlesbase.com/ask-an-expert-articles/step-by-step-guide-to-global-company-setup-4448323.html#ixzz1MixUqiAy Under Creative Commons License: Attribution

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6 tips for launching a business overseas

Some businesses think around the block. Some set their sights a bit further.

At some point, it's possible that you've considered an overseas business. Perhaps you've been pondering relocating temporarily outside the United States (a la the proverbial Army brat), opening an overseas branch or subsidiary, or simply wondering about the mechanics of selling a product halfway around the world.

It's no shocker: Business in one nation can be worlds apart from its next-door neighbor.

The formula becomes all the more muddy depending on logistics. Are you going to actually be in the country or staying stateside? Still, there are a number of salient issues that apply to all overseas ventures, no matter the country or the business.

Here are six to get you started on the right foot.

1. Start with the U.S. Department of Commerce. This should be stop No. 1, regardless of whether you're packing your suitcase or staying put. The department can provide a wealth of information, covering such topics as overseas agents and

tax ramifications. Even better, it's gratis.

2. Spend some time determining just how "different" things will really be. One assumption that many domestic businesses are too quick to make about entry into international markets is that they're drastically

different from the U.S. — that laws, commercial customs and the like are, by definition, exotic and bewildering. That certainly may be case in some places — laws and practices of certain countries in Latin America, for example, have been described as such. But there are many other countries where the basic nuts and bolts of business isn't that far removed.That was what Bulent Bicer learned when he and his wife established EuroMarket Partners in Germany in 2003. In fact, the company's central mission — to assist American companies with sales throughout Germany — is indicative of those very sorts of similarities. "The biggest obstacle is the perception that the German market

is a 'foreign' market," Bicer says. "It's really not much different from doing business in a different state. But you have to know what you're doing or you're going to waste a lot of time and money."

3. Seek out local guidance. Bicer's experience doesn't mean that every overseas market is, in essence, a mirror image of the United States. Anything but. That makes hooking up with competent advisers, locally based, absolutely critical. Whether it's an attorney or a banker, make certain that they're located in the market where you want to set up shop. For instance, law firms

with international contacts will likely be able to refer you to an attorney situated where you hope to do business; check, too, with any sort of local bar association."Try asking people who've already done business there if they can suggest someone," says Burton Landy, chairman emeritus of the international practice group at Akerman Senterfitt, a Miami law firm. "It's critical to obtain good, local legal advice. You're not only dealing with a different legal system, you may be dealing with a different language and culture as well."

4. Research the particulars of

the market — and the market for your product. A potential land mine for Americans looking to do business overseas is the mistaken assumption of novelty — that a product or service, by virtue of being "American," is somehow unique enough to sell itself no matter where or how.That's a potentially fatal mindset. For one thing, unless you're looking to hawk cell phones in a country that barely has wire-based communications, it's dicey that anything is going to prove that singularly novel.On top of that, it bypasses this basic precept of

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starting someplace new, no matter the exact spot: You need to investigate your market exhaustively to determine whether, in fact,

you've got something someone there will take an interest in. "It's imperative to understand the market conditions such as overall potential, competition and marketing channels," Bicer says. "It's no different than what any entrepreneur would do before going into business in the United States."

5. Protect yourself and your intellectual property. It goes without saying that your physical security is at greater risk in a foreign country than at home. But don't overlook other forms of protection that are almost equally as critical. If, for instance, your operation is centered on a genuinely unique product

or even a recognizable logo, be sure to investigate necessary trademark protection in any country you're considering.Not surprisingly, the issue of intellectual property is substantially different from one country to the next, so make certain you line up any necessary patents and trademarks proactively — one by one, if need be. "It's simply important to know the rules where you'll be working," Landy says. "And that means protecting yourself well ahead of time."

6. Arbitrate, don't litigate. One final tip may seem idiosyncratic but, in fact, could

save you piles of both cash and time. No matter if you're selling a product overseas in abstentia or starting a new business by moving to a foreign country, make certain that any contracts you draw up contain a locally enforceable arbitration clause to settle any dispute that may crop up.It's an ace in the hole on several levels. First, consider the logistics. Settling a problem via arbitration doesn't necessarily mandate a lengthy trip. (A case heard in court, however, may well require just that.) Tack on the issue of cost — not merely for expenses paid for any sort of legal representation, but also for being in those parts of the world where a greased palm is

the most efficient means of obtaining fair and speedy jurisprudence. That's not only cost-effective but considerably less messy for all concerned."Arbitration is the best way of avoiding getting bogged down in any local court system," Landy says. "It's less expensive, quicker and, just as important, keeps the dispute private."

http://www.microsoft.com/business/en-us/resources/startups/business-opportunities/6-tips-for-launching-a-business-overseas.aspx?fbid=VQvaKOaBR3v#tipsforlaunchingabusinessoverseas

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Doing Business in Europe

A special track consists out of a number of courses, which have been successfully combined in the past. If you register for the the special track, instead of for the individual courses, you will benefit from a substantial discount.

Experience what it takes to do business in Europe successfully. Focus on European politics and economics, zooming in on business life in Europe, and take your business competencies to the ultimate test: a real-life management game on marketing, finance or logistics.

Part 1 (Utrecht, the Netherlands)

The first part of the course lasts two weeks, and offers an introduction to Europe, a continent of great diversity. Each of its countries and peoples carry their own cultures, religions, traditions and languages, yet the majority of them are now engaged in a joint project aimed at political and economic integration in the European Union.

This course aims to introduce you to the main challenges and opportunities facing this project. You will analyze topics such as the emergence and construction of national identity and culture; processes of globalization and internationalization, and their effects on local cultures; citizenship in a European context and different national approaches to social issues. You will also examine the structure and institutions of the European Union and learn how national cultures are affected by and react to supranational developments. You will be introduced to diverse cultural identities of a number of European nations. This will help to understand the complicated structure of Europe and may shed some light on the motives for integration as well as the obstacles on the way to European unity.

Outstanding scholars will focus on the history, social and economic structures, culture, and current political debates within the wider European community. A visit to the European Commission and NATO Headquarters in Belgium is also part of the programme.

Part 2

The second part of the programme offers a practical approach to dealing with intercultural differences in a business setting. How do you act in negotiations with business partners from France? What can you expect in a first meeting with Spanish prospects? How do you prepare your marketing strategy for entering the German market? And, of course, how do you deal with the Dutch? Two case study programmes are offered to you: one focusing on the textile industry in Northern Italy, the other on the flower industry in the Netherlands. Every week in this part of the programme will be devoted to a specific theme.

Theme 1 ‘International Business Ethics & Communication’ (Utrecht, the Netherlands)In this week’s programme you will focus on how to approach international/European markets effectively, using intercultural sensitivity and creativity. You will study how culture influences our perception, and learn to be culturally creative in international marketing communication, promotion and advertising. You will become aware of the culture(s) that shaped your perception, and your preferred style of communication and management. You will become sensitive to communication styles of people with different cultural frames of reference. You recognize these differences, not as a problem, but as a source of innovation for your future international career. You will be able to use the most effective style to reach clients and consumers world-wide.

Theme 2 ‘Trust in Textile’ (Biella, Italy)This week’s programme offers you a case study of the textile industry in Northern Italy. And what better place to focus on this subject than in Northern Italy itself! The textile industry in this part of the world had almost everything in favor of becoming and staying a very strong industry. Brands like Zegna and Cerruti became world famous. However, the textile industry has changed dramatically, with especially Asia taking

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over large parts of the production process. How did this happen, and what can the industry in Northern Italy do to survive? This week will take place at a partner university in Northern Italy to take a closer look at the region and the industry.

Theme 3 ‘Bulb Business’ (Utrecht, the Netherlands)This week’s programme offers you a case study of the flower industry in the Netherlands. A worldwide business success, despite the odds apparently being so strongly against it. How did the Dutch manage to become so successful in this industry? Which economical, social en geographical factors were beneficial for the development of this industry, and which were not? How did this change in the course of time? And how did the Dutch culture influence the expansion of the market?

Part 3 (Utrecht, the Netherlands)

The third part of the full course lasts one week, and offers the real-life experience of a management game. You can choose to focus on marketing or finance in one of our management simulation games, or focus on logistics in the course business logistics from A-

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Doing Business in Europe - An Etiquette Primer for Americans

http://www.ravenwerks.com/?page_id=395 By admin, on July 16th, 2009

Paula Williams

The Opportunity

You’re an American businessperson whose company is expanding into European markets. Or your company is acquiring or has been acquired by one. Or you’re courting a supplier or venture capitalist from Europe. In any case, you want to

make good impression.

You’ve heard the rumors that Americans are thought to be, well, somewhat less than

cultivated. And it’s true that American businesses often place more stock in talent and skills than

they place in polish and style- we’ve all seen American managers who are brilliant strategist

but rudely answer cell-phone calls or type in their PDAs while having discussions with their

subordinates. We know a defense attorney who has a stellar record in spite of (or perhaps because

of) his unkempt appearance. (Maybe it’s disarming to jurists?) And we all know talented computer wizards who earn outrageous salaries going to work in jeans and flip-flops every day.

In Europe, dress, manners and demeanor are more important than they are in the States. But as

business here becomes more global and as businesses become more competitive, even the

most casual Americans are learning that there are benefits to having the more cordial manners of

their European counterparts.

Christmas Market in Germany

The Solution

There are some rules and standards of etiquette in Europe that are puzzling to Americans at first, and we cover some of those in this article. There are also some fairly simple rules of thumb that will spare you some awkward moments and prevent unintentional offenses.

Dress

For the past few years in the United States, businesses have been tending toward “business casual”- meaning polo shirts and casual slacks for men and women. In the recent few months, most industries are gearing back to a more “dressed up” appearance – blazers and slacks (if not a coat and tie) for men and more corporate pantsuits and dresses for women; although many workplaces still have “casual Fridays.”

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As far as we know, there are no “casual Fridays” in Europe. A dark-colored coat and tie with a light shirt for men; and more formal skirt and pantsuits for women are de rigeur. Anyone wearing something less formal might be seen as someone who does not take his business very seriously, or who has too little respect for the people he’s meeting with to spend the time on his appearance.

Business Interactions

Typical business interactions are more effective (and more enjoyable!) if you consider some cultural differences such as titles and introductions, language differences, differences in organizational structure and philosophy, and issues of style in matters such as taking blame and giving credit, giving compliments, and resolving differences of opinion.

Titles and Introductions

In the U.S., if you work for the same company as someone else, you can pretty much take for granted that you’re on a first-name basis with them. Everyone from the CEO to the janitor is addressed by first name only, even if you’re barely acquainted with them. That often transcends companies, and anyone who calls you Mr. or Ms. is probably trying to sell you something.

The opposite is true in Europe. Calling someone by their first name (unless invited to do so) is considered presumptuous and too familiar for business interactions. Courtesy titles and last names are the norm.

Introductions are also very different. In the U.S., introductions are almost an afterthought- you get “introduced around” an office if you’re new to the company, and introductions in meetings are cursory if done at all.

In Europe, introductions are very important, and they follow the old rules of introducing the “less important” person to the more important one. If Mr. Smith is the owner of the company you work for, and Mr. Jones is your newly-hired colleague, an introduction would be as follows:

“Mr. Smith, I’d like to introduce you to Mr. Jones.”

If you are standing when an introduction is made, shake hands (firmly, please!) with the person you’re introduced to. If you are sitting, stand up, face the person, and shake hands. Always stand when making introductions yourself.

In meetings, formal introductions may be made before the meeting before the participants take their seats, or everyone may go around the table and introduce himself or herself, (while seated) but a meeting is never begun if there are any participants that have not formally met. Follow the lead of the meeting host, or if you are hosting a meeting, ensure that introductions take place before addressing any items of business.

Language

You may be told by a company that all business will be conducted in English, so there is no need to learn a second language. You will find, however, that there are differences in structure and usage between American English and “European business English.”

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Language is more formal, and although there may be some slang (especially in new fields like computers) it’s best to avoid American slang and newer words.

The structure of sentences is a little different. The adjectives often come after the noun.

Take these differences in stride, and try to adapt your style of speaking and writing to the people you’re doing business with. It’s much more effective to communicate in he the way the majority of people are comfortable with than to try to change things to the style you may be more used to.

Organizational Structure and Philosophy

Companies in the U.S. have been tending in the last few years away from hierarchical systems and are more “flat” in style and structure. Senior managers might inhabit cubes the same as regular staffers, everyone is on a first-name basis, and everyone’s opinion carries equal weight if the idea has merit. In Europe, things are a bit more traditional and people are more deferential toward people who have “earned their stripes.” It’s fine to put forth ideas if you’re not the “top dog,” the only difference is in the style of communication. It’s much more effective to give suggestions than to pronounce opinions. (Note- although few would admit to it, this style often works better in the U.S., too!)

In the U.S., managers often listen to discussions of team members and say very little- allow the team members to come to a resolution themselves, and only facilitate discussion, resolve issues, or provide information as necessary. In Europe, managers are expected to be active participants, actively asking questions during the entire process. Otherwise they may appear to be uninterested or not knowledgeable.

Take Blame and Give Credit

In the 1930s, an American named Dale Carnegie wrote about the practice of taking blame for things that go wrong and giving credit for things that go right. Unfortunately, too few Americans seem to have taken his advice. But Europeans have! (Or maybe it was their practice all along and Mr. Carnegie happened to be the one to pass that along in the States. )

By admitting fault quickly and emphatically when you’ve made an error, you immediately take the antagonism out of a problem, and everyone’s focus turns more quickly to a solution rather than fault-finding.

Once when I was new at a company and putting together a web page, it was discovered that the search criteria didn’t work as expected. Although I wasn’t sure what was wrong with it, I admitted in an e-mail- “This is the first time I’ve done this, so I may have made an error on the page.” One of my colleagues immediately fired off an e-mail to everyone involved indicating that there was absolutely nothing wrong with my coding and there must be another problem. It was discovered that there was a problem with the search mechanism (not the page.) If I had not admitted fault (even incorrectly!) or had been defensive about my work, these people would still be wondering if there was something wrong with the code, coming from a “green” programmer as it were.

Passing along credit is even more effective than taking it for yourself. If a project goes well and you are congratulated, it is much more charming and effective to say “Thank you, but the

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administrative staff set it up beautifully” or “The programmers did all the work.” The administrative staff or the programmers will appreciate it, and the person congratulating you will think more rather than less of you for passing along credit.

Compliments

Another thing that Mr. Carnegie wrote about that seems more common in Europe than America is the practice of giving compliments.

In America, compliments are often seen as passe’ or condescending. Complimenting someone is seen as unnecessary. People refrain from pointing out things about differences in people’s dress, practices or cultures. Some men refrain from complimenting women colleagues in particular because they are trying to be “politically correct.”

Everyone likes to hear nice things about himself or herself, regardless of where they are in the world. But in Europe in particular, giving compliments is a perfectly acceptable and even expected mode of interaction. Compliments can be very simple- admiring someone’s taste in office furnishings (assuming you really DO like their office) or complimenting someone on their proficiency with the computer or complimenting their analysis of a situation. Many Europeans for whom English is a second language particularly like to be complimented on their grasp of English by Americans. (And often their English is better than ours! See notes on language.)

Being genuinely interested in other people, and expressing sincere compliments is a practice that is much more common in Europe but is effective in developing rapport with people anywhere.

Differences of Opinion

In the U.S., it is common practice at many companies to have spirited arguments in hallways and boardrooms. People that disagree with one another may use strong language or even raise their voices. In teams of people that have been working together for a long time, this is often seen as a healthy airing of opinions and no one takes the disagreement personally.

In Europe, however, differences of opinion are handled more decorously. If you disagree with someone, it is typically more effective to start with the points you agree on and work toward the differences.

“I agree that this advertising strategy will be expensive, and I understand your concerns that this year’s budget numbers will not support extravagance. However, I think that my idea may not cost as much as it might first appear.”

Handling differences of opinion in a more diplomatic fashion will be much more effective in Europe. And probably in the U.S., as well.

Meetings

Meetings in the U.S. are often brief, to the point, and may seem abrupt to people new to the company. There is often a focus on a particular problem or agenda item that people dive right into and attack from all sides. One company I worked for had fifteen minute meetings every morning to give status on the previous day’s results and the coming day’s planned activities. At exactly 8:30

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someone would yell “Time!” and the meeting would adjourn- anything unsettled from the meeting was postponed to the following day’s meeting or assigned to someone to resolve immediately. It was a remarkably efficient use of time and everyone got immediately about their business without taking up too much of their day. It was also abrupt to the point where newcomers to the company considered it rude and even offensive, especially if they had something they felt warranted further discussion.. Efficient companies often schedule meetings before 9:00 a.m. and after 5:00 so as not to interfere with “work time.”

People in meetings in the U.S. often “multi-task”- answering cell phone calls and pages; or responding to e-mail on their digital devices or taking notes.

Meetings in Europe are generally more relaxed. Introductions are never neglected, and meetings often start with a joke or a “brain teaser” puzzle or activity to get everyone involved and thinking together. Meetings are seldom scheduled before 10:00 a.m. or after 3:00 p.m., in deference to people’s family or social activities.

Often, a significant amount of meeting time is used in setting up ground rules, determining the purpose and expected outcome of the meeting, and so forth, especially when there are people from several cultures involved.

People participating in meetings in Europe are expected to be involved in the conversation, not buried in their digital device or steno pad. They demonstrate interest and attentiveness to the person speaking with their body language and by asking relevant questions.

Dining

Dining in the United States is often a rushed activity. Meeting someone over breakfast or lunch is often informal and hurried. People eat and talk efficiently, and are done in an hour or less.

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10 Steps to Starting a Business in China

China's fast-growing consumer class is giving business owners new reasons to set up shop abroad. Here's how to start and grow your business.

By Issie Lapowsky | Jul 12, 2010

WELCOME TO SHANGHAI. The bustling metropolis has more skyscrapers than New York City and a transit system as big as London's.

Dan Harris Lou Hoffman

Robert Collins

John Frisbie

Ken Wong

Partnerships

Lou Hoffman, CEO of the public relations firm The Hoffman Agency, wanted to place a recruitment ad in a Chinese paper for his new office in Beijing.

Back home in San Jose, California, he would have simply faxed it to the local paper.

In Beijing, he had to get the ad approved by four different government agencies - in person.

"It's a huge city, and there are traffic jams 9-5," he recalls. "We drove to the first agency, and they approved it. We drove to the next agency and they approved it. We drove to the third agency and they said, 'You'll need to tweak this.' So we needed to go back to the first agency because what they approved wasn't right anymore."

Getting one classified ad approved took Hoffman about 18 hours total.

"In the big scheme of things, it's not the end of the world," he says, "but it was a symbol that I was in a different world and how they get things done is completely different."

It's a realization all foreign business owners entering the Chinese market have to face, and while it may be frustrating to forgo all your Western sensibilities, experts say it's worth it to stake your claim in this growing consumer market.

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"Today's story is all about the new Chinese consumer. There's been a huge growth in disposable income, and the Chinese are ready to spend," says Robert Collins, co-author of Doing Business in China for Dummies.

"Europe's mired in mud. The U.S. economy's flat. So where's the action? It's in China," Collins says. "If you want to play, you've got to be here."

We've mapped out the 10 steps you'll need to take to get there, and it involves a lot more than getting a visa.

1. Do your homework.

Lucky you. You're not the first United States citizen to break into the Chinese market, so you don't have to learn the tough lessons the hard way (well, not all of them at least).

"There's no reason to be reinventing the wheel on things people have done before that could be avoided," says John Frisbie, president of the U.S.-China Business Council, based in Washington, D.C.

Talk to people who have opened offices in China. Ask them how they succeeded and especially how they failed. It's not just the Americans you need to talk to, either. Frisbie says you should travel to China and start networking at local trade shows, as relationships are crucial to doing business in the country. A calendar of trade shows is available here.

Make sure you're informed about the state of the industry you're in. A lot of this research can take place from your own home. Check out the five-year plan that the Chinese government publishes, which details what types of businesses they're looking for.

Dan Harris, a Seattle-based blogger and founding member of international business law firm Harris & Moure, says, "China wants high-tech. China does not want pollution. They want businesses that will give a lot of people good jobs, and they want to encourage development inland."

Because China's government is so tightly affiliated with its businesses, knowing what the government wants will help you draft your business plan later on.

Dig Deeper: In China, the Cost of Doing Business Rises

2. Pick a location.

At this point, you have an entire country at your disposal, but you can't set your business down just anywhere and expect to be a success.

First, get to know the big cities. Shanghai, Beijing and Guangzhou are the major business, government, and industrial centers. The very nature of your business may require you set down in one of the big cities. If you're a tech company, for instance, Beijing may be the place for you. Find out where the action is happening in your industry.

The major business centers aren't your only options, either. Some companies find moving inland to be the better bet. Ken Wong, president of the holding company Covenant Group of China suggests asking yourself the following questions, especially if you're selling goods rather than services, to determine how near to or far from the coast you need to be:

What are your transportation needs? What are your logistical needs?

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How can you get the goods from the port to your location?

What government inspections and restrictions will you be subject to?

Once you've settled on a region, you have to find an office, since you'll need proof of a lease to register your business.

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"You have to get an office rent agreement and you can use that as your office address," says Thomas Yang, a Philadelphia-based legal consultant with Stevens & Lee, and former judge and corporate lawyer from China. The agreement essentially promises you the space on the condition your business gets approved.

Dan Harris Lou Hoffman

Robert Collins

John Frisbie

Ken Wong

Partnerships

Find office space through a realtor, just as you would back home. Whatever space you choose, though, make sure it is zoned for the type of business you're planning on opening.

Dig Deeper: Second-tier Cities, First-rate Growth

3. Choose an entity status

Before you register with the government, you need to decide what type of business entity to register. The most common for foreign businesses are joint ventures, representative offices, and wholly foreign owned enterprises. Each, of course, has its pros and cons.

A joint venture requires a partnership between a foreign business owner and a Chinese citizen. Though joint ventures may sound like the safest route, experts warn against them. Critics say the most common problem with joint ventures is no more than a classic case of "same bed, different dreams" syndrome.

"They fail nine out of 10 times. You're working with someone who's familiar with the territory on their turf, and they will end up with the business," Harris says.

Representative offices are an easy, low-cost way to go, but it drastically limits the scope of what you're allowed to do in China. As Yang says, "A representative office is just there to represent your offshore entity." In other words, you cannot deliver any services or products, which means you also cannot generate revenue. A representative office affords you little more than the ability to show your face and build your brand name.

The most common type of entity, therefore, is a wholly foreign owned enterprise, known as a WFOE. According to Frisbie, "75 percent of American investment in China these days is 100 percent American-owned facilities," because it gives business owners maximum quality control.

Not surprisingly, though, a WFOE is much more complicated to set up. It takes more time to get approval from the government, and it requires a minimal capital investment that you must put in a Chinese bank. Harris says. And, he notes: "That amount can vary greatly depending on the nature of your business and where you're setting it up."

Dig Deeper: How to Build an International Brand

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4. Develop a business plan.

A detailed five-year business plan is crucial, because once the government approves it, you will be able to operate only within its guidelines. If you start offering a product or service that is not in your business plan, the Chinese government can shut your business down. The same goes for where and how you operate.

"Make sure your business plan is as broad as possible to allow the company to operate freely," says Collins. "U.S. companies expect to operate in a certain way here and they realize their business license may not allow them to do that."

While it needs to be broad, it should also be specific. Make sure you include your location, projected revenues, product or service description, expected number of employees and budget requirements in the plan.

It's also wise to tailor your plan to China's five-year plan.

"If you're making a high-tech piece of lawn equipment, and you just apply saying, 'I'm going to be making lawn equipment,' they're not going to look at you very favorably," says Harris. "But if you say I have this new, software-driven, high-tech piece of lawn equipment that's going to put 20 software engineers in China to work right away, then it's a different project."

To get that message across, of course, you'll need the right representative.

Dig Deeper: How to Write a Great Business Plan

5. Find a liaison … or several.

No matter how informed you are, you won't get very far without consulting a representative to register your business. According to Collins, there are tons of organizations in the United States that can help you navigate the complicated application process. Consult the U.S.-China Business Council or the Ministry of Commerce at the Chinese consulate.

Wong also suggests getting in touch with the U.S. Commercial Service office, which can direct you to local desks throughout China. All of these resources should be able to recommend a trustworthy international corporate lawyer for you.

Harris says to beware of local Chinese business agents that charge $800 for a bad English translation of the business application. "Your chances of getting your company registered with that are zero," he says. Perform thorough background checks or talk to other American business owners to find out who they used to register.

"We used Baker & McKenzie, and they are expensive, but you get what you pay for," says Hoffman. "They did a fantastic job."

A qualified liaison should be able to tell you where you need to go to register, whether it's the local, provincial or national government, and should do the talking once you get there. Harris says, "You need somebody who has negotiated that territory a number of times before and you absolutely have to have people who speak Chinese to go meet with the local officials."

Dig Deeper: Learn to Love Your Lawyer

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6. Organize the necessary documents.

"There's the written laws in China and then there's the reality on the ground," says Harris. Nowhere does this theory apply more than when it comes to what documents you'll need to register.

Though the documents you'll need to register for a WFOE will vary from place to place, you can find an extensive list of what you might need, here.

Always prepare for a wildcard, though. "We've had local authorities say they want to see exactly what it will be we're manufacturing, so we bring it in," Harris says. "We just did one, and they required we write a legal opinion explaining how LLCs worked in the United States. We'd never had that before, but when it happens, don't fight with them, because you'll lose, and you'll waste time."

Application forms may also differ depending on who you're dealing with, so Harris says it's usually best to get it directly from the local authority.

Dig Deeper: How China Will Change Your Business

7. Trademark your intellectual property.

Intellectual property violations are a big issue for foreign investors in China. Many U.S. manufacturers believe that because they have a trademark at home, it will hold up in China, but that's not the case. In China, the first person to register a trademark owns the rights to it, regardless of whether or not that person is the first person to use the trademark.

"Somebody could go register what you thought was your trademark," Harris says. "Then, when you're about to ship $3 million worth of product, and your product's held up at the port, you get a phone call from someone saying, 'You're using my trademark, and I'd like to sell it to you for $300,000 a year.' If you don't pay them for the trademark, your goods will never leave China."

You can find the trademark application here.

Dig Deeper: How to Stop Intellectual Property Theft in China

8. Find a bank.

This part should be quick and easy, since there are plenty of banks with a huge presence in China. Try HSBC, which is based in Hong Kong, or Bank of America, which you can find all over the country.

"If you're dealing with a bank that doesn't have any relationship with banks in the United States, it makes it tough to keep track of your money," says Wong. "You want to make sure you have a bank in the United States and a bank in China that has some sort of corresponding relationship, so your banking is more transparent."

Dig Deeper: Online Resources for the China Bound

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9. Hire a staff.

Hiring in China is a delicate process, especially when it comes to hiring managers. Don't assume that just because a person's English is impeccable they'll be able to run the business properly.

"If all things are equal," Frisbie says, "the language skills can be greatly beneficial, but it's far more important to have a smart business person in that role who's going to run the company the way you want it run."

In Hoffman's case, he tracked down a Chinese public relations professional and asked that she come out to the company's headquarters in Silicon Valley to learn the ropes for several months. She then returned to China with all the company's values and practices in mind and started the business.

"I think that really served us well," he remembers.

There are other options, of course. Try reaching out to human resources consultants and headhunting agencies in China, and don't disregard American-born Chinese or Chinese citizens who were schooled in America, either.

"Seriously consider using talent that's had some overseas experience that have been able to bridge the U.S. community and the Chinese business world," Collins recommends.

Good talent doesn't come cheap, according to the experts, so if you want the best, you have to be willing to pay them what they're worth.

"If you go to China expecting a deal, you'll be sorely disappointed," Hoffman says.

Once you have trusted managers in place, they should be able to assist you in hiring the rest of the staff. Remember, though, you need to have a contract for every employee you hire, as well as an employee manual. Without either, says Harris, "it may become nearly impossible for you to fire anyone."

"In China, you need a reason to fire someone," he explains. "That reason needs to be set down in your employee manual, otherwise your ex-employees can sue you for a lot of wages."

Dig Deeper: Is the Recession Draining the U.S. of Talent?

10. Take it slow.

Now that you're all set up, you have to manage expectations. If Hoffman's story about the recruiting ad proves anything, it's that things can move slowly in this fast-growing country.

"If you don't leave your Western lens behind, it can be frustrating," Hoffman says.

Don't jump into quick business deals just to turn a profit. It takes time to build business relationships over there. "It's much different than the U.S. in regards to the amount of time that's spent developing the business relationship before the actual deal is consummated," says Wong.

What will win you success in the Chinese market is patience. "The Chinese have been doing business in a certain manner for thousands of years. Don't even start to think for a millisecond that you're going to change it."

Dig Deeper: A Cheaper China

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http://www.inc.com/guides/2010/07/how-to-start-a-business-in-china.html

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Things to learn from how the USA sees the market abroad

Making it easy to launch a new enterprise is one of the many ways in which the U.S. has led the world in fostering a dynamic entrepreneurial class. Other structural factors, from bankruptcy laws to tax policies and employment regulations, help small businesses thrive here. And those moves have been copied into the playbooks of other nations eager to see their homegrown entrepreneurs create jobs and spur economic growth.

So what are the best countries for entrepreneurs now? Where might American entrepreneurs think about setting up overseas? And where should they keep an eye out for global competitors? Some of the stars - such as Iceland and Denmark - might surprise you. Laggards include India.

Our quest for startup-friendly countries began with the World Bank's Doing Business reports (doingbusiness.org), which every year measure the entrepreneurial climate of 175 nations in two ways: starting and operating a business. But the lists give an incomplete picture. France, for example, ranks in the top 10% for ease of starting a business and in the top fifth for operating one, but it has notoriously low rates of entrepreneurship.

Clearly there was a missing dimension. That brought us to the Global Entrepreneurship Monitor (GEM), an annual study produced by Babson College and the London Business School. Its 2007 High Growth Entrepreneurship Report (gemconsortium.org), due this month, gave us what we needed: a glimpse at national rates of high-expectation entrepreneurship - how many American-style entrepreneurs a country produces.

Those individuals, who can get good jobs, become entrepreneurs because they see a chance to build substantial companies. They aren't starting subsistence businesses for lack of other opportunity. Only 7.4% of business launchers in GEM's 53-nation survey fall into the high-expectation bucket, but such men and women are responsible for 70% of the jobs created by small business. Our list gives equal weighting to the World Bank data and the GEM high-expectation ratings.

Our top four - New Zealand, the U.S., Canada, and Australia - place relatively few hurdles in the path of business owners. In each nation it takes between two and five days to start a business and requires five or fewer steps to do so. Those nations impose relatively low marginal tax rates too. That's critical, says William Bygrave, a professor at Babson and director of the GEM project, because it helps business launchers- and the friends, relatives, and angels who support them - accumulate savings for seed money.

Those nations also have in common legal systems that protect intellectual property, enforce contracts, and provide relatively rapid adjudication of disputes. Poland, which at No. 44 tops our bottom ten, is notorious for its sclerotic courts: To settle a claim of unpaid receivables takes upwards of 1,000 business days.

In general, Latin America fares poorly. Despite efforts to streamline launch processes in Brazil - the World Bank applauds new online systems in some states - it still takes 17 steps to register a business. Brazil has many people starting businesses, mostly entrepreneurs by necessity, but produces ambitious entrepreneurs such as Veloso at less than half the U.S. rate.

http://money.cnn.com/magazines/fsb/fsb_archive/2007/06/01/100049637/index.htm

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Do You Need a Legal Entity for the Conduct of Your Business in the United States?

http://www.usbranchoffice.com/what-constitutes-doing-business-in-the-united-states.html

Why can't you just start doing business in the United States? Why can't you just send over some employees, solicit business in the U.S., and start servicing that business either with those U.S.-based employees or back home in your home country? Subject to the immigration laws, your company actually can send over employees to do business in the United States. There is no requirement that your foreign corporation must conduct business through a U.S. legal entity, but there are several reasons to set up a U.S. legal entity for the conduct of the U.S. business.

The main reason for conducting the U.S. business through a U.S. legal entity is taxation. If your company just establishes an office in a state in the United States and starts conducting business, that state considers the entire company to be "doing business" (see below on "doing business") in that state, and the entire company becomes subject to tax in that state. That is usually a bad outcome for a company. Similarly, the entire company would also come under the tax jurisdiction of the U.S. government (in addition to the state government), and would have to file tax returns and pay taxes as a unitary organization on the worldwide operations. Therefore, it is desirable for tax planning to have a U.S. entity through which your company would conduct its business in the United States.

"Doing Business" In the United States

The first step in deciding if you need a legal entity in the United States is to determine if you are or will "do business" in the United States. "Doing business" is a legal term that means your company has established sufficient contacts to a state through owning or leasing property, having employees in that state, or having a regular physical presence in that state that the state would recognize your company as using that state's market and having the benefit of that state's laws. "Doing business" is a determination that is done at the state level, not the federal level. Many internet-only businesses that do not have any physical presence in a state are not doing business in any particular state, and thus do not need a legal entity in the United States for the conduct of their business. However, as soon as there is any physical presence in that state, you should consult with an attorney or tax accountant to determine if registering to "do business" in that state is required.

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Most and least friendly countries to small biz

Rank Country FSB Score Rank Country FSB Score

1 New Zealand 2.0329 Colombia 1.29

2 United States 2.0130 Russia 1.29

3 Canada 1.9931 Austria 1.28

4 Australia 1.9332 Mexico 1.26

5 Singapore 1.8833 Turkey 1.26

6 Hong Kong, China 1.8634 Korea 1.25

7 United Kingdom 1.8535 Czech Republic 1.24

8 Ireland 1.8536 Italy 1.20

9 Denmark 1.7537 Taiwan, China 1.15

10 Iceland 1.7538 Spain 1.11

11 Norway 1.7039 Hungary 1.11

12 Sweden 1.6440 Slovenia 1.10

13 Japan 1.6441 Uganda 1.05

14 Finland 1.6042 China 1.05

15 Thailand 1.6043 Argentina 1.04

16 Chile 1.5944 Poland 1.02

17 Israel 1.5945 Croatia 0.95

18 Latvia 1.5746 India 0.94

19 Switzerland 1.5747 Jordan 0.94

20 France 1.5048 Uruguay 0.92

21 Jamaica 1.4949 Ecuador 0.92

22 Netherlands 1.4550 Brazil 0.92

23 Belgium 1.4551 Philippines 0.90

24 Germany 1.3752 Greece 0.76

25 Portugal 1.3653 Indonesia 0.61

26 Peru 1.33

27 South Africa 1.32

28 Malaysia 1.31

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Top Ten Countries Doing Outsourcing

A Chillibreeze report

Outsourcing has become a mainstay in the world economy today. Large corporations are looking at reducing their operating costs by seeking out the same work quality at lower costs. According to the 2005 Duke University CIBER/ Archstone Consulting study, 73% of Fortune 2000 companies say off shoring is an important part of their overall growth strategy. Here is a list of the top ten outsourcing destinations.

1. India is the leading star of this global outsourcing surge, cornering approximately 80-90% of the global offshore market. It has to its credit a large pool of talented and English speaking professionals (200,000 IT graduates per year), robust infrastructure as well as the advantage of providing outsourced services at a low cost. It leads over its nearest rival by a wide margin mainly due to its early start in the field.

2. China is being touted as being the next big IT outsourcing destination and is expected to rival India by 2007. The Chinese IT services market has grown nearly 42% a year since 1997. This growth is mainly built on the pricing plank and a study by PriceWaterHouse Coopers that suggests that using China based outsourcers could save companies approximately 37% as compared to those from India. The Chinese government has also put in its bit to enhance China’s image as an outsourcing destination. It has liberalized the economy, laws and policies and laid a major emphasis on education. China is fast becoming a low cost alternative to its economically developed neighbors like, Korea, Japan, Taiwan, Hong Kong and Singapore.

3. Malaysia has well-developed world-class infrastructure and its outsourcing industry has good government support. A number of policies are being put in place to widen the labor pool and improve proficiency in English and technical skills.

4. Philippines has many years of experience in the BPO space and have to their credit a vast population that speaks English with American accents, while also being exposed to Western culture and global business. It also has high bandwidth as compared to its other neighbors.

5. Hungary is slowly emerging as Europe’s leading IT service providers. Once an Eastern Bloc country, it has the advantage of offering its European counterparts with near shore facilities at a much lower cost. It also has to its credit a large pool of tech savvy workers with cultural compatibility to Western Europe. Among the top companies that have set up shop here are the likes of TCS, EDS and IBM. In a deal worth $35.54 million, IBM was to create approximately 700 service centre jobs, which include financial services, procurement, human resources and call centre positions.

6. Czech Republic also boasts of low costs and cultural compatibility combined with good political stability. It is emerging as an ideal destination to service the German market.

7. Russia is emerging as a preferred destination for outsourcing of complex R&D problems for most global corporations. The IT companies here are built on the “boutique” approach, which focuses on the solving of advanced R&D problems. Russia has over 2 million people working in their over 4500 R&D centers, and of these at least 1 million are researchers and scientists. This pool of highly educated and talented workers known for their unconventional approach and complex problem solving capabilities has attracted companies to outsource their R&D work to Russia. The companies with a presence here include Bechtel, IBM, Intel, Boeing, Microsoft, Sun Microsystems and Motorola.

8. South Africa is one country that is slowly emerging as an outsourcing destination that is taking advantage of increased competition worldwide. South Africa is advantageous to the UK market as it lies in the same time zone and has a similar culture. It has to its advantage good infrastructure; call center operation capabilities and mastery over the English language.

9. Mexico is increasingly becoming a preferred destination to service Spanish speaking populations. Big companies like Accenture, IBM and EDS have a significant presence here.

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10. Poland is another country favored by the German companies as it has a large base of German and English speakers. Its advantages as an outsourcing destination lie in its cultural and time zone compatibility for Western Europe.

Article published in December 2006.

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The World's Most Corrupt CountriesLiz Moyer and Andrew Farrell 06.26.08, 6:00 PM ET

Corruption continues to intensify in two-fifths of the world's nations, nurtured by persistent poverty, political instability and crime.

In percentage terms, the number of countries perceived to be corrupt fell slightly, according to recent surveys by Transparency International, an international watchdog group. But that's only because the sample size of its annual study has gotten larger with the addition of 17 countries.

In Pictures: The World's Most Corrupt Countries

Of the 180 countries looked at in its most recent rankings, 132 had index scores below 5, including Greece, India, Mexico, Brazil, Saudi Arabia and Thailand. Some 56 countries were rated below 3, a level that indicates rampant corruption, including Argentina, Pakistan and Russia.

Transparency International developed its index on a scale from 0 to 10, with the lowest number indicating the highest perception of corruption. The index is based on worldwide surveys of country specialists, business officials, human rights monitors and others.

For the most recent index, the best-scoring countries were New Zealand, Denmark and Finland, sharing an index ranking of 9.4. At the bottom of the heap, where perceptions of corruption were highest, Somalia and Myanmar are tied with an index ranking of 1.4.

Of course it's easy to see the difference between the two ends of the spectrum. New Zealand, Denmark and Finland have wealth and stable economies and governments, and don't stoke a lot of international controversy. Somalia and Myanmar are torn by armed conflict and political oppression.

The divide runs along economic realities. Forty percent of the countries rated below 3 are classified by the World Bank as low income. It doesn't help if the governments are weak or engaged in a struggle for power.

"Countries torn apart by conflict pay a huge toll in their capacity to govern," says Huguette Labelle, chairman of Transparency International. "With public institutions crippled or nonexistent, mercenary individuals help themselves to public resources, and corruption thrives."

Myanmar, also known as Burma, probably wins the prize for worst public relations of the year. Last fall, the military-led government cracked down on protesting monks, killing a few in the riots that broke out as the government rounded up protesters. Internet access was blocked to prevent news from getting out to the outside world.

To top it off, in May the Burmese government hindered international relief efforts after the most damaging cyclone in its history, which killed an estimated 130,000. America's first lady, Laura Bush, has led an active campaign against the military junta, calling on international bodies to pressure it to move toward democracy.

Somalia has its own problems, not least of which is persistent and growing piracy in the waters off its shores. There have been more than two dozen piracy attacks reported in the Gulf of Aden since the beginning of this year (see " Sea Piracy's Bloody Growth").

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In Pictures: The World's Most Corrupt Countries

The double whammy of weak government and abundant natural resources also stokes corruption, particularly where personal greed can run rampant without fear of recrimination. In Equatorial Guinea, 10th on the Transparency International list, 30% of the profits from recently discovered offshore oil fields goes straight into the state officials' pockets.

Nearby in the Democratic Republic of Congo, tied for 10th with Guinea, government officials demand payments from mining companies. The country has abundant reserves of some of the most sought-after commodities: copper, gold, uranium and coltan.

There is hope, however. Several African countries showed marked improvement in their rankings over one year, including Seychelles (to 57 from 63), South Africa (to 43 from 51) and Swaziland (to 84 from 121). Transparency International said the jumps mean genuine reform efforts can help combat perceptions of corruption.

Outside Africa, many countries that improved over the year are in Eastern Europe: Croatia (to 64 from 69), the Czech Republic (to 41 from 46), Macedonia (to 84 from 105) and Romania (to 69 from 84). Italy went to 41 from 45.

"The concentration of gainers in Southeast and Eastern Europe testifies to the galvanizing effect of the European Union accession process on the fight against corruption," says Transparency International.

http://www.forbes.com/2008/06/26/somalia-myanmar-corruption-bizcountries08-biz-cx_af_lm_0626bizcountries_corruptcountries.html

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World Business Culture

http://www.businessculture.com/index.php http://www.worldbusinessculture.com/Women-in-Business-in-China.html

When working in the global commercial environment, knowledge of the impact of cultural differences is one of the keys to international business success. Improving levels of cultural awareness can help companies build international competencies and enable individuals to become more globally sensitive. The culture-focussed country profiles contained in the World Business Culture website are your passport to international business expertise.

Choose from the 39 countries listed below

ArgentinaAustraliaAustriaBelgiumBrazilCanadaChinaCzech Republic

DenmarkEgyptFinlandFranceGermanyGreeceHong KongIndia

IndonesiaItalyJapanMalaysiaMexicoNetherlandsNigeriaNorway

PhilippinesPolandPortugalRussiaSaudi ArabiaSingaporeSouth AfricaSouth Korea

SpainSwedenSwitzerlandTaiwanUAEUKUSA

Philippines

Top Tips on Filipino Business Culture

Tip 1

The Philippines is the result a unique cultural mix of Asian and Western influences and presents the overseas business visitor with a host of seemingly conflicting characteristics.

Tip 2

Asian concepts such as the importance of the preservation of face coexist with such Latin characteristics as male machismo and the need to seek revenge for any perceived personal slights.

Tip 3

Most Filipino companies are hierarchically structured and local employees would look to a strong hierarchy as the sign of a well-run organisation. Flatter, matrix-oriented structures championing such concepts as delegation may be viewed with suspicion.

Tip 4

As companies tend to be hierarchical and family-run, decision making tends to be located with a few senior managers. All decisions will emanate from the top and be filtered down to middle management for implementation.

Tip 5

Expect a good level of education and professional competence from the local managerial cadre working at the middle levels of Filipino companies.

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Tip 6

Develop contacts at all levels of an organisation - at the top for decision making purposes, and lower down for when projects begin.

Tip 7

Managers are expected to manage and make decisions. These decisions will then be communicated to subordinates who are expected to comply with requests.

Tip 8

Instructions should be given clearly and in detail. People will do what is asked of them but may be unwilling to second-guess the unspoken requests of a superior. Do not expect too much individual initiative.

Tip 9

Meetings can seem quite relaxed with time keeping being less rigidly adhered to than in many other cultures. Meetings can start up to one hour late.

Tip 10

Relationship building is very important in the Philippines and all meetings will start with the obligatory small talk to re-establish contact. Do not try to rush this part of the meeting. This section sets the tone of what follows.

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Top 10 Global Consulting Firms

Internationally, the top business strategies firms and corporate consulting firms are in the United States yet operate here and abroad. The Top Ten firms when taking into consideration globalization capabilities, governmental client base, regional rebound power, corporate ‘Who’s Who’ client base and overall exposure would easily be McKinsey & Co. based in New York, Bain & Company out of Boston, The Boston Consulting Group, Monitor Co. centralized out of Cambridge, Arthur D. Little, the omnipresent Booz Allen & Hamilton, newcomer Princeton Corporate Solutions a recent transplant to NYC from Philadelphia, Mercer Management Consulting in DC, AT Kearney in lonely Chicago and Mitchell Madison Group, another New York Madison Ave veteran. These companies have their strengths and weaknesses.

One universal strength is that they have unique and targeted niches. They are lean and mean and able to turn on a dime when making a decision. From an employment perspective these companies have more downside than upside. If you’re considering working at any one of these firms expect long hours, seniority rule (last to be hired is the first to go) which works out well for those that can hide behind their desk and duck behind the computer monitor when management comes by to lower the hatchet on the non-performers and rookies.

If you’re looking to hire one of these companies know what sets them apart from other firms and why you are paying the premium for their efforts. The Boston Consulting Group specializes in strategies consulting known for creating matrices and diagrams to clarify issues, Bain stresses that all its strategy recommendations must be immediately useful totally customized around the client, McKinsey & Co is focused mainly on the ‘long term’ strategy that builds traction over time best suited for those experiencing current organic growth and want to maintain it with a plan that will begin to yield scalability results a year or two down the road. (note: McKinsey & Co. is a hiring giant with over 9,000 consultants globally.

Princeton Corporate Solutions is a small firm with massive international exposure to senior governmental officials. Their unique blend of economic/political regional and corporate turnaround has made them one of the most powerful micro-corps on the international scene. (note: it’s pointless to try to engage their HR director for a job because, as difficult as this is to believe, they don’t have a human resource department, if you’re the best in your field of expertise, they’ll find you, spooky.)

Are you an MBA? How’s it feel to have wasted your time? Booz & Co, McKinsey and Princeton Corporate Solutions want real world experience and pedigree as opposed to a hiring decision based off of educational and solely analytical.

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Boston Consulting Group

Shaping the Future. Together.

The Boston Consulting Group is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses.

Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. BCG is a private company with more than 70 offices in 42 countries.

We seek to be agents of change—for our clients, our people, and society broadly.

We are committed to:

Creating competitive advantage through unique solutions Building capabilities and mobilizing organizations

Driving sustainable impact

Providing unparalleled opportunities for personal growth

Succeeding together with passion and trust

As the Partner of choice to transform business and society.

Mumbai

The Boston Consulting Group (India) Private Ltd 14th Floor, Nariman Bhavan 227, Nariman Point Mumbai 400 021 India

Phone: +91 22 6749 7000Fax: +91 22 6749 7001

Arindam Bhattacharya

Senior Partner & Managing Director

Consultant Recruiting:

Reema Castelino

+91 22 6749 7000

Alumni:

Payal Sheth

+91 22 6749 7000

Media:

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Payal Sheth

+91 22 6749 7000

http://www.bcg.com/about_bcg/vision/mission.aspx

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International Business Transactions Checklist developed by: International Tax Practice Group

www.lexmundi.com

INTERNATIONAL BUSINESS TRANSACTIONS CHECKLIST EDITOR:Leonard Schneidman, Partner,Foley Hoag , LLP - Boston, MassachusettsChair, Lex Mundi International Tax Practice Group

I. Geography, culture and societyIi. Investment environmentIii. Investment incentivesIv. Financial facilitesV. Exchange controlsVi. Import/export regulationsVii. Structures for doing businessViii. Requirements for the establishment of a businessIx. Operation of the businessX. Cessation or termination of businessXi. Labor legislation, relation and supplyXii. Tax on corporationsXiii. Tax on individualsXiv. Tax on other legal bodiesXv. General tax considerationsXvi. Immigration requirementsXvii. Expatriate employees

I. GEOGRAPHY, CULTURE AND SOCIETY1. Culture- Are there cultural influences or prohibitions on the way business isconducted?2. Geography- What are the neighboring countries?3. Judicial System- What is the type of judicial system?- Is the judicial system general perceived to be impartial?- Must disputes be resolved in the country?- Is there a political method of resolving disputes?- Are alternative methods of dispute resolution permitted?- How long does it take to resolve disputes?- Can foreign judicial decisions be enforced in the country?- Can decisions from the country be enforced outside the country?- Are there separate tribunals depending upon the subject matter of the case?- Are there different legal systems within the country or its political subdivisions?- Can the investor choose to be subject to the country's jurisdiction or not?4. Languages- What languages are spoken?5. Public Services/Communications- What is the state of the public services (e.g. water, electricity, gas, etc.)?- What is the state of the communications system?- What is the state of the country's infrastructure (e.g. roads, railways, etc.)?6. Religion- Are there religious influences or prohibitions on the way business is conducted?

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II. INVESTMENT ENVIRONMENT1. Demography- What locales are available to an investor (e.g. industrial zones, duty free zones)? See also section III, no. 3 &4.- What are the sizes of the different markets?- What other types of businesses are being conducted in the country?2. Diplomatic Relations- Are there established diplomatic relations within the country?- What embassies or consulates are in the country?- Are there prohibitions or restrictions on certain business dealings with the country?- Are there any travel restrictions to or within the country?3. Environmental Considerations- What is the attitude and state of environmental regulation?4. Government- Are elections scheduled or is there an anticipated change in the present government?- Has the government been historically stable?- What is the administrative decision making process like in the country?5. Investment Climate- Does the country generally welcome investment?- Are investments protected against nationalization or expropriation?- Are there governmental or private agencies devoted to the promotion of investment?- What is the rate of inflation?6. Investment Regulations- Are foreign investments restricted or prohibited (e.g. depending on the sector of the economy)?- Must the investor be in association with a national of the country or a related state (e.g. the EU) to be permitted to invest?- Is the investor limited in the amount of his investment?7. Political System/Climate- What is the present political system?- What type of political system has existed in the past?- Has the political system been historically stable?- Is there a federal system?- If so, what are the principle areas of federal versus provincial jurisdiction?- Is the country socially stable?8. Treaties- Are there any treaties relevant to the anticipated investment?

III. INVESTMENT INCENTIVES1. Export Incentives and Guarantees- Are there tax incentives for exports?- If so, are they limited to certain types of products?- Is export financing available from government or private sources?- If so, what forms of financing or guarantees are available?- Is there any governmental insurance for exports?- Must a national be a participant in the enterprise in order for theinvestor to benefit from these incentives?2. Grants, Subsidies and Availability of Funds- Can the investor receive grants or subsidies?- Are grants and subsidies restricted by the type of activity?- What is the process for obtaining approval for these grants orsubsidies?- How long does it take to receive approval?- Can the investor receive loans from the government orgovernmental agencies?- Must a national be a participant in the enterprise in order for theinvestor to receive these grants or subsidies?3. National Tax Incentives

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- Are there national tax incentives for the investor (whether in thecountry of investment or from the investor's own country)?- Are the incentives restricted by type of activity?- Are the incentives restricted by duration of activity?- Does the investor need to receive approval to be eligible for theseincentives?- If so, what is the process of application?- How long does such approval take?- Must a national be a participant in the enterprise in order for theinvestor to benefit from these incentives?4. Regional Tax Incentives- Are there tax incentives for the investor that exists only in certainregions of the country?- Does the investor need to receive approval to be eligible for theseincentives?- Are the incentives restricted by the type of activity?- Are the incentives restricted by the duration of the activity?- What is the process of application?- How long does such approval take?- Must a national be a participant in the enterprise in order for theinvestor to benefit from these incentives?

IV. FINANCIAL FACILITES1. Banking/Financial Facilities- What kind of financial institutions exist?- Must the investor maintain a bank account in the country?- What are the requirements for opening a bank account?- What are the restrictions, if any, on the investor’s use of theaccount?- What is the type of financial system in the country?- How is the banking system structured?- Is there a stock market?- Can the investor receive bank loans?

V. EXCHANGE CONTROLS1. Business Transactions with Nationals, Residents or Non-Residents- How are nationals, residents and non-residents defined?- Are there restrictions on conducting business with nationals,residents or non-residents?- Are there reporting requirements?- Can the investor receive loans from nationals, residents or nonresidents?2. Investment Controls- Are there restrictions on direct investment in the country?- Are there restrictions on indirect investments in the country? Mustthe investor make declarations regarding the nature of hisinvestment?3. Money Transfer- Is there free determination of exchange rates?- Are there restrictions on the transfer of money into o r out of thecountry?- Are there restrictions on the remittance of profits abroad?- Are there reporting requirements?- Can hard currency be taken out of the country?

VI. IMPORT/EXPORT REGULATIONS1. Customs Regulations- Is the country a member of The WTO?

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- Is the country a member of the EU?- Is the country a party to a regional free trade agreement?- Does the Customs Department value the goods?- How are goods cleared through customs?- Are there applicable tariffs?2. Exports- Are there restrictions on exports?- Are export licenses required?- Are there applicable export duties?3. Foreign Trade Regulations- Are there foreign trade regulations on the import or export of goodsinvolved in the business?4. Imports- Are import licenses required?- Are there applicable import duties?- Are there applicable import quotas?- Are there applicable import barriers?5. Manufacturing Requirements- Must the product contain ingredients or components which arefound or produced only in the country?- Will the importation of certain component parts be permitted only ifthey are to be ultimately incorporated in a final product?6. Product Labeling- Are there applicable labeling or packaging requirements (e.g. multilingualnotices, safety warnings, listing of ingredients, etc.)?

VII. STRUCTURES FOR DOING BUSINESS1. Structural Considerations- Will the government seek to participate in the ownership oroperation of the entity (e.g. depending upon the type of activityinvolved)?- If so, to what extent?- What is the investor's potential liability to partners, investors orothers?- Are there restrictions on capitalization?- What are the investor's tax consequences? (see also Sections XIIand XIII)2. Joint Ventures- Are joint ventures permitted?- If so, what is the registration or incorporation procedure?- How long do these procedures take?- What costs and fees are involved?- Must a national of the country or a related state (e.g. the EU) be aparticipant, manager or director?- What is the investor's potential liability?16/373940.1 - 8 -- What are the investor's tax consequences?3. Limited Liability Companies- Are limited liability companies permitted?- If so, how are they registered or incorporated?- How long do these procedures take?- What costs and fees are involved?- Must a national of the country or a related state be a participant,manager or director?- What is the investor’s potential liability?- What are the investor's tax consequences?4. Liability Companies, Unlimited

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- What are the forms of liability companies?- How are these companies registered or incorporated?- How long do these procedures take?- What costs and fees are involved?- Must a national of the country be a participant, manager ordirector?5. Partnerships, General or Limited- Are partnerships recognized or permitted?- Must a national of the country or related state be a partner?- If so, to what extent?- What costs and fees are involved?- What is the investor's potential liability?- What are the investor's tax consequences?6. Partnerships, Undisclosed- Do undisclosed partnerships exist?- If so, how are they formed?- What costs and fees are involved?- Must a national of the country o r a related state be participant,manager or director?- What is the investor's potential liability?- What are the investor's tax consequences?7. Sole Proprietorships- Can the investor be a sole proprietor?- How is the sole proprietorship registered or established?- How long does this process take?- What costs and fees are involved?- What is the investor's potential liability?- Are there restrictions on capitalization?- What are the investor's tax consequences?16/373940.1 - 9 -8. Subsidiaries/Branches/Representative Offices- Can the investor establish a branch, subsidiary or representativeoffice?- If so, how long does registration or incorporation take?- What costs and fees are involved?- What is the investor's potential liability?- Must a national of the country be a participant, manager ordirector?- Are there restrictions on capitalization?- What are the investor's tax consequences?- Are these tax consequences different than those of a localcompany?9. Trusts and Other Fiduciary Entities- Are trusts or other fiduciary entities recognized?- If so, how are each defined?- What are the legal consequences of a transfer of assets to a trustor fiduciary?- Can the investor be the grantor, trustee or beneficiary?

VIII. REQUIREMENTS FOR THE ESTABLISHMENT OF A BUSINESS1. Alien Business Law- Is the business subject to a ny alien business law?- Is there registration or reporting requirements?2. Antitrust Laws- Do the entity's operations comply with anti-trust laws?- Are there filing requirements?3. Environmental Regulations

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- Is the business of the investor subject to environmentalregulations?- If so, are there added costs involved (e.g. audit requirements)?4. Government Approvals- Are government approvals required for the anticipated business?- If so, how long does this process take?- What fees are involved?5. Insurance- Must the enterprise carry insurance?- If so, what kinds of risks must be insured?- Is there a state monopoly on insurance?6. Licenses/Permits- Are licenses or permits required for the anticipated activity?- If so, how does the investor apply for and receive the necessarylicense or permit?- How long does it take to receive the license or permit?

IX. OPERATION OF THE BUSINESS1. Advertising- Are there restrictions on advertising?2. Attorneys- Is it necessary to have local counsel?- How can local counsel be found?- How much are attorneys' fees?3. Bookkeeping Requirements- Must the investor keep local books of accounts?- In what form must the investor keep accounts (e.g. GAAP, in whatlanguage, etc.)?4. Business Ethics/Codes- Are there certain business ethics or codes which the investor mustfollow (e.g. GAAP for accountants, etc.)?5. Consumer Protection Laws- Are there consumer protection laws which apply to the investor'soperations?6. Construction- What are the costs of construction?- Are permits required for construction?- How is authorization to construct obtained?- How long does it take to receive authorization?- What fees are involved?7. Contracts- Can the investor freely enter into local contracts?- Can the contracts be governed by the law of another country?8. Price Controls- Are there applicable price controls?9. Product Registration- Must the entity register its product?- If so, how is registration obtained?- How long does the process take?- Are there fees involved?10. Reduction or Return on Capital- Can capital be repatriated while the corporation is still ongoing?11. Sale of Goods- Are there restrictions on the manner, time or place of sale ofgoods?12. Trade Associations- Are there trade associations the investor can or must join?

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- If so, are there fees involved?- Are there mandatory trade practices?

X. CESSATION OR TERMINATION OF BUSINESS1. Termination- What are the tax consequences of terminating the business?- What costs are involved in termination?- How long does it take to terminate the business?- How is the investor's particular form of business treated intermination?- Can the business be terminated without government approval orintervention?- What are the obligations toward creditors, employees and othersupon termination?- What are the tax consequences of termination?2. Insolvency/Bankruptcy- What is the extent of the investor's liability in the event ofinsolvency or bankruptcy?- What choices, if any, are available to the investor with regard to therestructuring of the business?

XI. LABOR LEGISLATION, RELATION AND SUPPLY1. Termination- What laws govern employer/employee relations?- Are there restrictions on the ability to terminate employees?2. Employment Regulations- Must the investor hire nationals of the country?- Are there obligations to train employees?- Is there a minimum wage?- Is there required bonuses or profit sharing with employees?16/373940.1 - 12 -- Are there a maximum number of hours an employee can work eachweek?- Is there a minimum number of vacation and sick days to be given?3. Hiring and Firing Requirements- Must the investor employ a minimum number of people?- Must the investor employ a minimum number of nationals?- Must certain positions in the company be held by nationals?- Are there rules to follow in hiring/dismissing personnel (e.g.notice)?- Does the investor have a continuing obligation towards dismissedemployees?4. Labor Availability- Is adequate skilled or unskilled labor available for the anticipatedbusiness?5. Labor Permits- Are labor permits required?- If so, how are they obtained?- How long does the process take?- What fees are involved6. Safety Standards- Are there safety codes which must be followed?7. Unions- Are unions recognized?- What are the unions in the investor's business?- What are these unions' political affiliations, if any?

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- Is there an obligation on the part of the employer to organizeunions?- Are there mandatory collective bargaining agreements for thebusiness involved?

XII. TAX ON CORPORATIONS1. Allowances- What are the major allowances (e.g. capital costs depreciation)?- What are the major deductible items?- What are the major expenses that are excluded from deductibility?2. Calculation of Taxes- How is the taxable base determined?16/373940.1 - 13 -3. Capital Gains/Dividends- What are the federal or national tax rates on capital gains anddividends?- What are the regional or state taxes on capital gains anddividends?- What are the municipal or local taxes on capital gains anddividends?4. Filing and Payment Requirements- When must the corporation file its tax return, if any?- When are taxes required to be paid?5. Miscellaneous Taxes Due- Is there a tax on capital?- Is there a business license tax?- Is there an apprenticeship tax?- Is there a training tax?- Are there other taxes?- What are the filing and payment requirements?6. Registration Duties- Are there registration duties due upon the incorporation of acompany?- Are there registration duties due upon an increase in capital?- Are there registration duties due upon the transfer of the company'sshares?- Are there registration duties due upon the transfer of corporateassets?- Are there any other registration duties due?7. Sales Tax or Other Turnover Tax- What is the system of sales tax (e.g. V.A.T., cumulative)?- Is input tax creditable against output tax?- What are the tax rates?- What are the filing and payment requirements?8. Social Security and Welfare System Contributions- Are social security contributions due?- Are retirement or pension contributions due?- Are unemployment insurance contributions due?- What are the filing and payment requirements?9. Special Tax Schemes- Are there particular tax consequences of doing business in thecountry?10. Tax on Profits- What are the federal or national income tax rates on profits?- What are the regional or state tax rates on profits?- What are the municipal or local tax rates on profits?11. Tax Treaties

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- Are there any applicable tax treaties?- Are there any rules against treaty-shopping?12. Territoriality Rules- Where is the corporation subject to tax?- Is the corporation subject to tax on its worldwide income?13. Treatment of Tax Losses- How are corporate tax losses treated?14. Wealth Tax- Is there an applicable wealth tax?15. Withholding Taxes- What are the rates of withholding tax on dividends?- What are the rates of withholding tax on royalties?- What are the rates of withholding tax on interest?- What are the rates of withholding tax on profits realized by a foreigncorporation?

XIII. TAX ON INDIVIDUALS1. Allowances- What are the major allowances?2. Calculation of Taxes- How is the taxable base determined?3. Capital Gains Tax/Dividends- Are capital gains taxable- Are dividends taxable?4. Filing and Payment Requirements- When must the individual file a tax return, if any- When must the individual pay taxes that are due?5. 5. Inheritance and Gift Tax- Does the individual's presence in the country subject him toinheritance or gift tax?- What kinds of assets are subject to tax?- What are the tax rates?16/373940.1 - 15 -- Are allowances available?- What are the payment and filing requirements?6. Miscellaneous Taxes Due- What are the miscellaneous taxes to which the individual may besubject?- What are the filing and payment requirements?7. Real Estate/Habitation Tax- Is the individual subject to real estate or habitation tax?8. Sales Tax- Does the individual pay sales tax?9. Social Security and Welfare System Contributions- Are contributions to social security due?- Are contributions to the welfare system due?- If so, what are the payment and filing requirements?10. Stock Options, Profit Sharing and Savings Plans- Is there taxation of stock option plans?- Is there taxation of profit sharing plans?- Is there taxation of savings plans?11. Taxation of Benefits in Kind- What is the rate of taxation on benefits in king (e.g. automobile,housing and utilities, education, etc.)?12. Taxes on Dividends- Are dividends taxable regardless of their form?13. Tax on Income

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- What are the federal or national tax rates on income for residents?- What are the federal or national tax rates on income for nonresidents?- What are the regional or state tax rates o n income for residents?- What are the regional or state tax rates on income for nonresidents?- What are the municipal or local tax rates on income for residents?- What are the municipal or local tax rates on income for nonresidents?14. Tax Treaties- Are there a ny applicable tax treaties?- Are there any rules against treaty-shopping?16/373940.1 - 16 -15. Territoriality Rules- Where is the individual subject to tax?16. Wealth Tax- Is the individual subject to tax based upon his wealth?- If so, what are the rates?- Are there any allowances available?- What are the payment and filing requirements?17. Withholding Tax- Is salary subject to a withholding tax at the source?- What is the treatment of residents as compared to non-residents?

XIV. TAX ON OTHER LEGAL BODIES1. Allowances- What are the major allowances (e.g. capital cost depreciation)?- What are the major deductible items?- What are the major expenses that are excluded from deductibility?2. Calculation of Taxes- How is the taxable base determined?3. Capital Gains/Dividends- What are the federal or national tax rates on capital gains anddividends?- What are the regional or state taxes on capital gains anddividends?- What are the municipal or local taxes on capital gains anddividends?4. Filing and Payment Requirements- When must the entity file a tax return, if any?- When must the entity pay its taxes?- Are taxes paid in installments or annually?5. Miscellaneous Taxes- Are other taxes due?- What are the filing and payment requirements?6. Registration Duties- Are there registration duties or fees due upon the setting up of thelegal body?- Are there registration duties or fees due upon a change in thecapital of the legal body?16/373940.1 - 17 -- Are there registration duties or fees due upon the transfer ofcapital?- Are there registration duties or fees due upon the transfer ofassets?- Are there any other registration duties due?7. Sales Tax or Other Turnover Tax- Is the legal body subject to sales tax or any other turnover tax (e.g.VAT, cumulative)?- Is input tax credible against output tax?

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- What are the tax rates?- What are the filing and payment requirements?8. Social Security and Welfare System Contributions- Are social security contributions due?- Are retirement or pension contributions due?- Are unemployment insurance contributions due?- What are the filing and payment requirements for any suchcontribution?9. Special Tax Themes- Are there particular tax consequences of doing business in thecountry under the form of the particular legal body?10. Tax on Profits- What are the federal or national income tax rates on profits?- What are the regional or state tax rates on profits?- What are the municipal or local tax rates on profits?11. Tax Treaties- Are there any applicable tax treaties?- Are there any rules against treaty-shopping?12. Territoriality Rules- Where is the legal body subject to tax?- Is the legal body subject to tax on its worldwide income?13. Treatment of Tax Losses- How are tax losses treated?14. Wealth Tax- Is there an applicable wealth tax?15. Withholding Taxes- What are the rates of withholding tax on the legal body's activities?16/373940.1 - 18 -

XV. GENERAL TAX CONSIDERATIONS1. Taxes Generally- Is there a generally accepted way of structuring the company orother entity so as to insure the desired tax consequences?- Is there an advance tax ruling that can be used to validate orinvalidate the chosen form of doing business?- Is there a general a nti-tax avoidance system?- Can the chosen form of the business be treated as a deferent formfor tax purposes?

XVI. IMMIGRATION REQUIREMENTS1. Immigration Controls- Are there immigration quotas?- Are vaccinations required?- Are medical certificates required?- Are entry permits required?- If so, must you apply for an entry permit before entering thecountry?- Are exit permits required?- Are re-entry permits required?2. Immigration Requirements/Formalities- Is a residence permit required?- If so, does the investor have to apply for one before entering thecountry?- What information must be supplied to the immigration authorities?- How long does it take to receive authorization?3. Visas- Is a visa required for travel or stay in the country?

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- Is so, for how long is the visa valid?- How does the investor apply for a visa?- What documents are required?- How long does it take to receive a visa?- What fees are involved?

XVII. EXPATRIATE EMPLOYEES1. Cost of Living and Immigration- How does the cost of living compare to that in the investor's homecountry?- What is the rate of inflation?16/373940.1 - 19 -2. Drivers' Licenses- Must the investor obtain a driver's license for that country?- How does the investor obtain a driver's license?- What fees are involved?- Is an examination, either practical or written, required?3. Education- What types of schools are available for the investor's family?- What fees are involved?- What is required for enrollment?- Can the investor subsidize housing and receive a tax benefit?4. Housing- What type of housing is available for the investor?- Can the investor own property?- Must the investor have housing before he enters the country?- Can the investor receive any tax allowances?5. Importing Personal Possessions- How can the investor import his personal belongings?- Are import duties payable?- Are there requirements for clearing the belongings throughcustoms?6. Medical Care- What level of medical care is available?- Is there national health care?7. Moving Costs- What costs are involved in moving?- Can the investor receive any tax allowances?8. Tax Liability- What is the expatriate's tax liability? (see also Section XIII)- What are the allowances?- Are there any applicable tax treaties?9. Work Contracts- Does the investor need a work contract to work in the country?- If so, does the contract have to be for a certain duration, for theperformance of a specific job or for a specific position?10. Work Permits- Does the investor need a work permit to work in the country?- How and where does the investor apply for the permit?- What documents are required?- What fees are involved?- How long does it take to receive the permit?- For how long is the permit valid?

http://www.lexmundi.com/images/lexmundi/PDF/intl_tax_checklist.pdf

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Setting your International Legal Priorities for 2011

Well, 2010 is coming to a close and a new year is now before us. What’s the new year without new year’s resolutions? Naturally, a new year presents a tabula rasa that encourages people to change habits and start/engage in activities they have wanted to but have long procrastinated. This can exist in your legal work as well, and that’s why I’m proposing the following checklist for those businesses that do business overseas.

1. Have you had your standard contracts adapted for use overseas? I am always amazed at how some companies doing vast business overseas often use very poor contracts that sometimes have provisions that are unenforceable overseas. Some companies do not even use agreements! It is absolutely important for all commitments, such as distribution, franchise, and purchase and sale agreements be tailored for each individual market. You probably do not want the purchase and sale agreement you use for sales to Idaho to be modified by a non-lawyer in your company and then used to manage a sale or distribution arrangement in China or Brazil. Yes, there has arguably been considerable consolidation of international laws and business principles in some respects, but remember that the minute a contract becomes international you have to worry about two things – (i) whether the contract is enforceable overseas; and (2) whether the contract covers what you need it to cover (which may be significantly different from your concerns in the United States). Save yourself the trouble and have experienced counsel (and local counsel, where necessary) review all the terms.

2. Are you sure your standard forms and agreements are not obsolete? Still using a form agreement from 10 years ago, when your company was one-fifth the size it is now and had zero international operations? This is also a time to ensure your standard agreements are “cleaned up.” Not only can laws change over time, but so can your legal concerns, so make sure you are protected.

3. Are your permits current around the world? A huge problem. Many companies with international portfolios often lose track of all the necessary permits, from business registrations to import licenses work visas to driver’s licenses for their employees. Make sure everything is in order, and if you cannot keep track of it, you may want to consider talking to counsel who can maintain your corporate documents and licenses around the world in an organized manner.

4. What is the status of your current commitments? This is a good time to look at every ongoing commitment to make sure you remember the key terms, refresh your clarity on your obligations, and make sure that they do not expire unexpectedly! If you are not pleased with an agent in one of your territories, the end of your current contract may provide only a limited window to change agents – so make sure you are on top of things.

5. Have you met all your foreign and domestic tax obligations? Taxes are an exceptionally touchy subject and companies doing business overseas often have to keep track not only of obligations in multiple jurisdictions but also make sure that their U.S. returns properly reflect their international operations as may be necessary.

6. What types of vendors are you using to handle your international work? Every now and then I see a company that uses inadequate accountants or banks for their international activities. Large companies may not be the best choice necessarily but sophisticated vendors who can handle your international work satisfactory can save you a lot of trouble.

7. Have you identified potential areas for expansion overseas? Thinking about expanding overseas this year? Maybe Turkey, UAE, Australia, Hong Kong, or France? Make sure you educate yourself on your options and what steps you will have to take (and how much time it will consume) early on. The worst is when clients come up and say things like “we need our office set up in 4 weeks.” Depending on the jurisdiction, it could be doable. More often than not it’s not. Lawyers can only work but so hard! So make sure you use the early part of the year when business is generally slow to educate yourself on these topics. You don’t

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necessarily have to commission comprehensive reports from your lawyers but it may be a good idea to start looking into your potential projects

http://farhadalavi.wordpress.com/2010/12/23/setting-your-international-legal-priorities-for-2011/

BUSINESS STARTUP CHECKLIST

http://www.mynewcompany.com/checklist.htm

MyNewCompany.com™ is dedicated to helping you start your small business as quickly and easily as possible. In this section, we’ve listed the specific steps required to start your business in any State. Once you’ve formulated your business idea and know where you’ll obtain the money to fund your new startup, the next step is following our instructions for starting your business right the first time!

Tip: This page is "printer-friendly", you can print it out for later reference.

NOTE: This is a general startup checklist. Clients who utilize MyNewCompany.com’s Incorporation and LLC Formation services receive access to a detailed, state-specific checklist that includes links to state-specific forms and applications as well as specific information on doing business in your state.

1. Select a Name and Legal Structure

You basically have 4 choices when selecting a legal structure.

Click Here for a detailed explanation of all 4.

Sole Proprietorship (form a Sole Proprietorship Now) Partnership (form a Partnership now)

Limited Liability Company (LLC) (form an LLC now)

Corporation or S-Corporation (form a Corporation now)

Business Naming Resources:

Business Naming Software Business Name Brainstorming

Domain Name Search from MyNewCompany.WS (helps you identify available domain names before you register which can be helpful in determining general name availability)

2. Write a Business Plan

If you haven’t already, prepare at least a preliminary business plan.

3. Obtain your Federal Employer Identification Number (FEIN)

If you are setup as a Corporation, LLC or Partnership (or a sole proprietorship with employees), apply for a Federal Employer Identification Number (FEIN) from the IRS. A FEIN will be necessary to open a bank account or process payroll.

TIP: If you use our incorporation or LLC formation services we can obtain this on your behalf.

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4. Open the Company Bank Account

Select a bank and open the company bank account.

TIP: Contact the bank prior to opening the account to see what their specific requirements are to open a business checking account; some banks’ requirements are fairly simple whereas some banks’ requirements are extremely complex.

5. Lease Office, Warehouse or Retail Space (if not home-based)

Depending on your type of business (retail, office or warehouse), arrange for office space to be leased. Contacting a commercial realtor in your area can be helpful. Also, make sure to arrange for utilities and office furniture.

6. Obtain Licenses and Permits

A. Federal Permits

Depending on the type of business you are in, you may need a Federal license or permit.

Most businesses do NOT require a Federal license or permit. However, if you are engaged in one of the following activities, you should contact the responsible Federal agency to determine the requirements for doing business:

Investment advising ( http://www.sec.gov ) Drug manufacturing ( http://www.fda.gov )

Preparation of meat products ( http://www.fda.gov )

Broadcasting ( http://www.fcc.gov )

Ground transportation ( http://www.dot.gov )

Selling alcohol, tobacco or firearms ( http://www.atf.gov )

B. State Licenses

Some occupations and professions require a State license or permit. Laws vary from State to State, however, if you are engaged in one of the following professions, you should contact the responsible state agency to determine the requirements for your business:

building contractors banks

insurance carriers

physicians

appraisers

accountants

barbers

real estate agents

auctioneers

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private investigators

private security guards

funeral directors

bill collectors

cosmetologists

State Licenses and Permits based on products sold. Some state licensing requirements are based on the product sold. Contact your state licensing authorities to determine the licensing requirements of your business. For example, most states require special licenses to sell:

liquor lottery tickets

gasoline

firearms

TIP: Most people engaged in the types of business that require a special State License or Permit are already aware of the requirements (i.e. an accountant is familiar with the licensing requirements for accountants).

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C. Sales Tax Permit

If your company sells physical products within the state where it does business, you may have to collect and pay sales tax. This is usually accomplished by obtaining a State Seller’s Permit or Resale Permit.

TIP: many service businesses that do not sell a physical, tangible product are NOT required to collect sales tax, ask the State taxation agency for details/clarification.

TIP: Sales tax permit forms can be obtained from our partner here.

D. Business License

Most Cities or Counties require you to obtain a business license, even if you operate a home-based business. This is a license granting the company the authority to do business in that city/county.

TIP: Click here to learn more and to file your business license online.

7. Hire Employees (if applicable)

If you intend to hire yourself or others as a full or part-time employee of your company, then you may have to register with the appropriate State Agencies or obtain Workers Compensation Insurance or Unemployment Insurance (or both).

TIP: View our "Employees & Payroll" section for help with hiring employees and processing payroll.

8. Set up an Accounting and Record-Keeping System

Setup your Accounting and Record-keeping system and learn about the taxes your new company is responsible for paying.

Company documents generally are required to be kept for 3 years, including: a list of all owners and addresses, copies of all formation documents, financial statements, annual reports, amendments or changes to the company. All Tax and Corporate Filings should be kept for at least 3 years.

TIP: View our "Accounting & Financial Management" section for help with setting up an accounting system and purchasing accounting software.

9. Obtain Business Insurance

There are many types of insurance for businesses but they are usually packaged as “General Business Insurance” or a “Business Owner’s Policy”. This can cover everything from product liability to company vehicles. A decent policy can run as little as $300/year and offers a great extra level of protection.

TIP: Click here to view our preferred provider of business insurance online.

10. Systemize and Organize

Prepare the business as if someone needed to take it over and run it for you. This means have a method to process orders, pay bills, pay employees, pay taxes, maintain your permits, etc. Basically, try to make the operational aspect of the business as automated and efficient as possible so you can concentrate on growing your business.

TIP: View our "Manage Your Company" section for help with systemizing and automating your business.

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11. Develop a Business Identity

Order business cards, letterhead and promotional materials for your business. A professionally created logo can make your business look professional and established.

TIP: View our "Business Identity" section for help with naming, logos, trademarks and more.

12. Get the Word Out (Marketing)

Now that you’ve set-up the company for success, you need to get the word out. Create a marketing plan for your products and services that targets your ideal customer.

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Building your business abroad By Peter Ibbetson

Head of NatWest Business Banking

Have you ever dreamed about starting up your own business abroad? BBC News Online asked Peter Ibbetson to provide a few pointers. Deciding to pack up and move abroad to start your own business is probably one of the biggest decisions you will ever make.

Not only will you have to consider the personal aspects of moving abroad such as education, healthcare and buying a house, but you will also have to research and plan for setting up a business in unfamiliar surroundings.

Although many of the factors that you need to consider when setting up a business overseas will be the same as those in the UK, it is essential that you research and plan your move well in advance.

It will also help if you have already set up a small business in the UK and are aware of the challenges of going it alone.

Planning is key to success

I would recommend that you make several visits to the area you wish to relocate to.

BEACH BUSINESS I got lost and soaked on my own there every day and I loved it, I loved the frustration and everything Thea Vandeputte

It is essential that you research your customer base, even if you have been trading in the UK with the same product or concept for many years.

This will also allow you to assess local competition and network with potential business contacts.

If you are flexible about the country that you move to, it may be worth looking to start up where there is a shortage for your skills or a gap in the market for your particular product.

Be ready for cultural change

The NatWest/ British Franchise Association survey found that the biggest deterrent for businesses thinking of starting up abroad was the language barrier.

This can be easily overcome by either learning the language before you leave or by hiring a multi-lingual member of staff.

Simple things such as the hours people work and public holidays must be taken into consideration Peter Ibbetson

The way in which business is done varies in each country.

Simple things such as the hours people work and public holidays must be taken into consideration.

It is also vital that you investigate local customs with the countries' UK embassies.

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In Italy, for example, cold calling is rarely successful, therefore most introductions to new contacts will be via a third party.

Whilst in parts of Asia, strict punctuality is expected of all guests and arriving late to a meeting will cause great offence.

Mind the red tape

You will encounter government regulations and red tape in your chosen country.

It is therefore important that you employ a solicitor and accountant with an in-depth knowledge of your chosen country.

A list of these is available from any embassy in the UK.

Your tax position will also change and it can be complicated to assess

Much of the red tape that UK businesses encounter is the same across Europe, as they are European Laws.

There will be, however, some domestic legislation in place, which you must adhere to.

Your tax position will also change and it can be complicated to assess.

It is dependent on the number of days that you spend in the UK. The Inland Revenue will be able to verify your position on this.

The main hurdle however for those people who decide to set up business in a new country is gaining permission to do so and the visa/work permit process can be a lengthy one which varies from country to country.

In the US, for example, those planning to open a business may be eligible for an Investment Visa and in Australia, business owners can apply for a Business Skills Visa.

Finding your feet with the finance

It is important to assess and confirm your finance requirements before committing to anything in your chosen country.

Like all UK banks, foreign banks may require a personal investment and security.

Your UK bank will be able to make this easier by supplying a list of corresponding banks in your new country of residence, which will recognise a letter of introduction from your UK bank.

You can maintain your UK bank account, however, if you will be accepting payments in local currency it is usually beneficial to open an account with a local bank.

Finally, and perhaps most importantly, try not to worry.

Moving abroad and setting up your own business will be an exciting and rewarding experience - make the most of it.

Have you set up a business abroad? What has been your experience? What problems did you encounter? Was it plain sailing, or a total nightmare?

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Story from BBC NEWS:http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/2941538.stmPublished: 2003/05/28 17:56:08 GMT© BBC 2011

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Doing business abroad and growing internationally is an essential part of a company's business expansion policy. It is governed by a company's aim to diversify its commercial activities across national frontiers and increase its competitiveness. Hence, planning of manufacturing facilities, logistical systems, financial flows and marketing policies in such corporations are done by taking into consideration the entire world as a single market.

Any business transaction that involves persons or firms of more than one country is described as overseas business. In India economic reforms opened up important avenues for promoting global business by Indian entrepreneurs. The first policy governing overseas direct investment was in the form of guidelines issued in 1969. These guidelines defined the extent of participation of Indian companies in projects abroad and were subsequently revised and liberalised from time to time. They aim at providing transparency in the framework of overseas investments. The most important legislation was the Foreign Exchange Management Act (FEMA) which changed the entire perspective on foreign exchange particularly those relating to investment abroad. It changed the emphasis from exchange regulation to exchange management.

Indian companies can directly invest outside India by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity, signifying a long term interest in the overseas entity. It involves setting up a Joint Venture (JV) or a Wholly Owned Subsidiary (WOS) abroad. Under the guidelines, all applications for grant of approval for setting up joint ventures/wholly owned subsidiaries are to be made and processed by the Reserve Bank of India.

In order to make their investments abroad, Indian companies need funds to meet their various capital requirements; to make equity participation in overseas ventures as well as to acquire foreign companies or businesses. Under the Foreign Exchange Management Act (FEMA) and the various notifications issued by the Reserve Bank of India therein, the investments in overseas JVs/WOSs may be funded out of one or more of the following sources:- withdrawal of foreign exchange from an authorised dealer; capitalisation of exports and other dues; external commercial borrowings and foreign currency convertible bonds raised abroad as well as through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).

Indian entrepreneurs while investing abroad may face various commercial and political risks. To ensure safe and successful overseas expansion plans, it is necessary to provide them a comprehensive insurance cover against all such risks. Accordingly, Export Credit Guarantee Corporation of India Limited (ECGC) was established by the Government of India under the administrative control of the Ministry of Commerce & Industry which provides all such insurance facilities to them.

Also, the Government of India has, so far, signed BIPAs with 68 countries out of which 53 BIPAs have already come into force and the remaining agreements are in the process of being enforced. In addition, agreements have also been finalised and/ or being negotiated with a number of other countries.

Besides, an important legislation called as 'the Arbitration and Conciliation Act, 1996' provides a statutory provision for settlement of all commercial disputes of an enterprise without having recourse to the court of law. In India, the relief against the problem of double taxation faced by an entrepreneur while expanding his/her business abroad has also been provided through schemes of bilateral and unilateral relief.

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Till 1991, India's economic integration with the rest of the world was very limited. But the new economic policy and the liberalisation measures so introduced made way for the globalisation of Indian businesses. Earlier, exports were a predominant way of expanding business abroad and hence the emphasis was on export promotion strategies with restrictions on cash outflows so as to conserve our foreign exchange reserves. But over the years, its being realised that for expansion and growth of Indian companies, it is necessary that they increase their share in the world market not only by exporting their products but also by acquiring overseas assets and establishing their presence abroad. Accordingly, the policy for outward capital flows has evolved, marked by phased liberalisation.

The first policy in the form of guidelines governing overseas direct investment was issued in 1969 by the Government of India. These guidelines defined the extent of participation of Indian companies in projects abroad. They permitted minority participation by an Indian party with no cash remittances. Association of local parties, local development banks, financial institutions and local Governments, wherever necessary was also favoured for promoting such investments.

The Government modified these guidelines by issuing a set of more comprehensive measures in 1978. These measures included provision for the approval, monitoring, evaluation of investment proposals at a focal point by the Ministry of Commerce. These guidelines also recognised the need of vesting the necessary powers with the Reserve Bank of India( RBI) for the release foreign exchange to meet the preliminary and subsequent expenses of an Indian company relating to its investments abroad .

Such guidelines were subsequently revised in 1986,1992 and 1995. The policy on Indian investments overseas was first liberalised in 1992. Under it, an Automatic Route for overseas investments was introduced and cash remittances were allowed for the first time with restrictions on the total value. The basic rationale for opening up the regime of Indian investments overseas had been the need to provide Indian industry access to new markets and technologies with a view to increasing their competitiveness globally and help the country's export efforts.

Further liberalisation and streamlining of procedures was undertaken in 1995. The guidelines of 1995 provided for a detailed framework by transferring the work relating to overseas investment from Ministry of Commerce to Reserve Bank of India (RBI), which became the nodal agency for administering the overseas investment policy . This provided a single window system for overseas investment approvals. Since then, all proposals for direct investment abroad are being made to and processed by the Reserve Bank of India (RBI). Also, these guidelines aimed at providing transparency in the framework of overseas investment policy with the following basic objectives :-

To provide a framework for Indian industry and business to access global networks; To ensure that trade and investment flows, though determined by commercial interests, are

consistent with the macroeconomic and balance of payment compulsions of the country, particularly in terms of the magnitude of the capital flows;

To give liberal access to Indian business for technology-sourcing or resource-seeking or market-seeking;

To indicate that there is a change in the approach of the Government, from one of regulator or controller to one of facilitator;

To encourage the Indian industry to adopt a spirit of self-regulation and collective effort in order to improve its image abroad.

Subsequently, in 2000, introduction of FEMA (Foreign Exchange Management Act) changed the entire perspective on foreign exchange particularly those relating to investment abroad. It changed the emphasis from exchange regulation to exchange management. It aimed to facilitate external trade and payments as well as to promote an orderly development and maintenance of foreign exchange market in India.

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Over the years, the liberalisation measures for overseas investment by Indian companies have continued. RBI vide their A.P.(DIR Series) Circular No.66 dated 13.01.2003 (in partial modification of Notification No. FEMA 19/2000-RB dated 3 rd May 2000) has liberalized the policy under automatic route:-

Corporates: - listed Indian companies are permitted to invest abroad in companies, (a) listed on a recognized stock exchange and (b) which has the shareholding of at least 10% in an Indian company listed on a recognized stock exchange in India (as on 1 st January of the year of the investment). Such investments shall not exceed 35% as of the Indian company's net worth, as on the date of latest audited balance sheet.

Individuals: - Reserve Bank of India, under the “Liberalized Remittance Scheme for Resident Individuals” permits resident individual to remit up to US $ 100,000 per financial year for any permitted current or capital account transactions or a combination of both, such as bank deposits, purchase of immovable property, investment in equity and debt abroad. Similarly, resident individuals are permitted to remit for current account transactions such as gift, donation, medical treatment, education, employment, emigration, import of medicines, books and periodicals subject to foreign trade policy.

Indian corporates / Registered partnership firms are allowed to undertake agricultural activities either directly or through an overseas branch.

The stipulation of minimum net worth of Rs. 15 crores for Indian companies engaged in financial sector activities in India removed for investment abroad in the financial sector. However, an Indian party seeking to make investment in an entity engaged in the financial sector should also fulfill the following additional conditions:

be registered with the appropriate regulatory authority in India for conduction the financial sector activity;

have earned net profit during the preceding three financial years from the financial service activities;

have obtained approval for investment in financial sector activities abroad from regulatory authorities concerned in India and abroad; and

have fulfilled the prudential norms relating to capital adequacy as prescribed by the regulatory authority concerned in India .

Further liberalisation measures introduced in the fiscal year 2005-06 are as follows:-

Guarantees:- the scope of guarantee has been enlarged under the automatic route. Indian entities may offer any forms of guarantee i.e. corporate or personal/ primary or collateral/ guarantee by the promoter company/ guarantee by group company, sister concern or associate company in India , provided that: -

All "financial commitments" including all forms of guarantees are within the overall prescribed ceiling for overseas investment of the Indian party i.e. currently within 300% of the net worth of the investing company;

No guarantee is ‘open ended' i.e. the amount of the guarantee should be specified upfront; and

As in the case of corporate guarantees, all guarantees are required to be reported to Reserve Bank of India (RBI), in Form ODR.

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Disinvestment:- in order to enable companies to have operational flexibility according to their commercial judgment, the automatic route of disinvestment has been further liberalized. Indian companies are permitted to disinvest without prior approval of the RBI in the following categories: -

in cases where the JV/WOS is listed in the overseas stock exchange;

in cases where the Indian promoter company is listed on a stock exchange in India and has a net worth of less than Rs. 100 crore;

where the Indian promoter is an unlisted company and the investment in overseas venture does not exceed US$ 10 million.

Proprietorship concerns:- With a view to enabling recognized star exporters with a proven track record and a consistently high export performance to reap the benefits of globalisation and liberalization, proprietary/ unregistered partnership firms are allowed to set up a JV/WOS outside India with prior approval of RBI.

Overseas Investment Insurance

Indian entrepreneurs while investing abroad may face various commercial and political risks. The commercial risks may arise due to insolvency of the buyer; failure of the buyer to make the payment due within the specified period; or buyer's failure to accept the goods, subject to the given conditions. While, the political risks may be due to imposition of restrictions by the Government of the buyer's country or any Government action which may block or delay the transfer of payment made by the buyer; war, civil war, revolution or civil disturbances in the buyer's country.

Other unforeseen incidents like new import restrictions or cancellation of a valid import license in the buyer's country; interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges which cannot be recovered from the buyer; and any other cause of loss occurring outside India not normally insured by general insurers.

Hence, in order to ensure safe and successful overseas expansion plans it is necessary to provide a comprehensive insurance cover against all such risks faced by an entrepreneur. Such a insurance facility seeks to create a favourable climate in which investors including exporters can get timely and liberal credit facilities from banks at home.

Accordingly, Export Credit Guarantee Corporation of India Limited (ECGC) was established by the Government of India under the administrative control of the Ministry of Commerce & Industry in order to strengthen the export promotion drive by covering the risk of exporting on credit. It provides a range of credit risk insurance covers to exporters against loss in export of goods and services as well as offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them. Its objectives are to provide insurance cover to:- (i) exporters against political and commercial risks; (ii) exporters against the risk of exchange rate fluctuations; (iii) banks against export credit and guarantees extended by them; (iv) Indian investors abroad against political risks.

The insurance cover issued by it may be broadly divided into the following four groups:-

Standard policies or SCR issued to exporters to protect them against payment risks involved in exports on short-term credit, i.e. credit not exceeding 180 days. It is also known as shipments

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(comprehensive risks)policy. It is issued to exporters whose anticipated export turnover for the next 12 months is more than Rs. 50 lacs. It covers both commercial and political risks from the date of shipment. However,the policy does not cover losses due to the following risks:-

Commercial disputes including quality disputes raised by the buyer, unless the exporter obtains a decree from a competent court of law in the buyer's country in his favour.

Causes inherent in the nature of the goods.

Buyer's failure to obtain necessary import or exchange authorization from authorities in his country.

Insolvency or default of any agent of the exporter or of the collecting bank.

Loss or damage to goods which can be covered by general insurers.

Exchange rate fluctuation.

Failure or negligence on the part of the exporter to fulfill the terms of the export contract.

Specific policies designed to protect Indian firms against payment of risks involved in exports on deferred terms of payment, services rendered to foreign parties construction works and turnkey projects undertaken abroad.

Specific Shipment Policy-Short Term(SSP-ST) :- It provides cover to Indian exporters against commercial and political risks involved in export of goods on short-term credit not exceeding 180 days. Exporters can take cover under these policies for either a shipment or a few shipments to a buyer under a contract. These policies can be availed of by:-(i) exporters who do not hold SCR Policy and(ii) by exporters having SCR Policy, in respect of shipments permitted to be excluded from the preview of the SCR Policy.

Construction Works Policy :- It is designed to provide cover to an Indian contractor who executes a civil construction job abroad. The distinguishing features of a construction contract are that:- (i) the contractor keeps raising bills periodically throughout the contract period for the value of work done between one billing period and another; (ii) to be eligible for payment, the bills have to be certified by a consultant or supervisor engaged by the employer for the purpose.

Specific Policy for Supply Contract :- Contracts for export of capital goods or turnkey projects or construction works or rendering services abroad involve medium/long-term credits. Such transactions are, therefore, insured by ECGC on a case-to-case basis under specific policies.

Financial guarantees issued to banks in India to protect them from risks of loss involved in their extending financial support to exporters at the pre-shipment as well as post-shipment stages.

Packing Credit Guarantee:- Timely and adequate credit facilities at the pre-shipment stage are essential for exporters to realize their full export potential. The Packing Credit Guarantee of ECGC helps the exporter to obtain better and adequate facilities from their bankers. The Guarantees assure the banks that, in the event of an exporter failing to discharge his liabilities to the bank, ECGC would make good a major portion of the bank's loss.

Export Production Finance Guarantee:- The purpose of this Guarantee is to enable banks to sanction advances at the pre-shipment stage to the full extent of

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cost of production when it exceeds the Free On Board (f.o.b) value of the contract/order, the differences representing incentive/duty drawback receivable

Post-Shipment Export Credit Guarantee:- If the exporter intends to continue the credit facilities till the value of shipment is realised from the foreign buyer, he has to avail of post-shipment credit. It provides protection to banks against non-realisation of export proceeds and the resultant failure of the exporter to repay the advances availed.

Export Finance Guarantee:- This guarantee covers post-shipment advances granted by banks to exporters against export incentives receivable in the form of cash assistance, duty drawback, etc.

Export Performance Guarantee:- An exporter who desires to quote for a foreign tender may have to furnish a bank guarantee in the form of a bid bond. If he wins the contract, he may have to furnish bank guarantees to foreign buyers to ensure due performance or against advance payment or in lieu of retention money or to a foreign bank in case he has to raise overseas finance for his contract. Further, for obtaining import licenses for raw materials or capital goods, exporters may have to execute an undertaking to export goods of a specified value within a stipulated time, duly supported by bank guarantee.

Export Finance (Overseas Lending) Guarantee :- If a bank financing an overseas project provides a foreign currency loan to the contractor, it can protect itself from the risk of non-payment by the contractor by obtaining Export Finance (Overseas Lending) Guarantee.

Special schemes :-

Exchange Fluctuation Risk Cover:- It is intended to provide a measure of protection to exporters of capital goods, civil engineering contractors and consultants who have often to receive payments over a period of years for their exports, construction works or services. Under it cover is available for payments scheduled over a period of 12 months or more, upto a maximum of 15 years.

Transfer Guarantee:- When a bank in India adds its confirmation to a foreign Letter of Credit, it binds itself to honour the drafts drawn by the beneficiary of the Letter of Credit without any recourse to him provided such drafts are drawn strictly in accordance with the terms of the Letter of Credit. The confirming bank will suffer a loss if the foreign bank fails to reimburse it with the amount paid to the exporter. The Transfer Guarantee seeks to safeguard banks in India against losses arising out of such risks.

Overseas Investment Guarantee:- Export Credit Guarantee Corporation of India Limited has evolved a scheme known as the 'Overseas Investment Guarantee' or 'Overseas Investment Insurance' scheme in order to provide protection for Indian investments abroad. It provides insurance cover for the investments made by Indian corporates in Government of India approved joint ventures (JVs) or their wholly owned subsidiaries (WOSs) abroad either in the form of equity or loan.

The period of insurance cover will not normally exceed 15 years in case of projects involving long construction period. However,the cover can be extended for a period of 15 years from the date of completion of the project subject to a maximum of 20 years from the date of commencement of investment. The amount insured therein shall be reduced progressively in the last five years of the insurance period.

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The criteria for coverage under overseas investment insurance are:-

Any investment made by way of equity capital or untied loan for the purpose of setting up or expansion of overseas projects will be eligible for cover under investment insurance.

The cover would be available for the investments which emanates from India and benefit of dividend or interest therefrom accrues to India.

Such investments should not be in any way conflict with the policy of both India's Government and the overseas Government.

For investment in any country to qualify for investment insurance, there should preferably be a bilateral agreement between India and the host country for promotion and protection of Indian investment. In case there is no such agreement, the Corporation may consider providing cover if it is satisfied that the existing laws of the host country adequately safeguard Indian investment.

The risks of war,expropriation and restriction on remittances are also covered under the scheme. As the investor would be having a hand in the management of the joint venture,no cover for commercial risks would be provided under the scheme.

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Circulars and Guidelines

The policy for regulating overseas investments by Indian entrepreneurs and all other related aspects like finance and insurance is governed by the circulars and guidelines issued by the Reserve Bank of India from time to time. Guidelines and circulars are defined as the documents notified by the Reserve Bank for the purpose of clarifying and interpreting the various provisions of a law or regulation. For example, Foreign Exchange Management Act (FEMA) is an umbrella Act regulating all foreign exchange transactions including investments abroad. It is under this Act that the Reserve Bank of India is authorised to issue various circulars, guidelines, rules and notifications, etc. for managing the various aspects of capital outflows. One of the most important guidelines relating to doing business abroad is the "Guidelines for Indian direct investment in Joint Ventures and Wholly Owned Subsidiaries abroad".

These circulars and guidelines are broadly aimed to ensure:-

A transparent policy framework in order to enable Indian businessmen to plan their business and to be able to react to potential collaborators outside the country. Such transparency is also required to enable the financial institutions and banks to assess their support through professional judgement in the context of financial sector reforms.

A formal recognition of the changing global reality which include:- close relationship between flow of investment and trade; success in the domestic economy as a precursor to success in the international arena; the importance of continuously updating the technology through cross investments; more dynamic relation between market seeking and resource seeking investments; tendency for skill and service intensity rather than material intensity in the international flows.

Capturing of Indian realities which include:- strengthening globalisation of Indian economy by allowing the Indian entrepreneurship to go global; being a capital importing country, the need to avoid large capital outflows; visualising the global economic relationship well beyond physical exports and ensuring that Indian industry and business attain strategic positions in certain areas or regional blocs.

Some of the important circulars and guidelines of RBI are:-

AP(DIR Series) Circular No.3 dated June 22, 2000 AP(DIR Series) Circular No.13 dated September 14, 2000

AP(DIR Series) Circular No.32 dated April 28, 2001

AP(DIR Series) Circular No.16 dated December 15, 2001

AP(DIR Series) Circular No.18 dated December 18, 2001

AP(DIR Series) Circular No.23 dated February 19, 2002

AP(DIR Series) Circular No.27 dated March 2, 2002

AP(DIR Series) Circular No.43 dated April 30, 2002

AP(DIR Series) Circular No.51 dated June 24, 2002

AP(DIR Series) Circular No. 58 dated December 2, 2002

AP(DIR Series) Circular No. 66 dated January 13,2003

AP (DIR Series) circular No. 68 dated January 13,2003

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AP(DIR Series) Circular No. 83 dated March 1, 2003

AP(DIR Series) Circular No. 96 dated April 28, 2003

AP(DIR Series) Circular No. 97 dated April 29, 2003

AP (DIR Series) circular No. 104 dated May 31, 2003

AP (DIR Series) circular No. 107 dated June 19,2003

A.P.(DIR Series) Circular No.97 dated June 21, 2004

A.P. (DIR Series) Circular No. 30 dated April 05, 2006

Circulars of RBI relating to ADRs/GDRs

Circulars of RBI relating to ECBs

Circulars of RBI relating to FCCBs

Circulars of RBI relating to FEMA

Guidelines for prepayment of Foreign Currency Convertible Bond (FCCB) Issues by Indian companies

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Investment Routes and Procedures

The Indian companies can directly invest outside India by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity, signifying a long term interest in the overseas entity. It involves setting up a Joint Venture (JV) or a Wholly Owned Subsidiary (WOS) abroad and does not include portfolio investment. A joint venture abroad means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and in which investment has been made by an Indian entity. While a wholly owned subsidiary abroad means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and whose entire capital is owned by an Indian entity.

Resident corporate entities and partnership firms registered under the Indian Partnership Act,1932 (Indian Party) are eligible to make direct investment abroad in JVs/ WOSs. Also, a firm or a company or a body corporate registered or incorporated in India as well as proprietary concerns are permitted to open overseas branch. Besides such direct investment, listed Indian Companies can invest upto 25% of the net worth in overseas companies, listed on a recognized stock exchange, that have at least 10% share in an Indian company listed on a recognized stock exchange in India as on 1st January of the year of investment or by way of rated debt securities issued by the same companies. However, this 10 % holding should be a direct holding and not through a subsidiary or a special purpose vehicle (SPV).

The proposal from Indian companies for overseas investment in Joint Ventures (JVs) and Wholly Owned Subsidiaries (WOSs) abroad are considered in terms of the guidelines issued in this regard by the Government from time to time. Under the guidelines, all applications for grant of approval for setting up joint ventures/wholly owned subsidiaries are to be made and processed by the Reserve Bank of India. There are two categories of applications for setting up overseas JVs and WOSs :-

Overseas Investment Trends

The International Investment Position (IIP) is the statement of the stock of external financial assets and liabilities of a country. The financial assets consist of the country's financial claims on non-residents and financial liabilities consist of the country's financial liabilities to non-residents. These transactions are classified according to institutional resident sectors, namely, monetary authority, government, banks, and other sectors including corporate sector. The net international investment position (the stock of external financial assets less the stock of external financial liabilities) shows the difference between what an economy owns in relation to what it owes.

As per the Special Data Dissemination Standard (SDDS) of the International Monetary Fund (IMF), data on IIP are to be disseminated on annual basis (quarterly encouraged) with a time lag of two quarters. In India, since the quarter end-June 2006 onwards, the IIP is being disseminated on quarterly basis with a lag of less than two quarters.

The quarterly IIP of India as at end-June 2008 has been summarized below:

The net IIP (Assets - Liabilities) of India as at end-June 2008 resulting in net claim of non-residents on India, declined by US$ 3.39 billion to US$ 49.12 billion from a level of US$ 52.51 billion as at end-March 2008. The total external financial assets declined by US$ 3.81 billion to US$ 377.63 billion as at end-June 2008 over the

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Category A: Fast Track or Automatic Route

Category B: Normal Route

previous quarter mainly due to decrease in external loan extended through NOSTRO Accounts by the banking sector to the tune of US$ 8.46 billion. Among the other components of external financial assets, the Reserve Assets registered an increase of US$ 2.37 billion over the end-March 2008 and stood at US$ 312.09 billion at end-June 2008. Direct Investment abroad increased by US$ 2.02 billion during the same period and was at US$ 48.21 billion as at end-June 2008.

The total external financial liabilities declined by US$ 7.2 billion over the previous quarter and stood at US$ 426.76 billion as at end-June 2008. This declined was mainly attributed to outflow by FIIs from Portfolio equity investment during April-June 2008 and also effect of valuation changes. Direct Investment in India increased by US$ 4.03 billion at end-June 2008 over end- March 2008. Further, trade credits, component of 'Other Investment' in India, increased by US$ 2.06 billion during end-June 2008 over end-March 2008, mainly due to increase in short term trade credit (US$ 2.17 billion). The Reserve Assets stood at US$ 312.09 billion exceeding the entire external debt (US$ 221.30 billion*) by US$ 90.79 billion as at end-June 2008.

Note *: As published in External Debt Statistics of India, June 2008, RBI.

Overall International Investment Position

(US $ billion)

Period Jun. 06 (R) Jun. 07 (PR) Mar. 08 (PR) Jun. 08 (P)

Net IIP -59.46 -80.73 -52.51 -49.12

A Assets 192.22 261.89 381.45 377.63

1. Direct Investment 17.27 33.73 46.19 48.21

2. Portfolio Investment 1.02 0.93 0.73 0.70

2.1 Equity Securities 0.60 0.56 0.64 0.62

2.2 Debit Securities 0.43 0.38 0.09 0.07

3. Other Investment 11.02 13.87 24.80 16.64

3.1 Trade Credits -1.40 -1.02 0.85 1.95

3.2 Loans 1.52 2.15 10.51 2.06

3.3 Currency and Deposits 7.47 8.55 8.23 6.39

3.4 Other Assets 3.44 4.20 5.21 6.24

4. Reserve Assets 162.91 213.35 309.72 312.09

B Liabilities 251.68 342.62 433.96 426.76

1. Direct Investment 53.73 88.33 115.51 119.54

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2. Portfolio Investment 64.32 93.81 119.45 107.98

2.1 Equity Securities 52.47 75.17 98.28 87.44

2.2 Debt Securities 11.86 18.65 21.17 20.54

3. Other Investment 133.63 160.48 199.01 199.24

3.1 Trade Credits 22.41 29.49 45.22 47.28

3.2 Loans 70.76 85.73 106.44 106.52

3.3 Currency and Deposits 39.37 43.81 44.79 43.59

3.4 Other Liabilities 1.08 1.45 2.56 1.85

R: Revised.PR: Partially revised. P: Provisional.[figures in the Table have been compiled based on IIP estimates in terms of US $ Million]

Source: Reserve Bank of India

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Sectorwise Classification of Approved Overseas Investments

During the period from April 1999 to March 2007, the largest amount of approvals for overseas investment was in the financial and non-financial services sector (including software development) at US$ 13099.72 million followed by manufacturing sector at US$ 12538.38 mn, Other activities at US$ 2393.06 million and Trading sector at US$ 1884.57 million respectively.

(Amount in US$ million)

Year Manufacturing Financial services Non financial services Trading Others

1999-00 548.84 4.26 1143.52 58.31 2.30

2000-01 370.74 16.61 876.53 89.17 29.14

2001-02 2210.90 48.62 565.49 139.18 61.34

2002-03 1056.74 1.82 280.17 69.880 61.69

2003-04 765.64 35.11 438.79 76.940 134.08

2004-05 2026.43 9.210 548.24 69.120 151.330

2005-06 1711.08 167.71 707.44 134.34 134.29

2006-07 3748.01 24.99 8231.21 1247.63 1808.16

Total 12538.38(42%)

308.33(1%)

12791.39(43%)

1884.57(6%)

2393.06(8%)

Source: Ministry of Finance

Regionwise Approved Overseas Investments For 2006-07

In the year 2006-07, Other European countries (US$ 6702.96 million) accounted for major share of India's overseas investment followed by European Common Market Region (US$ 3344.89 mn, Economic & Social Commission for Asia Pacific Region (US$ 1737.89 mn), Organisation Commune African El Malagache Region (US$ 1289 mn) and North American region (US$ 1252.44 mn) respectively.

1st April 2006 – 31st March 2007

Amount in US$ million

Name of the Region No. of approvals

Equity Loan Guarantee Total

Central American Common Market 001 -- 0.096 -- 0.096

Caribbean Common Market 001 0.050 0.050 -- 0.100

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Common Wealth of Independent States

28 17.597 14.852 3.000 35.449

East African Community 002 0.201 - - 0.201

East European countries 10 1.534 34.500 -- 36.034

Economic Commission for West Asia 215 111.138 104.371 115.276 330.785

European Common Market 300 2248.461 117.997 978.433 3344.891

European Free Trade Area 43 83.733 55.677 -- 139.410

Economic & Social Commission for Asia & Pacific

448 1157.397 259.509 320.985 1737.891

North America 477 943.919 275.425 33.100 1252.444

Organisation of African Unity 24 6.194 9.465 -- 15.659

Organisation Commune African El Malagache

130 671.043 540.210 75.761 1289.014

Other African countries 32 218.169 4.858 -- 223.027

Other Asian & Oceanian & Antarctic & Artic Counter

4 0.975 -- -- 0.975

Other Central American & Caribbean countries

13 23.776 2.058 5.000 30.834

Other European countries 46 5733.441 55.111 914.405 6702.957

South America 42 25.967 1.106 5.000 32.073

Total 1817 11244.96 1475.28 2339.76 15060.00

Source: Ministry of Finance

Countrywise Approved Indian Direct Investments in Joint Ventures and Wholly Owned Subsidiaries

During the period from April 1996 to July 2006, Russia was the largest recipient of approvals for Indian direct investment at US$ 2828 million, followed by USA at US$ 2619 million, Mauritius at US$ 1927 million, Sudan at US$ 1035 million and U.K at US$ 989 million.

During the period April 1996 to March 2007, Channel Island was the largest recipient of approvals for Indian direct investment at US$ 5414.07 million, followed by USA at US$ 3285.19 million, Russia at US$ 2839.63 million, U.K at US$ 2683.3 million and Mauritius at US$ 2572 million.

(Amount US$ million)

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S.No Name of the country Apl. 1996 to Mar 02 2002-03 2003-04 2004-05 2005-06 2006-07 Total

1 Afghanistan -- -- -- -- 0.055 -- 0.055

2 Algeria -- -- 0.54 0.25 0.235 0.315 1.340

3 Australia 6.99 94.97 92.87 158.76 75.271 174.912 603.773

4 Austria 77.64 -- -- 0.11 -- 1.696 79.446

5 Argentina 0.30 -- -- -- -- -- 0.3

6 Azerbaijan 0.01 -- -- 2.05 -- -- 2.06

7 Bangladesh 14.95 1.18 4.08 1.72 1.203 15.952 39.085

8 Bahamas 0.01 -- 0.02 -- -- 0.100 0.130

9 Bahrain 11.36 1.16 -- 0.05 0.712 0.411 13.693

10 Belgium 5.15 0.30 9.19 1.06 69.382 97.799 182.881

11 BritishVirgin Island 776.53 3.27 4.92 131.41 29.534 62.799 1008.463

12 Belize 0.36 -- -- -- -- -- 0.36

13 Bermuda 232.63 28.95 142.46 221.26 2.600 -- 627.90

14 Botswana 3.46 -- 0.05 0.02 0.017 -- 3.547

15 Brazil 12.98 5.17 4.95 17.21 420.122 26.638 487.070

16 Burkino Faso -- -- -- 0.05 -- -- 0.05

17 Bulgaria -- -- -- -- -- 0.288 0.288

18 Bhutan -- -- -- -- -- 1.118 1.118

19 Channel Island 13.64 0.49 -- 3.61 37.490 5358.843 5414.073

20 Cameroon -- 0.02 -- -- -- -- 0.02

21 Canada 5.58 2.34 0.66 0.80 1.557 404.274 414.090

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22 Cayman Island 11.63 -- -- 2.76 82.437 7.085 103.912

23 Colombia 16.23 -- -- -- -- -- 16.23

24 Congo -- -- -- -- 0.220 -- 0.220

25 China 38.35 29.55 26.59 15.13 52.167 54.614 216.401

26 Cambodia -- -- -- 0.04 -- 14.458 14.498

27 Cuba -- -- -- -- -- 17.000 17.000

28 Cyprus 1.85 -- 0.03 1.93 13.400 1344.158 1361.368

29 Czech Republic -- -- 0.01 0.35 0.421 34.508 35.289

30 Denmark 0.01 -- -- 6.78 16.516 2.358 25.664

31 Egypt 8.49 0.01 -- 3.07 0.100 0.084 11.754

32 Ethiopia 0.54 0.57 0.22 0.20 1.796 2.523 5.849

33 France 5.07 1.83 84.37 22.31 0.630 0.693 114.903

34 Finland 2.40 -- -- 0.03 -- 0.01 2.44

35 Gabon -- -- -- -- -- 63.00 63.000

36 Germany 11.82 4.92 18.24 9.09 36.077 67.899 148.046

37 Georgia -- -- -- -- 0.130 8.861 8.991

38 Ghana 0.03 0.33 0.01 -- 0.660 1.689 2.719

39 Greece 0.05 -- -- -- -- 0.185 0.235

40 Honduras Republic -- -- -- -- 0.200 0.096 0.296

41 Hong Kong 445.12 14.80 16.15 73.64 88.758 80.115 718.583

42 Hungary 5.51 -- 1.89 -- -- -- 7.40

43 Indonesia 20.19 0.12 19.30 80.80 7.918 31.332 159.660

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44 Iraq 5.00 -- -- -- -- -- 5.00

45 Iran 59.15 43.60 0.49 0.21 0.312 0.561 104.323

46 Isle of Man -- -- -- -- -- 0.066 0.066

47 Israel 2.88 -- -- 0.68 -- -- 3.56

48 Ireland 43.46 -- 4.63 1.93 3.596 2.906 56.523

49 Italy 42.21 0.09 0.06 7.62 0.216 7.117 57.313

50 Ivory Coast 0.01 -- -- 7.24 6.852 0.390 14.492

51 Jordan 0.03 -- -- -- -- -- 0.03

52 Japan 5.74 0.37 0.04 -- 0.087 1.309 7.546

53 Kazakhstan 4.44 0.11 74.96 44.00 9.600 10.000 143.110

54 Kenya 12.75 0.59 1.77 0.19 0.319 0.200 15.819

55 Kuwait 11.81 0.04 0.21 1.55 0.301 -- 13.911

56 Kyrgyzstan 7.98 0.15 -- 2.75 2.000 -- 12.88

57 North Korea -- -- 51.51 -- -- -- 51.51

58 South Korea 0.45 -- -- 1.55 -- 0.700 2.700

59 Latvia -- -- -- -- -- 0.275 0.275

60 Liechtenstein 0.01 -- -- -- -- -- 0.01

61 Luxembourg 17.30 0.95 -- -- -- 0.009 18.259

62 Libya 30.00 -- -- -- 25.280 75.00 130.280

63 Liberia 0.28 -- -- -- 154.940 -- 155.220

64 Malta 21.69 24.37 40.25 10.04 -- -- 96.35

65 Mauritius 618.34 133.35 175.59 149.38 332.665 1162.786 2572.111

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66 Myanmar 8.07 -- 4.31 -- -- 59.067 71.447

67 Maldives 21.00 -- -- -- 1.10 0.143 22.243

68 Moldova -- -- -- 3.75 1.500 1.250 6.500

69 Malaysia 39.22 0.79 1.44 4.85 4.392 14.594 65.286

70 Republic of Madagascar 0.03 -- -- -- -- -- 0.03

71 Morocco 32.49 -- -- -- -- -- 32.49

72 Mozambique -- -- -- 2.55 7.515 -- 10.065

73 Mexico 0.70 0.50 -- 0.26 51.851 9.611 62.922

74 Nepal 67.00 5.69 5.32 3.86 0.793 4.112 86.775

75 Netherlands 157.92 15.92 30.18 30.65 284.619 1286.129 1805.418

76 Niger -- -- -- -- 0.010 -- 0.010

77 Nigeria 6.69 4.08 2.16 7.53 4.301 11.637 36.398

78 Namibia 0.06 -- -- 0.001 -- -- 0.06

79 New Zealand 0.13 0.57 0.03 0.00 0.102 0.596 1.428

80 Norway -- 0.01 -- -- -- 0.395 0.405

81 Oman 204.88 0.35 1.51 5.00 2.256 27.386 241.382

82 Pakistan -- 2.50 -- -- -- -- 2.50

83 Peru -- -- -- -- -- 0.085 0.085

84 Philippines 0.14 0.01 0.79 3.34 4.478 1.125 9.883

85 Poland 0.11 0.12 0.37 0.50 0.483 0.578 2.161

86 Portugal 3.01 -- -- -- -- -- 3.01

87 Panama 0.67 -- -- -- 19.209 3.954 23.33

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88 Qatar -- -- 0.32 -- 15.500 0.054 15.874

89 Romania -- -- 0.10 -- 10.506 0.319 10.925

90 Russia 1748.68 0.15 1.43 1076.17 1.168 12.031 2839.629

91 South Africa 21.56 0.07 0.79 2.88 10.422 23.390 59.112

92 Sierra Leone -- -- -- 0.01 -- 0.010 0.020

93 Saudi Arabia 18.81 0.12 3.27 -- -- 18.492 40.692

94 Senegal 22.24 -- -- -- 1.00 -- 23.24

95 Singapore 152.96 46.79 15.85 239.29 200.493 1085.604 1740.987

96 St. Vincent -- -- -- 0.050 -- -- 0.050

97 Sri Lanka 61.58 6.60 44.52 9.95 17.429 8.269 148.348

98 Spain 0.55 0.04 0.19 0.008 2.194 10.628 13.611

99 Sudan -- 750.00 162.03 51.548 63.048 118.154 1144.780

100 Sweden 0.64 0.01 2.16 -- 4.500 2.890 10.200

101 Switzerland 6.99 1.05 0.75 2.452 73.307 134.421 218.970

102 SyrianArab Republic -- -- 9.45 -- -- -- 9.45

103 Tajikistan 0.36 -- -- 0.041 -- 3.964 4.365

104 Taiwan -- -- -- -- 0.240 0.023 0.263

105 Thailand 25.09 7.73 7.36 3.465 3.384 93.429 140.458

106 Tanzania 4.02 0.01 0.08 0.342 -- -- 4.452

107 Trinidad & Tobacco 2.09 -- 0.60 -- -- -- 2.69

108 Tunisia -- -- -- -- -- 5.242 5.242

109 Turkey 0.06 -- -- -- 0.278 0.196 0.534

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110 UAE 110.24 12.60 32.07 41.851 141.019 284.454 622.234

111 Uganda 2.44 -- 0.010 0.190 -- 0.001 2.641

112 U.K 410.62 34.53 138.48 71.852 158.270 1869.548 2683.300

113 Ukraine 0.70 -- -- 3.960 -- 0.280 4.940

114 USA 1540.83 185.27 207.14 251.42 270.256 830.276 3285.192

115 Uruguay -- 1.39 1.96 1.800 25.250 5.500 35.900

116 Uzbekistan 25.73 1.56 0.16 0.177 0.027 0.065 27.719

117 Vanatua 0.001 -- -- 2.301 0.175 -- 2.477

118 Vietnam 228.79 0.06 0.04 0.055 -- 76.216 305.161

119 Zambia 2.35 -- -- 0.105 -- -- 2.455

120 Zanzibar 0.09 -- -- -- -- -- 0.09

121 Zimbabwe 1.11 -- -- 0.175 0.300 0.948 2.533

Source: Ministry of Finance

Overseas Investment Approvals and Outflows

The overseas investment approvals have been steadily increasing since 1996 both in terms of number of approvals and value. The value of approved/reported Indian investments abroad has gone increased by more than 5 time to US$ 2854.84 million between April 1996 to March 2006.

In the year 2006-07, 1817 approvals were granted to Indian companies for overseas investments worth US$ 15060 million, a substantial increase in terms of number of approvals and value of investments approved as compared to last 5 years.

(Amount in USD million)

FinancialYear

No.of approvals

Equity Loan Guarantee Total Annual Cap Actual outflows

1996-97 290 363.73 37.76 155.12 556.61 500 204.99

1997-98 228 482.01 8.34 135.52 625.87 750 120.77

1998-99 275 144.98 18.48 86.21 249.67 750 142.83

1999-00 395 1298.93 50.44 407.64 1757.01 750 318.64

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2000-01 714 1176.83 89.84 113.43 1380.10 1000 1211.85

2001-02 908 2712.46 157.21 155.86 3025.53 1000 981.67

2002-03 1034 1298.69 104.49 141.53 1544.71 1000 1799.08

2003-04 1214 822.40 229.90 413.84 1450.56 Annual ceiling

removed w.e.f.

1.4.2003

1494.26

2004-05 1281 2010.03 384.39 409.91 2804.33 ---- 1744.50

2005-06 1395 1887.87 629.74 337.32 2854.84 ---- 4531.87

2006-07 1817 11244.96 1475.28 2339.76 15060.010 ---- 11001.28

Source: Ministry of Finance

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Actual outflows of overseas investments

Actual outflows rose from US$ 318.64 million in 1999-2000 to US$ 4531.87 million in the year 2005-06, a jump of 1422%. In the year 2006-07, actual outflows stood at US$ 11001.28 million as compared to US$ 4531.87 million during the last year.

US$/million

Financial year Equity Loan Invoked guarantee Total

1999-2000 314.31 3.93 0.40 318.64

2000-2001 1138.32 68.55 4.98 1211.85

2001-2002 859.82 121.43 0.42 981.67

2002-2003 1698.06 100.38 -- 1798.44

2003-2004 1234.25 260.67 -- 1494.92

2004-2005 1349.34 395.16 --- 1744.50

2005-2006 3594.84 934.03 3.00 4531.87

2006-2007 10130.37 870.91 -- 11001.28

Source: Ministry of Finance

Inflows from Joint Ventures (JVs)/Wholly Owned Subsidiaries(WOSs)

Foreign exchange inflows from Indian overseas investments in joint ventures and wholly owned subsidiaries have been steadily rising. While inflows rose from US$ 49 million in 1999-2000 to US$ 51 million in 2000-01, there was more than eight fold increase when the inflows aggregated US$ 438.17 million in year 2005-06. During the year 2006-07, actual outflows declined to US$ US$ 181.95 million by way of repatriation of dividend etc. from overseas JV/WOS and non equity exports has been increased as Rs. 1919.67 crores as against Rs. 1366.22 crores during the previous year.

US$ million

Financial year Dividend Others (Tech.know-how, royalty, Engg. fees, consultancy etc.)

Total @ Non-equity exports(Rs. in crs)

1999-2000 17.63 031.56 049.19 0555.30

2000-2001 12.50 038.93 051.43 1325.80

2001-2002 36.31 242.97 279.28 1889.68

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2002-2003 33.60 068.66 102.26 1007.07

2003-04 26.24 324.49 350.73 0627.08

2004-05 24.23 066.50 090.73 0854.06

2005-06 28.08 410.09 438.17 1366.22

2006-07 14.20 167.75 181.95 1919.67

Source: Ministry of Finance

@ Figures are provisional and are updated on receipt of ODRs/APRs by RBI

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Legal Aspects

An entrepreneur can successfully expand and grow his/her business abroad by taking into account the basic legal framework of the home country as well as of the particular foreign country. It is necessary for him/ her to abide by such laws and regulations in order to ensure efficient and healthy functioning of the organisation and face the various challenges that he/ she may encounter abroad. In India, the most important law which regulates all foreign exchange transactions including investments abroad is the Foreign Exchange Management Act (FEMA),1999. It is an investor friendly legislation which aims to facilitate external trade and payments as well as promote an orderly development and maintenance of foreign exchange market. Under the Act, Reserve Bank of India (RBI) has been authorised to frame various rules, regulations and norms pertaining to overseas investments in consultation with the Central Government.

In order to encourage capital inflows and provide safe business environment for all investments abroad, many countries have entered into bilateral investment treaties or agreements. Bilateral Investment Promotion and Protection Agreement (BIPA) is one such bilateral treaty which is defined as an agreement between two countries (or States) for the reciprocal encouragement, promotion and protection of investments in each other's territories by the companies based in either country (or State). These bilateral agreements have, by and large, standard elements and provide a legal basis for enforcing the rights of the investors in the countries involved. The Government of India has, so far, signed BIPAs with 58 countries out of which 49 BIPAs have already come into force and the remaining agreements are in the process of being enforced.

Arbitration and Conciliation Act, 1996 is another law which provides solution to business disputes for an entrepreneur. It consolidates and amends the laws relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards and also defines the law relating to conciliation. Arbitration is an alternative dispute resolution mechanism in which the parties get their disputes settled through the intervention of a third person and without having recourse to the court of law. While, conciliation is the process of amicable settlement of disputes by the parties, with the assistance of a conciliator. In India, the Indian Council of Arbitration (ICA) established in 1965 is the apex arbitral organisation at the national level which provides facilities for arbitration of commercial disputes.

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Financing Overseas Investment

A business firm requires finance to commence its operations, to continue its operations and for its expansion and growth. Indian companies need financial support in order to make their investments abroad. There must be continuous flow of funds in and out of business. They need funds to meet their various capital requirements; to make equity participation in overseas ventures as well as to acquire foreign companies or businesses. Sound plans, efficient production and marketing are all dependent on smooth flow of finance.

Till 1990, the Government policies were not in favour of obtaining finance or capital from overseas markets and the Indian industry by and large could not take advantage of the availability of cheap finance from abroad. The rationale for raising capital (either as equity or debt) from abroad is the desire on the part of companies to tap low cost funds and broaden the shareholder's base. This also serves as a launching pad for future overseas operations such as opening of branches, acquiring assets abroad as well a expanding the business operations abroad.The issue of ordinary shares and foreign currency convertible bonds (FCCBs) began in 1992 with a Government notifying the Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993.

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Sources of Overseas Investment

Financial Support by Banks

Financing Overseas InvestmentSources of Overseas Investment

Under the Foreign Exchange Management Act (FEMA) and the various notifications issued by the Reserve Bank of India under it, the investments in overseas JVs/WOSs may be funded out of one or more of the following sources:-

Drawal of foreign exchange from an authorised dealer in India upto the extent of 100 percent of the Indian party's net worth as on the date of last audited balance sheet. Under Foreign Exchange Management Act (FEMA), the Reserve Bank may authorise any person to be known as an authorised person, to deal in foreign exchange as an authorised dealer, money changer or off-shore banking unit or in any other manner as it deems fit.

Classification of Persons Authorised to deal in the foreign exchange

Sr. No. Present category Entities Revised category Major Activities

1. Authorised Dealer Commercial Banks

State Co-op Banks

Urban Co-op Banks

Authorised Dealer - Category - I

All current and capital account transactions according to RBI directions issued from time-to-time.

2. Authorised Dealer Upgraded FFMCs

Co-op. Banks

Regional Rural Banks (RRBs)

Others

Authorised Dealer - Category - II

Specified non-trade related current account transactions as at paragraph 3 below as also all the activities permitted to Full Fledged Money Changers. Any other activity as decided by the Reserve Bank.

3. Authorised Dealer Select Financial and other Institutions

Authorised Dealer - Category - III

Transactions incidental to the foreign exchange activities undertaken by these institutions.

4. Full Fledged Money Changers (FFMCs)

Dept. of Posts

Urban Co-op. Banks

Other FFMCs

FFMCs Purchase of foreign exchange and sale for private and business visits abroad.

Source: Reserve Bank of India

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Capitalisation of exports and other dues. Indian parties are permitted to capitalise:- (i) the payments due from the foreign entity towards exports made to it, fees, royalties; or (ii) any other entitlements due from the foreign entity for supplying technical know-how, consultancy, managerial and other services within the ceilings applicable. But, the export proceeds remaining unrealised beyond a period of six months from the date of export will require the prior approval of Reserve Bank before capitalisation.

Also, the Indian software exporters are permitted to receive 25 per cent of the value of their exports to an overseas software company in the form of shares without entering into Joint Venture Agreements, with the approval of the Reserve Bank.

Share swap, which refers to the acquisition of the shares of an overseas entity by way of exchange of the shares of the Indian entity. Under this, Indian companies can automatically swap their fresh issue of American Depository Receipts (ADRs)/Global Depository Receipts (GDRs) for overseas acquisitions in the same core activity in accordance with the scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme 1993 and the guidelines issued thereunder from time to time by the Central Government, subjected to compliance with the following conditions:-

ADRs/GDRs are listed on any stock exchange outside India;

Such investment by the Indian Party does not exceed the higher of the following amounts, namely:- (i) amount equivalent of USD 100 mn.; or (ii) amount equivalent to 10 times the export earnings of the Indian Party during the preceding financial year as reflected in its audited financial statements.

The ADR and/or GDR issue for the purpose of acquisition is backed by underlying freshequity shares issued by the Indian Party;

The total holding in the Indian entity by persons resident outside India in the expanded capital base, after the new ADR and/or GDR issue, does not exceed the sectoral cap prescribed under the relevant regulations for such investment;

Valuation of the shares of the foreign company shall be:- (i) as per the recommendations of the Investment Banker if the shares are not listed on any stock exchange; or (ii) based on the current market capitalization of the foreign company arrived at on the basis of monthly average price on any stock exchange abroad for the three months preceding the month in which the acquisition is committed and over and above, the premium, if any, as recommended by the Investment Banker in its due diligence report in other cases.

The Indian party is required to report such acquisition in Form ODG to the Reserve Bank within a period of 30 days from the date of the transaction.

External commercial Borrowings (ECB)/Foreign Currency Convertible Bonds (FCCBs) raised abroad. External Commerial Borrowings (ECBs) means borrowings in foreign exchange by a resident Indian, a firm, a bank or a company incorporated under the Indian Companies Act. It essentially includes:-

Credit extended by foreign banks.

Credit extended by foreign financial institutions.

Credit extended by overseas corporate bodies (OCBs)

Loans for imports, advances against exports, advances from overseas export credit agencies.

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Floating rate notes (FRN) and bonds.

Credit extended by individuals abroad including Non Resident Indians (NRIs).

The Government has formulated policies and procedures governing each of the above categories. ECBs were first permitted by the Government in 1999 as a source of finance for Indian entities or individuals for setting up new projects (known as green field projects), expansion of existing business, infrastructure projects and fresh investment in general. Policy on ECBs is framed by the Government of India in consultation with RBI. Government has been liberalising ECB procedures in order to enable Indian corporates, to have greater access to international financial markets. It has empowered Reserve Bank of India to give ECB approvals in accordance with the guidelines brought out by the RBI. Under the policy, ECBs can be accessed under two routes, namely :-

Automatic route:- ECBs for investment in the real sector is under the Automatic Route i.e. will not require RBI or Government approval.

Approval route:- All cases which fall outside the purview of the automatic route, will be decided by an Empowered Committee set up by RBI. In case of doubt as regards eligibility to access Automatic Route , applicants may take recourse to the Approval Route .

The banks in India offering ECBs are:-

o Bank of Baroda o State Bank of India (SBI)

o Indian Overseas bank

o Canara Bank

Foreign Currency Convertible Bonds(FCCBs) can be issued by Indian companies in the overseas market in accordance with Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993. The FCCB issue needs to conform to External Commercial Borrowing guidelines, issued by Reserve Bank vide Notification No. FEMA 3/2000-RB dated May 3, 2000, as amended from time to time.

Exchange Earner's Foreign Currency(EEFC) account of the Indian party. EEFC account means an account expressed in foreign currency and maintained with an authorised dealer (a bank dealing in foreign exchange) in India to credit prescribed percentage of earnings in convertible foreign currency. A person resident in India such as individuals, firms, companies, etc.,may open such an account. The permissible credits into this account are:-

Inward remittance through normal banking channel, other than remittances received on account of foreign currency loan or investment received from abroad or received for meeting specific obligations by the account holder.

Payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park for supply of goods to similar such unit or to a unit in Domestic Tariff Area.

Payments received in foreign exchange by a unit in Domestic tariff Area for supply of goods to a unit in Special Economic Zone (SEZ).

Payment received by an exporter from an account maintained with an authorised dealer for the purpose of counter trade. (Counter trade is an arrangement involving adjustment of value of goods imported into India against value of goods exported from India in terms of

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Reserve Bank guidelines).

Advance remittance received by an exporter towards export of goods or services.

Payment received for export of goods and services from India, out of funds representing repayment of State Credit in U.S. dollar held in the account of Bank for Foreign Economic Affairs, Moscow, with an authorised dealer in India.

Professional earnings including directors fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity.

Interest earned, if any, on the funds held in the account.

Re-credit of unutilised foreign currency earlier withdrawn from the account.

Amount representing repayment by the account holder's importer customer, of loan/advances granted, by the exporter holding such account.

Indian companies are allowed to raise capital in the international market through the issue of American Depository Receipts (ADRs)/Global Depository Receipts (GDRs). They can issue ADRs/GDRs without obtaining prior approval from the Reserve Bank of India if they are eligible to issue ADRs/GDRs in terms of the Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and subsequent guidelines issued by Ministry of Finance, Government of India:-

Amendment to the "Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993.

Guidelines For Overseas Business Acquisition By Indian Software Companies Through ADR/GDR Realisations/Stock Swap.

Guidelines For ADR/GDR Issues By The Indian Companies Dated The 19 th January, 2000

Guidelines for overseas business acquisition by Indian Companies through ADR/GDR stock swap - expansion in the scope of eligibility dated 17th April 2001

These instruments are issued by a Depository abroad and listed in the overseas stock exchanges. The proceeds so raised have to be kept abroad till actually required in India. After the issue of ADRs/GDRs, the company has to file a return in the proforma given in Annexure 'C' to the Reserve Bank Notification No.FEMA.20/ 2000-RB dated May 3, 2000. The company is also required to file a quarterly return in a form specified in Annexure'D' of the same regulation. There are no end-use restrictions on GDR/ADR issue proceeds, except for an express ban on investment in real estate and stock markets.

Financial Support by Banks

Export-Import Bank of India (EXIM) Bank has been playing a unique role in supporting Indian direct investment abroad since its inception. It acts as a nodal agency for financing the overseas investments by Indian firms. It has been facilitating Indian corporates’ access to new markets and technologies, and thereby enhancing their international competitiveness. It offers financial assistance to Indian companies to enable them to establish their products in overseas markets.

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EXIM Bank was established as a wholly Government-owned financial institution, under the Export-Import Bank of India Act, 1981, by relocating International Finance Division of Industrial Development Bank of India (IDBI), which had first initiated a program of rupee term loans to Indian companies towards their equity contribution in overseas ventures. Since then, EXIM Bank has been involved in supporting Indian direct investment overseas and has developed its financing programme further and enlarged its scope from time to time:-

It offers a range of fund and non-fund based support to enhance the export competitiveness of Indian companies.

Its major operations comprise financing projects, products and services exports, building export competitiveness, promotional programmes and financing research and development activities of exporting companies.

It provides information, advisory and support services to enable exporters to evaluate international risks, exploit export opportunities and improve their competitiveness.

It assists Indian companies in identifying technology suppliers, partners and in consummation of domestic and overseas joint ventures.

It also provides market driven export-financing solutions for small and medium sized Indian exporters.

The bank has launched a 'Overseas Investment Finance (OIF)' programme which seeks to cover the entire cycle of Indian investment overseas including the financing requirements of Indian Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS) with the help of the following financing instruments:-

Loan against investment in share capital. Loan against Indian promoter company’s loan.

Loans to Overseas Indian Ventures.

Non-fund based facilities to Indian Overseas Ventures.

Finance for direct equity Investment.

Direct Finance, that is, the term and working capital to the overseas ventures.

Finance for equity or debt component for acquisition of overseas businesses or companies including leveraged buy-outs including structured financing options.

Many other banks provide the necessary financial support for overseas investment. For example, State Bank of India (SBI). It's International Banking Group delivers the full range of cross-border finance solutions through its four divisions:- (i) the Domestic division; (ii) the Foreign Offices division; (iii) the Foreign Department; and (iv) the International Services division. The bank has a network of 66 offices/branches in 29 countries. It's offshore joint ventures and subsidiaries enhance its global stature.

Its Trade finance facilities include:-

Rupee Export Credit (Pre-Shipment and Post-Shipment) Pre-Shipment Export Credit

Post-Shipment Export Credit

Pre-Shipment Credit in Foreign Currency (PCFC)

Getting Started - Opening a PCFC

Operating PCFC

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Export Bill Rediscounting

Letter of Credit

Foreign Currency import credit

Supplier's credit

SBI's Merchant Banking Group specialize in the arrangement of various forms of Foreign Currency Credits for Corporates through:-

Commercial loans Syndicated loans

Lines of Credit from Foreign Banks and Financial Institutions

FCNR loans

Loans from Export Credit Agencies

Financing of Imports.

Overseas Business Opportunities

Overseas business by a company refers to undertaking and expanding its commercial activities across the national borders. It encompasses diverse nature of activities like trading (exporting and importing its goods and services); manufacturing and marketing as well as outsourcing for production and marketing. The main reason for making such overseas investments is to explore business opportunities abroad and take advantage of such opportunities. Foreign markets in both developed and developing countries provide enormous growth opportunities. For example, a number of Indian pharmaceuticals firms have achieved a much faster growth of their overseas business. The various other reasons for investing abroad are:-

Competition is the main driving force behind internationalism. Until liberalisation in 1991, the Indian economy was a highly protected market. Not only that the domestic producers were protected from foreign competition, but also domestic competition was restricted by several policy induced entry barriers. The economic liberalisation and globalisation has ushered in increased competition both domestically and internationally.

Government policies and regulations also motivate internationalism. Many Governments offer a number of incentives and other positive support in order to encourage foreign investments. Restrictive domestic Government policies which limit the scope of business expansion in domestic country and undermines their competitiveness is also an important factor for entering overseas markets.

Domestic demand constraints drive many companies to expand their markets beyond the national borders. If the domestic market potential is fully tapped, the market for such products tends to be saturated. Another type of domestic market constraint arises from the scale-economies. The technological advances has increased the size of optimal scale of operations in many industries, thus making it necessary to have foreign markets in addition to domestic ones. Domestic recession often provokes the companies to explore foreign markets.

It may also help the company to improve its domestic business, increase its market share and help establish the image of the company.

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Business strategy relating to overseas investment differs from that of domestic investment due to the differences in business environment:-

The political environment includes the characteristics and policies of the political parties, nature of the constitution and the governmental system. These factors vary considerably between different nations.

The legal system that exists in different countries across the world may be classified into common law, civil law or code law and theocratic law. Common law is based on tradition, past practices and legal precedents set by the courts through interpretation of statutes, legal legislations and past rulings. Code law, on the other hand, is based on an all-inclusive system of written rules of law. While the theocratic law is based on religious precepts. These differences in the legal framework play a very important role in overseas investment strategy.

Cultural differences are one of the most important factors influencing international investments. The cultural or social environment of any country encompasses language, religion, customs, traditions and beliefs, tastes and preferences, social stratification, social institutions,etc.

Economic environment also varies from country to country. It broadly includes the nature and level of development of the economy, economic resources, size of the economy, economic systems and economic policies, economic conditions,trends in various economic indicators like national income, per capita income, foreign trade, inflation rate, industry production, etc.

However, a firm which plans to invest abroad has to make a series of strategic decisions:-

The first decision a company has to make is whether to expand its business abroad or not. This decision is based on consideration of number of important factors like:-

Present and future opportunities

Present and future market opportunities

The resources of the company like skill,experience, financial support, production and marketing capabilities,etc.

Company's objectives.

Once the company has decided to invest abroad, the next important decision is the selection of the most appropriate market. For this, a thorough analysis of the potentials of the various overseas markets and their respective marketing environment is essential.

The next important decision relates to determining the appropriate modes of entering those foreign markets. The important foreign market entry strategies are:-

Exporting: is the most traditional mode of entering a foreign market. It is an appropriate strategy when any of the following conditions prevail:- (i) the volume of foreign business is not large enough to justify production in the foreign market; (ii) cost of production in the foreign market is high; (iii) the foreign market is characterised by production bottlenecks like infrastructural problems, problems with materials supplies, etc; (iv) there are political or other risks of investment in the foreign country; (v) the company has no permanent interest in the foreign market concerned or that there is no guarantee of the market available for a long period; (vi) foreign investment is not favoured by the foreign country concerned; (vii) licensing or contract manufacturing is not a better alternative.

Licensing and Franchising:- are easy ways of entering the foreign markets. Under international licensing, a firm in one country (the licensor) permits a firm in another country (the licensee) to use its intellectual property (such as patents, trade marks,

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copyrights, technology, technical know-how, marketing skill or some other specific skill). The monetary benefit to the licensor is the royalty or fees which the licensee pays.

Franchising is a form of licensing in which a parent company (the franchiser) grants another independent entity (the franchisee) the right to do business in a prescribed manner. This right can take the form of selling the franchiser's products, using its name, production and marketing techniques, or general business approach. One of the common forms of franchising involves the franchiser supplying an important ingredient for the finished product, like the Coca Cola supplying the syrup to the bottlers.

Management Contracting:- is one in which the supplier brings together a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership. It enables a firm to commercialise existing know-how that has been built up with significant investments and frequently the impact of fluctuations in business volumes can be reduced by making use of experienced personnel who otherwise would have to be laid off. Under it the firm providing the management know-how may not have any equity stake in the enterprise being managed.

Turnkey Contracts:- are common in international business in the supply,erection and commissioning of plants like in the case of oil refineries, steel mills, cement and fertilizer plants, etc. A turnkey operation is an agreement by the seller to supply a buyer with a facility fully equipped and ready to be operated by the buyer's personnel, who will be trained by the seller.

Fully Owned Manufacturing Facilities:- Companies with long term and substantial interest in the foreign market normally establish wholly owned manufacturing facilities there. It provides the firm with complete control over production and quality. It does not have the risk of developing potential competitors as in the case of licensing and contract manufacturing.

Assembly Operations:- A manufacturer who wants to take advantages that are associated with overseas manufacturing facilities and yet does not want to go that far may establish overseas assembly facilities in selected markets. It represents a cross between exporting and overseas manufacturing. It is an ideal strategy when there are economies of scale in the manufacture of parts and components and when assembly operations are labour-intensive and labour is cheap in the foreign country.

Joint ventures:- is a very common strategy of entering the foreign market. It represents a combination of subsets of assets contributed by two (or more) business entities for a specific business purpose and a limited duration. It generally has the following characteristics:- (i) contribution by partners of money, property, effort, knowledge, skill or other assets to the common undertaking; (ii) joint property interest in the subject matter of the venture; (iii) right of mutual control or management of the enterprise; (iv) right to share in the property.

For more details visit our Section on 'Growing Business'

Mergers and Acquisitions:- have been a very important market entry strategy as well as expansion strategy for maximisation of a company's growth by enhancing its production and marketing operations. They are being used in a wide array of fields such as information technology, telecommunications, and business process outsourcing as well as in traditional businesses in order to gain strength, expand the customer base, cut competition or enter into a new market or product segment.

For more details visit our Section on 'Growing Business'

Strategic Alliance:- has been becoming more and more popular in international business. This strategy seeks to enhance the long term competitive advantage of the firm by forming

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alliance with its competitors, existing or potential in critical areas, instead of competing with each other. It helps a company to leverage critical capabilities, increase the flow of innovation and increase flexibility in responding to market and technological changes.

Countertrade:- has been successfully used by a number of companies as an entry strategy. It is a form of international trade in which certain export and import transactions are directly linked with each other and in which import of goods are paid for by export of goods, instead of money payments. Its main attraction is that it can give a firm a way to finance an export deal when other means are not available. For example, Pepsico gained entry to the USSR by employing this strategy.

Decision regarding the nature of the organisational structure of the company internationally.This will depend on number of factors like:- Company's international orientation; nature of business; size of business; its future plans,etc.

Designing a suitable marketing mix- production,promotion, price and physical distribution, so as to adopt to the characteristics of overseas markets.

Hence, a firm typically passes through different stages in its transition from local firm to a transnational firm. That is, a firm which is entirely domestic in its activities normally passes through different stages of internationalisation before it becomes a truly global one. A firm may start exporting its products on an experimental basis and if the results are satisfying, it would enlarge its international operations and in due course it would establishes its offices,branches or subsidiaries or joint ventures abroad. This expansionary process may also be characterised by increasing the product mix and the number of market segments and the number of countries of operation. Thus, the company becomes multinational or global. In other words, for many firms overseas business initially starts with a low degree of commitment and involvement, and gradually develops into a global business organisation.

The examples of some of the business opportunities abroad are:-

http://business.gov.in/doing_business/oversea_opp.php

Government of Australia Investing in Australia

Government of Canada Investing in Canada

Government of China Investing in China

Government of Denmark Investing in Denmark

Government of France Investing in France

Government of Germany Investing in Germany

Government of Mauritius Investing in Mauritius

Government of UK Investing in UK

Government of USA

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TaxationAn entrepreneur willing to expand his/her business abroad must abide by the tax laws of the home country as well as of the particular foreign country and accordingly pay the required taxes. Taxes (or duties) are defined as the financial charges levied by the Government upon an individual or an organisation or property in return for the government services received by them. These taxes may be broadly classified into direct and indirect taxes. Direct taxes are those where the tax payer pays the taxes directly to the imposing authority like income tax and corporate tax. Whereas, indirect taxes are those which are not paid directly to the imposing authority but paid to someone else who acts as an intermediary link between the tax payer and the tax levying authority like customs duty and service tax. In India, the power to levy taxes and duties is distributed among the three tiers of Government, in accordance with the provisions of the Constitution.

The most important tax which an entrepreneur is subjected to is the 'customs duty' which is a type of indirect tax levied on goods imported into India as well as on goods exported from India. In India, the basic law for levy and collection of customs duty is Customs Act, 1962. It provides for levy and collection of duty on imports and exports, import/export procedures, prohibitions on importation and exportation of goods, penalties, offences, etc. The Central Board of Excise & Customs (CBEC) is the apex body for customs matters. It is a part of the Department of Revenue under the Ministry of Finance, Government of India.

But due to different tax laws and rules prevailing in different countries, a businessmen faces the problem of 'double taxation'. Double taxation refers to a situation where the same income becomes taxable in the hands of the same company or individual (tax-payer) in more than one country. This puts unnecessary and prohibitive burden on the tax-payer. In India, the liability under the Income tax Act arises on the basis of the residential status of the assessee during the previous year. Hence, if the assessee is resident in India, he/she has to pay tax not only on the income which is received in India but also on that income which accrues, arises outside India or received outside India. Thus he becomes liable to pay double taxes. The relief against such double taxation in India has been provided through, bilateral relief and unilateral relief.

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Indian Investments Abroad

Last Updated: January 2011

India has emerged as the world's 21st largest outward investor, with more than US$ 75 billion overseas investment in the past decade, according to a report by Columbia University.

According to the data from the Reserve Bank, investments by domestic companies in overseas joint ventures and wholly-owned subsidiaries stood at US$ 10.3 billion during 2009-10.

Equity accounted for more than 64 per cent (over US$ 6.6 billion) of the total outward foreign domestic investments (FDI), loans for about 35.6 per cent (over US$ 3.6 billion), as per the Reserve Bank of India (RBI). In terms of destinations, Singapore, Mauritius, the Netherlands, the US and the British Virgin Islands accounted for 67 per cent of total outward foreign direct investment (FDI). Singapore and Mauritius remains top destinations with more than 48 per cent share of the investments during 2009-10.

Overseas Investments

Elecon Engineering Company Ltd, a material handling equipment, industrial gears and transmission products manufacturer, has announced the acquisition of the UK-based Benzlers-Radicon Group (BR Group) for US$ 34.34 million.

Sahara India Pariwar’s US$ 752 million (GB£ 470 million) purchase of the Grosvenor House hotel in central London in February 2011 was one of the highest profile international acquisitions.

Biocon Ltd will set up its first overseas manufacturing and research facility in Malaysia with an initial investment of around US$ 160.38 million.

Allcargo Global Logistics Ltd through its step-down wholly owned subsidiary has acquired business rights and controlling stake in Hong Kong-based companies engaged in NVOCC business in China and other parts of eastern regions.

The Essar Group-owned back-office firm, Aegis, has acquired Actionline, one of the largest BPO firms in Argentina. The acquisition will give Aegis a 5,000-people strong facility and a presence in the Latin America region, in addition to Spanish-speaking capability that can be leveraged for US and European markets.

Mumbai-based drug-maker Twilight Litaka Pharma Limited has picked up 26 per cent equity in South Africa's Interpro Healthcare Ltd.

Mumbai-based Patni Computer Systems has opened a new delivery and support centre in Suzhou, China. This centre is set to serve Yangtze region – the largest manufacturing base for international companies.

Auto component maker Ashok Minda Group has completed the acquisition of specialist composite moulding manufacturer Aksys Koengen of Germany.

Tata Motors has bought an 80 per cent stake in Italy-based Trilix Srl, a design and engineering company for US$ 2.56 million.

ICICI Bank has opened its first retail branch in Singapore after it received the Full Banking Licence with Qualified Full Banking (QFB) privileges from the Monetary Authority of Singapore in April 2010.

Arvind Ltd will invest US$ 60 million over the next three years on setting up a joint venture plant in

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Bangladesh.

Larsen & Toubro (L&T) signed an agreement with South Africa-based Befula Investments for a joint venture to develop power transmission and distribution (T&D) projects in South Africa. L&T will have a 72.5 per cent stake in the venture.

Refractory manufacturer IFGL Refractories has acquired two US-based firms—EI Ceramics and CUSC International—for US$ 13 million to build a presence in one of the world’s largest markets for steel.

KEC International Ltd, an RPG group company, has acquired Texas-based power transmission infrastructure company SAE Towers Holdings for an enterprise value of US$ 95 million.

Ahmedabad-based Elitecore Technologies, provider of network security solutions, has announced foray into the African market with its NGN ready billing support system and operations support system (BSS/OSS) product suits.

Ybrant Digital, a digital marketing solutions company, has acquired Lycos Inc, a search-based internet properties and services company, from Daum Communications of Korea for US$ 36 million.

Mobile value-added services company Mauj Mobile has acquired UK-based Mobango, an independent mobile application and user generated content store.

Marico has acquired the OTC Healthcare brand, Ingwe, from Guideline Trading CC of South Africa, at an estimated US$ 2.15 million through its subsidiary, Marico South Africa (MSA). This is the fast moving consumer goods (FMCG) major's seventh acquisition and its second one in South Africa.

Solar Semiconductor, a photovoltaic (PV) products company, has announced a strategic partnership with Sonepar, a distributor of electrical and Solar PV products in Canada and worldwide.

Infotech Enterprises, a geo-spatial and engineering services company, has acquired the US-based Wellsco Inc, a telecom engineering services company, with an annual run rate of US$ 12 million.

Transgene Biotek Ltd has said that it has entered into an agreement to acquire Marillion Pharmaceuticals Inc, a US Oncology Biopharmaceuticals company based in Exton, Pennsylvania, in an all-share deal.

Coal importer Adani Enterprises, has acquired an Australian coal asset of Linc Energy in a cash and royalty deal worth US$ 2.7 billion. This would be the largest single investment by an Indian company in Australia and a second coal acquisition abroad for Adani.

Commercial vehicle major Ashok Leyland (ALL) has picked up a 26 per cent stake in Optare, a UK-based bus manufacturer.

Ahmedabad-based Lambda Therapeutic Research Ltd, a Contract Research Organisation (CRO), has successfully acquired the US-based veteran CRO, Biovail CRD.

Dabur India Ltd has announced a US$ 69 million acquisition of Turkish personal care products company Hobi Kozemtik Group.

HCL Infosystems announced the acquisition of a 60 per cent stake in Dubai-based IT services and solutions company, NTS Group, for an estimated US$ 6.5 million.

Overseas Investment Policy

Indian overseas investment policies have been progressively liberalised and simplified to meet the changing needs of a growing economy. The policy, which was evolved as one of the strategies for export promotion and for strengthening economic linkages with other countries, has expanded significantly in scope and size, especially after the introduction of Foreign Exchange Management Act (FEMA) in June 2000.

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The Indian venture capital funds (VCFs) registered with the Securities and Exchange Board of India (SEBI) are permitted to invest in equity and equity-linked instruments of off-shore venture capital undertakings, subject to an overall limit of US$ 500 million and compliance with the SEBI regulations issued in this regard.

The Liberalised Remittance Scheme (LRS) for Resident Individuals was further liberalised by enhancing the existing limit of US$ 100,000 per financial year to US$ 200,000 per financial year (April-March) in September 2007.

The limit for portfolio investment by listed Indian companies in the equity of listed foreign companies was raised in September 2007 from 35 per cent to 50 per cent of the net worth of the investing company as on the date of its last audited balance sheet.

The aggregate ceiling for overseas investment by mutual funds, registered with SEBI, was enhanced from US$ 4 billion to US$ 7 billion in April 2008. The existing facility allows a limited number of qualified Indian mutual funds (MFs) to invest cumulatively up to US$ 1 billion in overseas Exchange Traded Funds, as may be permitted by the SEBI, would continue.

Registered trusts and societies engaged in manufacturing/ educational sector have been allowed in June 2008 to make investment in the same sector(s) in a JV or WOS outside India, with the prior approval of the Reserve Bank. Registered trusts and societies which have set up hospital(s) in India have been allowed in August 2008 to make investment in the same sector(s) in a JV/ WOS outside India, with the prior approval of the Reserve Bank.

The central bank has permitted Indian companies to transfer shares of their joint venture (JV) or wholly-owned subsidiaries (WOS) abroad by way of sale under the automatic route. Such disinvestment is permitted only in case of full repatriation of investment made and other entitlements. It has also been decided to permit Indian listed companies to disinvest their investment in a JV/ WOS abroad even in case where such disinvestment may result in a write-off of the capital invested to the extent of 10 per cent of the previous year's export realisation.

All proposals for investment by way of swap of shares have also been brought under the automatic route. However, all share swap transactions require prior approval of the Foreign Investment Promotion Board (FIPB) for the inward leg of investment.

The RBI said that domestic parternership firms with a good track record can make direct investments outside India in an entity engaged in any bona fide business activity under the automatic route up to 100 per cent of its net worth or US$ 10 million, whichever is less, in one financial year.

Investments in JV or WOS abroad through special purpose vehicle (SPV) have also been brought under the automatic route.

Prior permission of the central bank is required for transfer by way of sale of shares of a JV/WOS. It has now been decided to permit an Indian party to transfer by way of sale to another Indian party, which complies with the stipulated provisions on or to an NRI, any share or security held by it in a JV or WOS outside India.

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