The Indian Corporate Scene has been ever evolving. Business in India has been
ever accepting the idea of totality and has been trying to lay more and more
emphasis on the welfare of all the stakeholders so as to ensure that everybody's
interest is well accounted for. With this welfare bound setup, the Corporate
scene in India has improved as well. With the help of more business-friendly
legislations, the corporate scene has improved to meet the international
The first step in the direction of establishment of the company's regime in
India came in the pre-colonial era in the year 1850, with the establishment of
Companies Act which was a model of the British Companies Act 1844. However not
much of it was accepted widely and hence was amended on a number of occasions.
Thereafter, a number of new acts were incorporated which were all valiant
efforts to meet up to requirements of the new India and included Legislations in
the year 1882, 1913. Post-Independence also, it was recommended by the Bhabha
Committee that changes need to be made to the Companies Act and hence on the
recommendation of the committee led by Mr C.H. Bhabha, the Companies Act 1956
came into effect on 1st April 1956. The first major amendment was the enactment
of the Depositories Act, 1996.
Currently, the new Companies Act 2013 consists of 29 chapters, 658 sections and
Foreign Direct Investment (FDI)
When we talk about corporate law, an important aspect regarding corporate law is
the intricate nuances concerned with the Foreign Direct Investment (FDI) policy.
FDI refers to that situation when a company who is in one country takes
controlling ownership of a business entity of another country.
means that such foreign companies have a full say in how that business
organization would function. Moreover, since they are directly involved with the
day-to-day activities of the organization, they often would bring, apart from
money, technology, skills and knowledge with themselves
Generally speaking, Foreign Direct Investment is preferred in open economies
which has the required growth prospect alongside the much-needed skilled
FDI in India
India's economic development in the post liberalisation era was chalked out on
the map of FDI. The entire motive with regards to opening the Indian economy was
the easing up of the inflow of foreign investment in the Indian market. India at
that point had all the required elements to be the next industrial hub of the
world, but lacked the much-needed finances and upper end technology. Opening up
the economy to foreign investment filled this much called for vacuum. Today,
India is in the list of the top 100 countries of the world with respect to ease
of doing business and ranks first with regards to the greenfield FDI ranking.
In 2019 alone, India attracted over $64 billion in FDI making it 9th on the list
of the countries that have received the most FDI.
There are two routes, primarily through which, India gets its FDI.
- The first one is the automatic route whereby the Non-resident or the
Indian company does not require any permissions as such from the Reserve
Bank or the Government for their foreign direct investments.
- The second one is the government route, where any FDI would require the
governments prior approval. Any company that wishes to use this route would be
required to fill and submit an application routed through the Foreign Investment
Facilitation Portal. It is a facility which uses single window clearance and is
hassle free. The application would then be sent to the respective ministry which
would then in consultation with the Department for Promotion of Industry and
Internal Trade (DPIIT) either reject or accept the proposal.
New Rules of 2020
Keeping India's foreign affairs in mind, the DPIIT tweaked the FDI policy in
India to protect the Indian Market from an economic hijack by neighbouring
countries such as China in the wake of the global economic crisis and liquidity
shortfall. The new rules, announced on the 17th of the month of April made it
compulsory for any company located in any country that shares a land border with
India to first seek permission from the government and then invest in India.
Such rules would also apply to owners of firms who are citizens of these
specific countries (namely Pakistan, Bhutan, Nepal, China, Afghanistan and
Myanmar) and might benefit from such investments.
FDI in Germany
Since the onset of beginning of the Industrialization of the European Union,
Germany has emerged as one of the strongest economies for foreign investments
which boasts of a highly advanced technological infrastructure. The government
of Germany has been for long, keen to attract foreign investment.
With this in
mind, it grants exclusive tax subsidies to all the foreign investors, investing
in Germany for a period of one year, for acquiring immovable assets. Alongside
that, a massive tax subsidy of up to the rate of 27% is provided to all those
companies that employ about 250 people.
The German Government also provides attractive concession on loans for foreign
investors who indulge in research and development, especially small-scale
companies. Intelligent investment in Germany can be done in certain key sectors
that can help the investors gain up to 50% of the eligible cost from the various
schemes of the federal government
FDI in Canada
The UNCAD's World Report (2020) states that Canada had attracted almost 50
billion USD worth of FDI in the financial year ending 2019. In that year itself,
Canada ranked 11th in the world for the most convenient destination for FDI. The
foreign investment that Canada gets is mostly oriented towards the,
professional, scientific and technical activities which mainly include sectors
such as mining, finance, wholesale trade etc.
The country recently adopted a regulation on the ownership of land by the
foreign investors whereby it increased the tax charged on residential properties
which were transferred to foreign entities.
It must also be noted that in the upcoming years, the ratification of the USMCA
(Canada-United States-Mexico Agreement) would have a huge impact on the FDI
policy since the United States is the main investor in Canada. Add to that, the
fact that country ranks 23 in the ease of doing business globally, Canada is all
set to become investment hub of the globalised world
In the post liberalisation era, one thing was understood clearly, that the
provisions of the present (at that time), Monopolistic and Restrictive Trade
Practices Act (MRTP) 1969 wasn't sufficient enough to tackle the problem of
competition in the country. There was a growing call for a level playing field
and an investor-friendly environment. To tackle this, the Competition Act was
enacted in the year 2002. The act provided for a 3-stage transition. It would
also include the replacement of the MRTP Commission with the Competition
Commission of India.
The following were the objectives of the Competition Law :
- To make sure that no business entity was in a dominant position (except
by own merit)
- To provide for a regulation of combinations
- To check anti-competitive practices
Section 3 of the aforementioned act provides for anti-competitive agreements. It
states that enterprises, or persons including cartels would not enter into
agreements in respect of production (or the other nuances of business), which
would adversely impact the competition in India. Such agreements, even if
entered into would be deemed void. For this purpose, the following things would
be referred to as having appreciable adverse impact.
- Determining sale prices (directly or otherwise)
- Try to limit or control, in any manner, production, supply, market
- Share the market or source of production by allocation of any specific
geographical area of the market, number of customers or the nature of the
goods produced in any manner whatsoever
- Indulge in bid rigging or collusive bidding (directly or otherwise)
Competition Law in Germany
Germany has for long, strongly advocated the rigorous enforcement of the
prohibition of cartels. The German Federal Cartel Office in the year 2017,
during rigorous audits found out that many companies were breaching the rules of
competition. Although the fines that were collected were less as compared to
other years, the FCO made it aptly clear that prevention of competition by any
means in the market would be strongly taken care of.
The competition act in Germany is known as the Act Against Restraint of
Competition (ARC) and was put to force on 5th June 2017. The provision regarding
prohibition of Cartel is mentioned in Sec 1. However, what must be noted in this
regard is that formation of Cartels isn't considered a crime under their
criminal law, but they are considered an administrative offense. There is one
important exception here, which is the rigging of bids which is considered a
criminal offence under section 298 of the German Criminal Code.
Competition Law in Canada
The Competition Act in Canada is a federal law which more or less covers all the
business conduct in Canada. It contains provisions from both civil and criminal
side and aims at preventing the business houses to stop competition.
Following are the purposes of the Canadian Competition Act
- To enhance the efficacy and adaptation capacity of the economy of Canada
- Give the domestic players in the Canadian market, a level playing field
and help them compete internationally.
- Ensure that the small-scale business houses are not completely bulldozed
by the firms who boast of a huge economic and technological backing.
- To ensure that the consumers have a plethora of choices from among goods
and services available in the market.
These were a few of the most important areas in which the comparison of Canada
and Germany with India was done as far as the Corporate scene in the three
countries are concerned. A detailed study shows us that India still lacks a
couple of steps behind these two countries in this area but at the rate at which
our country is catching up, the time is not far when we would topple these two
countries and secure their position instead.
Written By: Mr. Saikat Mukherjee,
- Available at https://blog.ipleaders.in/history-of-the-company-legislations/#:~:text=By%20the%20end%20of%201950,(Amendment)%20Act%2C%201956.
Browsed on 21/06/2020 at 13:15 hrs.
- Available at https://www.rna-cs.com/an-insight-into-the-depositories-act-1996/
browsed on 21/06/2020 at 14:15 hrs.
- Available at https://www.business-standard.com/about/what-is-fdi browsed on
21/06/2020 at 14:50 hrs.
- Refer to footnote no 3.
- Available at https://www.thehindubusinessline.com/economy/india-among-top-10-fdi-recipients-attracts-49-billion-inflows-in-2019-un-report/article30608178.ece
browsed on 21/06/2020 at 15:06 hrs.
- Available at https://theprint.in/opinion/investment-a-must-to-become-global-power-new-fdi-rules-cant-protect-indias-interests/407263/#:~:text=On%2017%20April%202020,it%20can%20invest%20in%20India.
Browsed on 21/06/2020 at 15:26 hrs
- Available at http://www.investineu.com/content/germany-%25E2%2580%2593-major-destination-foreign-investment#:~:text=Foreign%20Direct%20Investment%20(FDI)%20policy%3A&text=The%20Federal%20Government%20of%20Germany,a%20period%20of%201%20year.&text=Foreign%20investment%20investing%20in%20certain,50%25%20of%20the%20eligible%20costs.
Browsed on 21/06/2020 at 18:29 hrs.
- Available at https://www.nordeatrade.com/en/explore-new-market/canada/investment
browsed on 21/06/2020 at 18:42hrs.
- Available at https://www.mondaq.com/india/antitrust-eu-competition-/33971/indian-competition-act-an-overview
browsed on 21/06/2020 at 17:26 hrs.
- Available at https://www.globallegalinsights.com/practice-areas/cartels-laws-and-regulations/germany#:~:text=The%20competition%20act%20in%20Germany,in%20section%201%20et%20seq.&text=Cartels%20are%20not%20criminalised%20under%20German%20law.
Browsed on 21/06/2020 at 18:01 hrs.
- Available at https://www.gesetze-im-internet.de/englisch_stgb/englisch_stgb.html
browsed on 21/06/2020 at 18:08 hrs.
- Available at https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04267.html
browsed on 21/06/2020 at 18:18 hrs.
BA LLB - 3rd Year,
Symbiosis Law School, Nagpur.
Email: [email protected]