There is a long list of overdue changes in the regulatory sphere for the next couple of years.

• The Indian general accepted accounting practices (GAAP) will be converged into the International Financial Reporting Standards (IFRS). The ICAI has also stated that IFRS will be applied to companies above Rs.1000 crore from April 2011.

• The New Direct Tax Code (DTC) is said to replace the existing Income Tax Act of 1961 in India. The new code would now be applicable from April 1, 2012, instead of next year as earlier proposed by the finance minister.

• Goods Service Tax Act (GST): The idea of a uniform VAT / GST across goods and services would remove the duality of goods and service taxation at the federal level. The rate may be set at 16% to 20%- P.Chidambaram

• A major recast of the TakeOver Code which ensures public announcement of a “substantial” acquisition, followed by an open offer for buying a certain minimum of public holdings is quite Investor friendly but could result in an Era of Hostile and expensive Takeovers in India.

• The Companies Bill 2009 contains concepts like One-person Company & A revised framework for regulation of insolvency, including rehabilitation, winding up and liquidation of companies with the process to be completed in a time bound manner.

All this should be a welcome change for the Corporate Sector in India.

A Liaison Office (also known as Representative Office) can undertake only liaison activities, i.e. it can act as a channel of communication between Head Office abroad and parties in India. It is not allowed to undertake any business activity in India and cannot earn any income in India. Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India. The role of such offices is, therefore, limited to collecting information about possible market opportunities and providing information about the company and its products to the prospective Indian customers.

Liaison Office can undertake the following activities in India:

i.	Representing in India the parent company / group companies.
ii.	Promoting export / import from / to India.
iii.	Promoting technical/financial collaborations between parent/group companies and companies in India.
iv.	Acting as a communication channel between the parent company and Indian companies.

Branch Office can undertake the following activities in India:

a) Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank. Such Branch Offices are permitted to represent the parent / group companies and undertake the following activities in India:

i.	Export / Import of goods
ii.	Rendering professional or consultancy services.
iii.	Carrying out research work, in areas in which the parent company is engaged.
iv.	Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
v.	Representing the parent company in India and acting as buying / selling agent in India.
vi.	Rendering services in information technology and development of software in India.
vii.	Rendering technical support to the products supplied by parent/group companies.
viii.	Foreign airline / shipping company.

Normally, the Branch Office should be engaged in the activity in which the parent company is engaged.

b) Retail trading activities of any nature is not allowed for a Branch Office in India.

c) A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly.

Overseas Direct Investment covers investment of Indian Entities in overseas joint ventures and wholly owned subsidiaries. It also includes investments of person resident in India in shares and securities issued outside India.

These investments can be done under automatic and approval route. However investments in a foreign entity engaged in real estate (barring development of township, construction pr residential/ commercial premises, roads or bridges) or banking business prohibited.

The Indian entities that can invest under the automatic route are companies incorporated in India or a body created under an act of parliament or a partnership firm registered under the Indian Partnership Act. The maximum investment that can be done under automatic route is 400% of the networth of the Indian entity. However the said ceiling will not be applicable when investments made out of balances held in EEFC A/c of the Indian Party or if the funds are raised through ADR’s /GDR’s.

However under the approval route, even the unregistered partnership firms , proprietary concerns , society can apply for such outbound investment subject to the fulfillment of certain conditions.

The Income Tax Act, 1961 does not have specific anti – avoidance rules. However, the recent judicial decisions in case of Vodafone or Samsung or Jebon Corporation India are indicative of the trend that only genuine tax efficient structuring or planning within the four corners of the law will be acceptable and not any complex colourable devises or structuring carried out with a view to avoid taxes in India.

The Direct Tax Code, which is proposed to be effective from 1st April, 2012 and which will replace the current Income Tax Act, has specific General Anti Avoidance Rules whereunder, arrangements for tax mitigation which;

a) are not at arms length;
b) represent abuse or misuse of the code ;
c) lack commercial substance or;
d) are entered into or carried on in a manner not employed for bonafide business purposes;

will be classified as impermissible.

Conducting Due Diligence is important in order to understand the contracts, litigation, finances and various other business affairs of the selling company. The goal of this effort is to reveal any potentially damaging information regarding the business to be purchased as soon as possible.

The principal goal of due diligence is to ensure that all information regarding the selling company has been fully disclosed, and that there will not be any surprises after the transaction has been completed.

Due Diligence is undertaken under the following circumstances:

• Before a Potential Acquisition
• For a Merger
• To Grant loan for projects.
• For selection of venture capital investment.

• Financial and Accounting
• Environmental
• Business/Market Due Diligence
• Technical Due Diligence
• Human Resource Due Diligence
• Legal Due Diligence
• System Due Diligence
• Tax Due Diligence