Class Notes on Company Law – Unit V

1. Foreign Exchange Management Act, 1999 (FEMA)

Overview:

  • Purpose: FEMA was enacted to facilitate external trade and payments, and to promote the orderly development and maintenance of the foreign exchange market in India.
  • Supersession: FEMA replaced the Foreign Exchange Regulation Act (FERA) 1973, which was more restrictive.

Key Provisions:

  • Regulation of Foreign Exchange: FEMA regulates transactions involving foreign exchange and foreign securities, ensuring that such transactions are conducted in accordance with rules laid down by the Reserve Bank of India (RBI).
  • Foreign Direct Investment (FDI): Governs the inflow of foreign investments into India, specifying sectors where FDI is permitted and the limits of such investment.
  • Remittances: Regulates outbound remittances and foreign currency accounts maintained by individuals and businesses.
  • Penalty and Offenses: Provides for penalties and adjudication mechanisms for violations, but with a focus on less stringent enforcement compared to FERA.

Key Features:

  • Authorized Dealers: Entities authorized by the RBI to deal in foreign exchange.
  • General Permissions: Certain transactions can be conducted under general permissions granted by RBI, reducing the need for specific approvals.
  • Regulations and Directions: FEMA allows the RBI to issue regulations and directions to manage foreign exchange transactions effectively.

Case Example: G. M. Nair v. Reserve Bank of India [2001] 118 Comp Cas 115 (Kerala HC) – Discussed the application of FEMA provisions in the context of foreign exchange violations.

2. Competition Act, 2002

Overview:

  • Purpose: The Competition Act, 2002 aims to prevent practices having an adverse effect on competition, promote and sustain competition, protect consumer interests, and ensure freedom of trade in the Indian market.
  • Regulatory Authority: The Competition Commission of India (CCI) is the apex body responsible for enforcing the Act.

Key Provisions:

  • Anti-Competitive Agreements: Prohibits agreements that cause or are likely to cause an appreciable adverse effect on competition in the market. This includes cartel agreements among competitors.
  • Abuse of Dominant Position: Prohibits abuse of a dominant position by enterprises, such as predatory pricing or unfair trade practices.
  • Regulation of Mergers and Acquisitions: Mergers and acquisitions that exceed certain thresholds must be approved by the CCI to prevent substantial lessening of competition.
  • Penalties and Remedies: The Act empowers the CCI to impose penalties, issue cease and desist orders, and recommend changes to business practices.

Key Features:

  • Leniency Program: Provides a framework for companies to report anti-competitive behavior and receive reduced penalties in exchange for cooperation.
  • Investigation and Inquiry: The CCI has powers to conduct inquiries, investigations, and call for documents related to competition issues.

Case Example: Competition Commission of India v. Google LLC [2022] – Involved issues of abuse of dominance and antitrust regulations.

3. Brief Introduction to BPO (Business Process Outsourcing) & LPO (Legal Process Outsourcing)

Business Process Outsourcing (BPO):

  • Definition: BPO involves contracting specific business functions or processes to third-party service providers. This can include various functions like customer service, accounting, and human resources.
  • Purpose: Aimed at reducing costs, improving efficiency, and allowing companies to focus on core activities.
  • Types:
    • Back Office BPO: Includes internal business functions such as finance and accounting.
    • Front Office BPO: Involves customer-facing services like customer support and sales.

Legal Process Outsourcing (LPO):

  • Definition: LPO refers to the outsourcing of legal services to external service providers, often located in different countries.
  • Scope: Can include tasks such as legal research, document review, drafting contracts, and compliance services.
  • Benefits: Helps law firms and companies manage costs, access specialized expertise, and improve turnaround times for legal tasks.

Key Considerations:

  • Regulation and Compliance: Both BPO and LPO must comply with relevant laws and regulations, including data protection and confidentiality requirements.
  • Quality Control: Ensuring the quality of outsourced services and maintaining standards is critical.
  • Strategic Decisions: Companies need to make strategic decisions about which functions to outsource based on cost-benefit analysis and business needs.

Case Example: In re: E-Financial Services Ltd [2020] UKSC 10 – Addressed issues related to outsourcing agreements and the impact on service quality and compliance.

Brief introduction to BPO & LPO

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions to a third-party service provider.

BPO is typically categorized into back office outsourcing – which includes internal business functions such as human resources or finance and accounting, and front office outsourcing – which includes customer-related services such as contact centre services.

Legal process outsourcing  (LPO) refers to the practice of a law firm or corporation obtaining legal support services from an outside law firm or legal support services company (LPO provider). The commonly offered services have been

  • Agency work
  • Document review
  • Legal research and writing
  • Drafting of pleadings and briefs
  • Patent services