LEGAL ASPECTS

UNIT-IV
 Permits
• Starting a business in India requires obtaining the necessary licenses
and permits.
• The specific licenses and permits required will depend on the nature
of your business and its location.
• How to get a business license in India?
 Importance of Obtaining a Business License
➢In India, businesses must obtain various licenses and permits to operate
legally.
❑Here are some reasons why business licenses and permits are
necessary for India:
• Compliance with laws and regulations
• Protection of public health and safety
• Environmental protection
• Tax Compliance
• Legal protection
• Building trust with customers
 Eligibility to Apply for a Business License in India
➢The eligibility criteria to apply for a business license in India vary depending on
the type of business license or permit you require.
• Age: The applicant must be at least 18 years old
• Legal status: You should have a legally recognized business entity
• Citizenship or residency: The applicant should be an Indian citizen or a foreign
national with a valid visa to apply for a business license in India
• Educational Qualification: Some business licenses require a specific educational
qualification.
• Experience: Some business licenses require the applicant to have prior
experience in the relevant field
• Financial stability: Some business licenses require the applicant to demonstrate
financial stability.
 List of Business Licenses in India
• Some of the common types of business licenses that are required in India are as follows:
• Company Registration
• Company registration is the first and foremost requirement for a new business entity in India. The company
registration is based on the business structure and the partners involved.
• Types of company registration that exist in India are as follows:
• Proprietorship
• Partnership Firm Registration
• Limited Liability Partnership (LLP)
• One Person Company Or OPC
• Public Limited Company (PLC)
• Private Limited Company (PLC)
• GST Registration
• Every business with an annual turnover of over Rs. 40 lakhs (or Rs. 20 lakhs for certain states) must register for
GST.
 List of Business Licenses in India
✓GST Registration
• Every business with an annual turnover of over Rs. 40 lakhs (or Rs. 20
lakhs for certain states) must register for GST.
✓Trade License
• A trade license is required for businesses that involve trade or
commerce, such as shops, restaurants, and other establishments.
✓FSSAI (Food Safety and Standards Authority of India) License
• India’s Food Safety and Standards Authority issues FSSAI licenses to
food businesses, including manufacturers, distributors, and retailers.
 List of Business Licenses in India
✓MSME Registration – Udyam Registration
• Micro, Small, and Medium Enterprises (MSMEs) can obtain
registration under the MSME Act to avail of various benefits and
subsidies.
✓Pollution Control Board License
• Businesses that impact the environment, such as manufacturing units
and waste management facilities, require a license from the Pollution
Control Board.
 List of Business Licenses in India

✓Shops and Establishment License

• All businesses with a physical establishment, such as shops, offices, and
other commercial establishments, must register under the respective state
Shops and Establishment Act.
✓Professional Tax Registration
• Businesses with employees in certain states must obtain professional tax
registration and pay professional tax.
✓Drug License
• Businesses involved in the manufacturing, selling, or distributing of drugs
and medicines require a license from the Drug Control Department.
 List of Business Licenses in India
✓Import-Export Code (IEC)
• Businesses importing or exporting goods require an IEC from the
Directorate General of Foreign Trade.
✓Other Registrations and Licenses
• Certain businesses that deal with or provide financial services, insurance,
defense-related services, broadcasting services, and so on would require
regulatory permission from agencies like the Reserve Bank of India, IRDAI,
etc.
• Note: The licenses and permits required for a business may vary
depending on the nature of the company and the state in which it
operates.
Steps to Register a Company in India
 Steps to Register a Company in India
• 1. Digital Signature Certificate (DSC)
• A DSC by an authorized person is needed to authenticate electronically
filed legal documents.
• The Controller of Certification Agencies appoints and authorizes eight
Certificate Agencies to issue the DSCs.
• The Ministry of Corporate Affairs (MCA) website has a list of the
approved Certificate Agencies.
• The issued DSC is valid for one to two years and can be renewed on
expiry.
• A person with a DSC can use it for all applications.
 Steps to Register a Company in India
• Director Identification Number (DIN)
• DIN is a unique Identification Number allotted to an individual who is
appointed as a director of a company upon making an application
according to the Companies Act, 2013
• In respect of a new company an application for allotment of DIN shall
be made only through e-form at the time of its incorporation.
 Steps to Register a Company in India
2. Register the company name:
• Reserve a unique name for your company with the Registrar of Companies
(ROC) through the Ministry of Corporate Affairs (MCA) website.
• Company Registration
• This is governed by the Companies Act and the registration is done by the
Registrar of Companies (ROC), Ministry of Corporate Affairs, Government of
India.
• The pre-requisite for registering a company is to have directors who will run
the company and they need to be registered for this you need the following
–
• Director Identification Number (DIN)
• Digital Signature Certificate (DSC)
• This process can take anywhere from 2 - 14 days.
 Steps to Register a Company in India
• A company may be registered as –

• Public Limited Company

• Private Limited Company
• Limited Liability Partnership (LLP)
• One Person Company (OPC)
• Not for Profit (NGO / NPO)
 Steps to Register a Company in India
• Memorandum of Association and Articles of Association
(MoA and AoA)
• The Company's Memorandum of Association (MoA) is the company's
constitution, containing the company's objectives, work scope, and
duties.
• The Articles of Association (AoA) contain the company's rules and
regulations for its internal management.
• The MoA and the AoA must be submitted to the RoC right after the
company's name has been approved.
• Form SPICe MoA and Form SPICe AoA are filed for this purpose.
 Steps to Register a Company in India
• Corporate Bank account:
• For getting (Import / Export Code – IEC):
• IEC, you need to have a current account in a bank under your new registered
company's name.
• The bank will ask for your documents of company registration.
• The board resolution is just a letter/statement from the people who represent the
company, but some banks like it in a specific format and you can ask the bank to give
you the board resolution format if they have.
• Some banks even have this format downloadable on their websites 'corporate banking'
sections.
• The current account, will also be useful for you to do transactions in your company's
name, which is a MUST for accounting your company's cash flows.
• Also able to accept payment from your clients in the name of your company through
Cheques, direct wire transfers, etc.,
 Steps to Register a Company in India
• Apply for a Permanent Account Number (PAN) and Tax Account
Number (TAN):
• Once your company has been incorporated you can open a Current
account in any of the leading banks for carrying out your operations.
• Then you need to apply for TAN and PAN for the Company.
• If your services are in Software related area you can apply for (Software
Technology Parks India) STPI license which will give you certain benefits
like the Company need not pay tax for 5 years, there will be no import or
export duty levied on software/hardware etc.
• All this you can do on your own or you can outsource these to a
professional auditor.
• The whole procedure generally takes around 3-4 weeks.
 Steps to Register a Company in India
• Trademark or Logo Registration:
• Trademark registration of a brand name means nothing but brand
name registration.
• In India, you can trademark any of the following or even a
combination of these things:
• Letter, Number, Word, Phrase, Logo, Graphic, Smell, Sound Mark or a
Combination of Colors.
• Publication in the Indian Trade Mark Journals
• After examination, the logo or brand name is published in the Indian
Trade Mark Journal.
 Compliance of a Company in India
• Compliance for companies in India is governed by various laws
and regulations, and businesses must adhere to these requirements
to ensure smooth operations and avoid legal penalties.
• Some key areas of compliance for companies in India include:
➢Company Law Compliance:
➢The Companies Act, of 2013, regulates the formation, governance,
and dissolution of companies in India.
➢Compliance includes maintaining statutory registers, conducting
board meetings, filing annual returns, and complying with
requirements related to share capital, directors, and auditors.
 Compliance of a Company in India
➢Tax Compliance:
• Companies need to comply with various tax laws such as the Income
Tax Act, Goods and Services Tax (GST), and other local taxes.
• This includes timely payment of taxes, filing tax returns, and adhering
to tax deduction and collection at source (TDS/TCS) provisions.
➢Labour Law Compliance:
• Companies must comply with labor laws governing employment
contracts, wages, working conditions, and social security benefits.
• Key legislations include the Payment of Gratuity Act, Employees'
Provident Funds and Miscellaneous Provisions Act, and the
Employees' State Insurance (ESI) Act.
 Compliance of a Company in India
➢Environmental Compliance:
• Companies need to adhere to environmental laws and regulations to
mitigate their impact on the environment.
• This includes obtaining environmental clearances for projects, managing
waste disposal responsibly, and complying with pollution control norms.
➢Intellectual Property Rights (IPR) Compliance:
• Companies should ensure compliance with intellectual property laws to
protect their trademarks, copyrights, patents, and designs.
• This involves filing for registrations, maintaining records, and taking legal
action against infringement.
 Compliance of a Company in India
➢Data Protection and Privacy Compliance:
• With the advent of the Personal Data Protection Bill, 2019 (expected
to become law soon), companies will be required to comply with
regulations concerning the collection, storage, and processing of
personal data.
➢Industry-specific Regulations:
• Certain industries such as banking, insurance, pharmaceuticals, and
telecommunications have specific regulatory requirements that
companies must comply with.
➢Corporate Governance:
• Companies need to adhere to principles of corporate governance,
which include maintaining transparency, accountability, and fairness
in dealings with stakeholders.
 Compliance of a Company in India
• Failure to comply with these regulations can result in penalties,
fines, legal proceedings, or even suspension of business operations.
• Therefore, it's essential for companies to stay updated with the latest
legal requirements and ensure robust compliance mechanisms are in
place.
• Many companies enlist the services of legal experts or compliance
consultants to assist them in fulfilling their compliance obligations
effectively.
 Compliance of a Company in India
• Filing Of Form inc-20A
• Appointment of Auditor
• Board and Annual General Meeting
• Preparation of Annual Financial Statements
• Filing Annual Return
• Maintaining Statutory Records
• Tax Compliance Statutory Audit
• DIR-3 KYC
• DPT-3 Return
• MSME Return
 Compliance of a Company in India
• FORM INC – 20A
• Declaration for Commencement of Business INC-20A is a mandatory
form that is to be filed by a company incorporated on or after
02/11/2018 with MCA.
• It is also known as the Declaration of Commencement of Business.
• It should be filed by the directors within 180 days from the date of
incorporation of a company that has a share capital.
 Compliance of a Company in India
• APPOINTMENT OF AUDITOR (Sec. 139)
• According to sec. 139 of Companies Act 2013;- The first auditor of the
company shall be appointed by the Board within 30 days of
Incorporation & otherwise within 90 days in Extra Ordinary General
Meeting.
• Auditor shall be appointed In case of an individual- for not more than
1 term of 5 years and in case of an Audit Firm- for not more than 2
terms of 5 years (Applicable for companies prescribed u/s 2 of sec.
139 ).
• E- Form ADT-1 shall be filed with ROC within 15 days of such
appointment.
 Compliance of a Company in India
• BOARD AND ANNUAL GENERAL MEETING
• According to Companies Act 2013: the first Board Meeting to be held
within 30 days of incorporation at least 4 Board Meetings must be
held every year and the time gap between 2 Board Meetings- should
not be more than 120 days.
• Notice of Board Meeting shall be given at least 7 days in advance
through electronic mode.
• Annual General Meeting must be held each year apart from other
meetings and the first Annual General Meeting must be held within a
period of 9 months from the closing of its first financial year
otherwise in other cases within the period of 6 months.
 Compliance of a Company in India
• FILING OF ANNUAL RETURN FORM AOC-4:-
• Form AOC 4 is an annual return required to be filed for filing the company’s
financial statement for every financial year with the Registrar of Companies.
• Hence, Form AOC-4 is submitted with the MCA for each Financial Year within
30 days of a company’s ANNUAL GENERAL MEETING. FORM MGT-7A: The
following Companies shall file their annual return in Form MGT-7A from the
financial year 2020-2021 and onwards:-
• 1. One Person Company
• 2. Small Company Small company means a company other than the public
company of which paid up capital and turnover shall not exceed rupees two
crores and rupees twenty crores respectively.”
• Provided that nothing in this clause shall apply to (A) A holding company or a
subsidiary company; (B) A company registered under section 8; or (C) A
company or body corporate governed by any special Act.
 Compliance of a Company in India
• MAINTAINING STATUTORY RECORDS
• Register of the Company
• Register of Members (MGT-1)
• Register of Debenture-holders (MGT-2)
• Register of Directors and Key Managerial Personnel. (no particular
format)
• Register of Charges. (CHG-7)
• Register of Renewed and Duplicate Share Certificates. (SH-2)
• Register of Shareholders
• Register of Shares/Other Securities Bought Back (SH-10)
 Compliance of a Company in India
• DIR-3 KYC (TO KEEP DIRECTOR DIN ACTIVE)’
• Every Director who has been allotted DIN on or before the end of the
financial year, and whose DIN status is ‘Approved’, would be
mandatorily required to file form DIR-3 KYC before 30th September of
the immediately next financial year.
• After the expiry of the respective due dates, the system will mark all
non-compliant DINs against which the DIR-3 KYC form has not been
filed as ‘Deactivated due to non-filing of DIR-3 KYC’ and to make DIN
active there is a requirement to pay a fine of Rs. 5000.
 Compliance of a Company in India
• DPT-3 RETURN
• DPT-3 is an annual return that is required to be filed every year by
Companies having any amount of loan or advances, not considered as
deposits as of 31st March within 90 days of closure of the financial
year i.e. up to 30th June.
• Every company except a government company must file this return.
Additionally, as per Rule 1(3) of the Companies (Acceptance of
Deposits) Rules 2014, the following companies are also exempt:
• Banking company Non-Banking Financial Company A housing finance
company registered with the National Housing Bank
 Compliance of a Company in India
• MSME RETURN MSME RETURN:-
• Every company, that gets supplies of goods or services from Micro
and Small Enterprises and whose payments to micro and small
enterprise suppliers Exceed Forty-Five Days from the date of
acceptance or the date of deemed acceptance of the goods or
services, shall submit a9 half-yearly return to the Ministry of
Corporate Affairs stating the following: (b) the reasons of the delay of
payment;
 Goods and Services Tax

• Goods and Services Tax (GST) in India is a comprehensive indirect tax

that has replaced multiple layers of taxation levied by both the central
and state governments.
• It was implemented on July 1, 2017, to simplify the taxation system,
reduce tax evasion, and promote ease of doing business. GST is
governed by the Goods and Services Tax Council, which consists of
the Finance Ministers of the central and state governments.
 Goods and Services Tax

• Structure of GST:
Dual GST Model:
1. GST in India follows a dual model, meaning it is levied by both the central and
state governments.
2. Central GST (CGST) is collected by the central government on intra-state
supplies (transactions within the same state).
3. State GST (SGST) is collected by the state governments on intra-state
supplies.
4. Integrated GST (IGST) is collected by the central government on inter-state
supplies (transactions between different states).
 Goods and Services Tax

Destination-Based Consumption Tax:

1. GST is a destination-based consumption tax, meaning it is levied where goods
and services are consumed rather than where they are produced.
2. This ensures that the revenue generated from GST goes to the state where
the consumption occurs.
Tax Structure:
1. GST subsumes various indirect taxes such as central excise duty, service tax,
VAT, octroi, entry tax, luxury tax, etc.
2. It is levied at multiple rates, including 0%, 5%, 12%, 18%, and 28%. Certain
essential items may be taxed at 0% or exempted altogether.
 Goods and Services Tax
1.Simplification of Tax Structure:
1. GST has streamlined the tax structure by replacing multiple indirect taxes with a single tax
regime.
2. This simplification has reduced compliance burden and administrative costs for businesses.
2.Boost to Economic Growth:
1. GST aims to create a unified national market by eliminating inter-state barriers to trade.
2. It promotes efficiency in logistics and supply chain management, thereby fostering economic
growth.
3.Reduction in Tax Evasion:
1. The seamless flow of Input Tax Credits and the digitization of processes have made it difficult
for businesses to evade taxes.
2. GST's robust invoice matching system helps in detecting discrepancies and curbing tax
evasion.
4.Transparency and Accountability:
1. GST promotes transparency in the taxation system by ensuring better documentation and
tracking of transactions.
2. The online platform facilitates easier access to tax information and enhances accountability.
 Goods and Services Tax
• Challenges and Criticisms:
1.Compliance Burden for Small Businesses:
➢Small and medium enterprises (SMEs) often face challenges in complying with
the complex GST procedures and technology requirements.
2.Multiple Tax Slabs:
➢Critics argue that the multiple tax rates under GST complicate the tax
structure and may lead to classification disputes.
3.Transition Challenges:
➢The transition to GST posed implementation challenges for businesses,
particularly in terms of technology readiness and procedural changes.
4.Revenue Neutrality Concerns:
➢There have been concerns about the revenue neutrality of GST, with some
states experiencing revenue losses due to the new tax regime.
• Despite these challenges, GST represents a significant milestone in
India's taxation system, with the potential to unlock economic
efficiencies and foster inclusive growth.
• Ongoing efforts to address implementation issues and streamline
processes are crucial for maximizing the benefits of GST.
Legal Aspects

UNIT-IV
Intellectual Property Rights (IPR)
What are intellectual property rights?
• Intellectual property rights are the rights given to persons
over the creations of their minds. They usually give the
creator an exclusive right over the use of his/her creation
for a certain period of time.
• IP is protected in law by, for example, patents, copyright,
and trademarks, which enable people to earn recognition
or financial benefit from what they invent or create.
• By striking the right balance between the interests of
innovators and the wider public interest, the IP system
aims to foster an environment in which creativity and
innovation can flourish.
 Types of IPR
• Patents
• Copyrights
• Trademarks
• Trade Secrets
• Geographical Indications
• Industrial Designs
• Plant Varieties
• Integrated Circuits
 Patents Act
• After India became a signatory to the TRIPS agreement forming part of
the Agreement establishing the World Trade Organization (WTO) for the
purpose of reduction of distortions and impediments to international
trade and promotion of effective and adequate protection of intellectual
property rights, the Patents Act, 1970 has been amended in the year
1995, 1999, 2002 and 2005 to meet its obligations under the TRIPS
agreement.
• The Patents Act has been amended keeping in view the development of
technological capability in India, coupled with the need for integrating
the intellectual property system with international practices and
intellectual property regimes.
• The amendments were also aimed at making the Act a modern,
harmonized, and user-friendly legislation to adequately protect national
and public interests while simultaneously meeting India’s international
obligations under the TRIPS Agreement.
 Patents Act
• Subsequently the rules under the Patent Act have also been amended
and these became effective from May 2003.
• These rules have been further amended by Patents (Amendment)
Rules 2005 w.e.f 01.01.2005.
• Thus, the Patent Amendment Act, 2005 is now fully in force and
operative.
Patents Act
 Trade Mark Act
• The law of trademarks is also now modernized under the Trademarks
Act of 1999.
• A trademark is a special symbol for distinguishing the goods offered for
sale or otherwise put on the market by one trader from those of
another.
• In India the trademarks have been protected for over four decades as
per the provisions of the Trade and Merchandise Mark (TMM) Act of
1958.
• India became a party to the WTO at its very inception.
• One of the agreements in that related to the Intellectual Property Rights
(TRIPS). In December, 1998 India acceded to the Paris Convention.
• The Trademarks Bill of 1999 was passed by Parliament that received the
assent of the President on 30th December, 1999 as Trade Marks Act,
1999 thereby replacing the Trade and Merchandise Mark Act of 1958.
Trade Mark Act
Trade Mark Act
 The Designs Act

• The Designs Act of 1911 has been replaced by the Designs Act, 2000.
• In view of considerable progress made in the field of science and
technology, a need was felt to provide more efficient legal system for
the protection of industrial designs in order to ensure effective
protection to registered designs, and to encourage design activity to
promote the design element in an article of production.
• In this backdrop, the Designs Act, 2000 has been enacted essentially
to balance these interests and to ensure that the law does not
unnecessarily extend protection beyond what is necessary to create
the required incentive for design activity while removing
impediments to the free use of available designs.
The Designs Act
 The Geographical Indications of Goods
(Registration and Protection ) Act
• Until recently, Geographical indications were not registrable in India and in the
absence of statutory protection, Indian geographical indications had been
misused by persons outside India to indicate goods not originating from the
named locality in India.
• Patenting turmeric, neem and basmati are the instances which drew a lot of
attention to this aspect of Intellectual property.
• Mention should be made that under the Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPS), there is no obligation for other countries to
extend reciprocal protection unless a geographical indication is protected in the
country of its origin.
• India did not have such a specific law governing geographical indications of
goods that could adequately protect the interest of producers of such goods.
The Geographical Indications of Goods
(Registration and Protection ) Act
 The Geographical Indications of Goods
(Registration and Protection ) Act
• To cover up such situations it became necessary to have a
comprehensive legislation for registration and for providing adequate
protection to geographical indications and accordingly the Parliament
has passed a legislation, namely, the Geographical indication of Goods
(Registration and Protection) Act, 1999.
• The legislation is administered through the Geographical Indication
Registry under the overall charge of the Controller General of Patents,
Designs and Trade Marks.
 Copyright Act
• Copyright in India is governed by Copyright Act, 1957.
• This Act has been amended several times to keep pace with the changing
times.
• As per this Act, copyright grants the author’s lifetime coverage plus 60
years after death.
• Copyright and related rights on cultural goods, products, and services arise
from individual or collective creativity.
• All original intellectual creations expressed in a reproducible form will be
connected as “works eligible for copyright protections”.
• Copyright laws distinguish between different classes of works such as
literary, artistic, musical works and sound recordings, and cinematograph
films.
• The work is protected irrespective of the quality thereof and also when it
may have very little in common with accepted forms of literature or art.
Copyright Act
The Protection of Plant Varieties and Farmers’
Rights Act
• The concept of Plant Breeders’ Rights arises from the need to provide
incentives to plant breeders engaged in the creative work of research
which sustains agricultural progress through returns on investments
made in research and persuades the researcher to share the benefits
of his creativity with society.
• The issue of enacting a law relating to Plant Varieties Protection and
Farmers’ Rights in India assumed importance, particularly in the wake
of TRIPS agreement under WTO which seeks to promote effective
protection of Intellectual Property Rights in all fields of technology.
• Article 27 of TRIPS Agreement defines patentable subject matter and
requires member countries to provide for the protection of plant
varieties whether by patenting.
The Protection of Plant Varieties and Farmers’
Rights Act
 The Semi-Conductor Integrated Circuits Layout
Design Act
• Electronics and Information technology is one of the fastest growing sectors
that has played a significant role in world economy.
• This is primarily due to the advancements in the field of electronics,
computers and telecommunication.
• Microelectronics, which primarily refers to Integrated Circuits (ICs) ranging
from, Small Scale Integration (SSI) to Very Large Scale Integration (VLSI) on a
semiconductor chip - has rightly been recognized as a core, strategic
technology world-over, especially for Information Technology (IT) based
society.
• Design of integrated circuits requires considerable expertise and effort
depending on the complexity.
• Therefore, protection of Intellectual Property Rights (IPR) embedded in the
layout designs is of utmost importance to encourage continued investments
in R & D to result in technological advancements in the field of
microelectronics.
The Semi-Conductor Integrated Circuits Layout
Design Act
 Importance of IPR
• Enhances market value - Intellectual property rights can help you
generate business through the licensing, sale and even
commercialization of the products and services protected under IPRs.
This will ultimately improve the market share and helps in raising
profits. Having registered and protected intellectual property rights
can also raise the business' value in case of sale, merger or
acquisition.
• Turn ideas and thoughts into profit-making assets - Ideas have little
value on their own but registering ideas under intellectual property
rights can help you turn it into commercially successful products and
services. Copyrighting or licensing the patents can lead to a steady
stream of royalties and additional income.
 Importance of IPR
• Market your products and services - Getting intellectual property rights can
help your business' image. Intellectual property rights like trademark
registration can help you separate your products and services from others.
• Access or raise Capital - Through sale, licensing, or by using IPRs as
collateral for debt financing, an individual can monetize for debt financing.
Intellectual property rights can be used as an advantage while applying for
government funding like grants, subsidies, and loans.
• Enhances export opportunities – A business that has registered IPRs will be
able to use brands and designs to market its products and services to other
markets as well. A business can also tap into franchising agreements with
overseas companies or export patented products.
 World Intellectual Property Organisation
(WIPO)
• The World Intellectual Property Organization (WIPO) is a specialized
agency of the United Nations.
• It is dedicated to developing a balanced and accessible international
intellectual property (IP) system, which rewards creativity, stimulates
innovation and contributes to economic development while
safeguarding the public interest.
• WIPO was established by the WIPO Convention in 1967 with a
mandate from its Member States to promote the protection of IP
throughout the world through co-operation among states and in
collaboration with other international organizations.
• Its headquarters are in Geneva, Switzerland.
World Intellectual Property Organisation
(WIPO)
 World Intellectual Property Organisation (WIPO)

• The roots of the World Intellectual Property Organization go back to the

year 1883, when Johannes Brahms was composing his third Symphony,
Robert Louis Stevenson was writing Treasure Island, and John and Emily
Roebling were completing construction of New York’s Brooklyn Bridge.
• The need for international protection of intellectual property became
evident when foreign exhibitors refused to attend the International
Exhibition of Inventions in Vienna in 1873 because they were afraid their
ideas would be stolen and exploited commercially in other countries.
• The year 1883 marked the origin of the Paris Convention for the
Protection of Industrial Property, the first major international treaty
designed to help the people of one country obtain protection in other
countries for their intellectual creations in the form of industrial property
rights, known as inventions (patents); trademarks; industrial designs.
 World Intellectual Property Organisation (WIPO)
• The Paris Convention entered into force in 1884 with 14 member
States, which set up an International Bureau to carry out
administrative tasks, such as organizing meetings of the member
States.
• In the year 1886, copyright also entered the international arena with
the Berne Convention for the Protection of Literary and Artistic Works
to help nationals of its member States obtain international protection
of their right to control, and receive payment for, the use of their
creative works such as novels, short stories, poems, plays; songs,
operas, musicals, sonatas; and drawings, paintings, sculptures,
architectural works.
• Like the Paris Convention, the Berne Convention set up an
International Bureau to carry out administrative tasks.
 World Intellectual Property Organisation (WIPO)
• In 1893, these two small bureaux united to form an international organization
called the United International Bureau (BIRPI) for the Protection of Intellectual
Property.
• The BIRPI indeed was the predecessor of the World Intellectual Property
Organization.
• With the growing importance of intellectual property, the structure and form
of the Organization also changed.
• In 1960 BIRPI moved from Berne to Geneva to be closer to the United Nations
and other international organizations in that city.
• A decade later, following the entry into force of the Convention Establishing the
World Intellectual Property Organization, BIRPI became WIPO and in the year
1974, WIPO became a specialized agency of the United Nations system of
organizations, with a mandate to administer intellectual property matters
recognized by the member States of the UN.
 Contracts
• A contract is an agreement between two parties that creates an obligation
to perform (or not perform) a particular duty.
• Essential elements of a contract:
• an offer
• an acceptance
• an intention to create a legal relationship
• a consideration (usually money).
➢However it may still be considered invalid if it:
• entices someone to commit a crime, or is illegal
• is entered into by someone who lacks capacity, such as a minor or bankrupt
• Was agreed through misleading or deceptive conduct, duress,
unconscionable conduct, or undue influence.
 Standard form contracts and unfair terms
• A standard form contract is a pre-prepared contract where most of the terms are
set in advance with little or no negotiation between the parties. These contracts
are usually printed with only a few blank spaces for adding names, signatures,
dates, etc.
• Examples of standard form contracts can include:
• employment contracts
• lease agreements
• insurance agreements
• financial agreements
• Standard form contracts are generally written to benefit the interests of the person
offering the contract.
• It is possible to negotiate the terms of a standard form contract.
 Standard form contracts and unfair terms
• However in some cases, your only option may be to ‘take it or leave it’.
• You should read the entire contract, including the fine print, before signing.
• If you intend to offer standard form contracts you must not include terms
that are considered unfair. This could include terms that:
• allow one party (but not another) to avoid or limit their obligations
• allow one party (but not the other) to terminate the contract
• penalize one party (but not another) for breaching or terminating the
contract
• allow one party (but not another) to vary the terms of the contract.
• There are laws protecting consumers from unfair contract terms in
circumstances where they had little or no opportunity to negotiate with
businesses (such as standard form contracts).
 Before signing a contract
➢Before you sign a contract:
• read every word, including the fine print
• ensure that it reflects the terms and conditions that were negotiated
• seek legal advice
• allow plenty of time to consider and understand the contract
• don’t be pressured into signing anything if you are unsure
• never leave blank spaces on a signed contract – cross them out if you have
nothing to add so they cannot be altered later
• make sure that you and the other party initial any changes to the contract
• obtain a copy of the signed contract for your records.
 Ending a contract
• Most contracts end once the work is complete and payment has been
made. Contracts can also end:
• by agreement – both parties agree to end contract before the work is
completed.
• by frustration – where the contract cannot continue due to some
unforeseen circumstances outside the parties’ control.
• for convenience – where the contract allows a party to terminate at
any time by providing notice to the other party.
• due to a breach – where one party has not complied with an essential
contract condition, the other party may decide to terminate the
contract and seek compensation or damages.
 Financial Aspects
• What Is Finance?
• Finance is a term for matters regarding the management, creation, and study of money and investments. It
involves the use of credit and debt, securities, and investment to finance current projects using future income
flows. Because of this temporal aspect, finance is closely linked to the time value of money, interest rates, and
other related topics.
• Key Finance Terms
• These are some key finance terms you should be familiar with.
• Asset: An asset is something of value, such as cash, real estate, or property. A business may have current
assets or fixed assets.
• Liability: A liability is a financial obligation, such as debt. Liabilities can be current or long-term.
• Balance sheet: A balance sheet is a document that shows a company's assets and its liabilities. Subtract the
liabilities from the assets to see the firm's net worth.
Cash flow: Cash flow is the movement of money into and out of a business or household.
Compound interest: Unlike simple interest, which is interest added to the principal one time,
compound interest is calculated and added periodically. This results in interest being charged not only
on the principal, but also on the interest already accrued.
Equity: Equity means ownership. Stocks are called equities, because each share represents a portion
of ownership.
Liquidity: Liquidity refers to how easily an asset can be converted to cash. For example, real estate
is not a very liquid investment, because it can take weeks or months to sell.
Profit: Profit is the money left over after expenses. A profit and loss statement shows how much a
business has earned or lost for a particular period.
 Financial Aspects Of
Business
• Financial aspects of business refer to the
management, acquisition and utilization of financial
resources in order to meet the strategic objectives of
the business. This includes budgeting, forecasting,
analyzing, planning, controlling and negotiating as
well as risk management. It involves assessing
sources of finance, providing advice on cash flow
and responding to revenue shortfalls. By maintaining
a firm grip on financial matters, businesses can
remain solvent and make wise decisions about how
best to use their available funds. Proper planning and
analysis of financial aspects are an essential part of
business success.
Working Capital Management
• Working Capital Management is a strategic
financial approach that involves overseeing a
company's short-term assets and liabilities to
ensure operational efficiency and financial stability.
The components of working capital encompass
current assets, including cash, accounts receivable,
and inventory, as well as current liabilities such as
accounts payable and short-term debt. The primary
objectives of working capital management are to
maintain adequate liquidity, optimize cash flow,
minimize financial risks, and maximize
profitability. Achieving these objectives involves
careful consideration of various factors.
• Understanding and optimizing the working capital cycle is
crucial, as it represents the time taken to convert current assets
into cash. Ratio analysis, including metrics like the current ratio
and quick ratio, provides insights into the company's liquidity
and financial health. Additionally, tools such as cash
flow forecasting, budgeting, and working capital financing play
essential roles in managing working capital effectively. The
benefits of a well-executed working capital management strategy
include improved liquidity for daily operations, reduced financial
risk, and increased profitability through optimized cash flow.
Overall, working capital management is a dynamic process that
requires continuous attention to ensure a harmonious balance
between short-term assets and liabilities.
• Key components of working capital management include:
1. Current Assets:
1. Cash and Cash Equivalents: This includes physical currency, bank balances, and short-term
investments with high liquidity.
2. Accounts Receivable: The money owed to the company by customers for goods or services
provided on credit.
3. Inventory: The stock of goods a company holds to meet customer demand.
2. Current Liabilities:
1. Accounts Payable: The amount owed by the company to its suppliers for goods and services
received on credit.
2. Short-term Debt: Any obligations that need to be settled within a year.
 Working Capital Objectives

Effective Working Capital Management aims to achieve specific objectives:

• Ensure Adequate Liquidity:
• Maintaining enough liquidity to meet short-term obligations.
• Strategies: Cash reserves, credit lines, etc.
• Optimize Cash Flow:
• Efficient management of cash inflows and outflows.
• Strategies: Cash flow forecasting, budgeting.
• Minimize Financial Risks:
• Mitigating risks associated with market fluctuations.
• Strategies: Hedging, risk assessments.
• Maximize Profitability:
• Balancing working capital for increased profitability.
• Strategies: Revenue enhancement, cost control.
Financial Management

• Financial management refers to applying

management concepts to budgeting,
forecasting, managing, and controlling a
company’s financial resources to achieve its
objective. It aims to maximize investors profit
by optimizing the firm’s money usage. It deals
with all the areas connected to profitability,
expenses, cash, and credit.
• Management of finances is the foundation of all enterprises. They need to earn a higher rate of return
on investment of market-sourced money than the related expenses. Financial management frequently
balances the legal and accounting sides of a company. It consists of three essential components:
reducing the cost of finance, ensuring sufficient funds, and utilizing funds appropriately.
The scope of Financial Management :
• The introduction to financial management also requires you to understand the scope of financial
management. It is important that financial decisions take care of the shareholders‘ interests.
• Further, they are upheld by the maximization of the wealth of the shareholders, which depends on the
increase in net worth, capital invested in the business, and plowed-back profits for the growth and
prosperity of the organization.
The scope of financial management is explained in the diagram below:
• In organizations, managers in an effort to minimize the costs of procuring finance and using it in
the most profitable manner, take the following decisions:
1.Investment Decisions:
Managers need to decide on the amount of investment available out of the existing finance, on a
long-term and short-term basis. They are of two types:
• Long-term investment decisions or Capital Budgeting mean committing funds for a long period of
time like fixed assets. These decisions are irreversible and usually include the ones pertaining to
investing in a building and/or land, acquiring new plants/machinery or replacing the old ones, etc.
These decisions determine the financial pursuits and performance of a business.
• Short-term investment decisions or Working Capital Management means committing funds for a
short period of time like current assets. These involve decisions pertaining to the investment of
funds in the inventory, cash, bank deposits, and other short-term investments. They directly affect
the liquidity and performance of the business.
2.Financing Decisions:
Managers also make decisions pertaining to raising finance from long-term sources (called Capital
Structure) and short-term sources (called Working Capital). They are of two types:
• Financial Planning decisions which relate to estimating the sources and application of funds.
It means pre-estimating financial needs of an organization to ensure the availability of adequate
finance. The primary objective of financial planning is to plan and ensure that the funds are
available as and when required.
• Capital Structure decisions which involve identifying sources of funds. They also involve
decisions with respect to choosing external sources like issuing shares, bonds, borrowing from
banks or internal sources like retained earnings for raising funds.
3.Dividend Decisions: These involve decisions related to
the portion of profits that will be distributed as dividend.
Shareholders always demand a higher dividend, while the
management would want to retain profits for business
needs. Hence, this is a complex managerial decision.
Long-Term Investments

• Long-term investments are assets that

an individual or company intends to
hold for a period of more than three
years. Instruments facilitating long-term
investments include stocks, real estate,
cash, etc. Long-term investors take on a
substantial degree of risk in pursuit of
higher returns.
• Long-term investments are not subject
to any adjustments due to temporary
market fluctuations. However, such
investments may be written down to
reflect declining market value.
 Advantages of Long-Term Investing
• Long-term investing is likely to lead to meaningful wealth creation in the long term. Many individuals who
lack the expertise required to participate in derivative markets depend on long-term investment returns to
plan their financial future. It may include dividend income from shareholding and interest received on fixed
deposits.
• Less time-consuming
• Long term investing is less time-consuming as investors need not monitor markets for small fluctuations on
a daily basis.
• Lower transaction fees
• Brokerage fees and capital gains taxes form a majority of the costs of investing, excluding the risk factor.
Long-term investors are subject to transaction fees less frequently, if not at a lower rate, than short-term
investors. Many investors are able to allow returns to compound in their bank accounts while deferring
capital gains taxes. Capital gains taxes are also charged at a lower rate than short-term profits.
• Capital structure is the composition of a company’s sources of funds, a mix of owner’s capital (equity)
and loan (debt) from outsiders. It is used to finance its overall operations and investment activities. The
owner’s capital is in the form of equity shares (common stock), preference shares (preference stock), or
any other form that is eligible to control the entity’s retained earnings of the entity. Debt capital is in
the form of the issue of bonds or debentures of loans from a financial banker.
• Capital structure is a very critical factor in the case of project financing. The bankers are concerned
about the initial percentage of funding to the proposed project and usually assist with up to 70% of the
project cost.
Capital Structure Explained
• Capital structure is a specific mix of equity and
debt used to finance a company’s operations and
assets. From a corporate finance perspective,
equity capital provides a more long-term and
flexible source of finance for the company’s
growth prospects and daily transactions.
An optimal capital structure comprises of
enough balance between equity and debt. Debt
for an organization includes all short-term and
long-term loans that the company has to repay.
Equity is the combination of common and
preferred shares and their retained earnings.
 Example:
• A company has proposed an investment in a project with information
about its project cost. The project will be financed 20% by the common
stock, 10% by the preferred stock, and the rest by the debt. The company
intends to understand its calculations.
Solution:
Debt Equity will be:

• Debt Equity Ratio = (1794/769) = 2.33.

Capital Structure and taxation
• Capital structure refers to the way a company finances its overall operations and growth through
a combination of debt and equity. Taxation plays a significant role in shaping a company's capital
structure decisions. Here's how capital structure and taxation are interconnected:
1. Interest Deductibility:
1. Debt Financing: Interest paid on debt is generally tax-deductible. This tax advantage makes debt financing
attractive for companies. By utilizing debt, a company can reduce its taxable income, resulting in lower
overall tax liabilities.
2. Equity Financing: Dividends paid to shareholders are not tax-deductible. As a result, companies might prefer
debt financing over equity to benefit from the tax shield provided by interest deductions.
2. Tax Shields:
1. Debt Tax Shield: The interest expense on debt creates a tax shield, reducing a company's taxable income. This
tax shield is particularly beneficial when the corporate tax rate is relatively high.
2. Depreciation Tax Shield: Depreciation on assets can also provide a tax shield. When a company uses debt to
finance capital expenditures, it can claim depreciation on the assets, leading to lower taxable income.
3. Effective Tax Rate:
1. Capital Structure Optimization: Companies aim to optimize their capital structure to achieve the lowest
possible cost of capital. This involves finding the right balance between debt and equity to minimize the
overall cost, taking into account the tax implications.
4. Tax-Advantaged Debt:
• Tax-Exempt Debt: In some cases, companies may issue tax-exempt debt, such as municipal bonds. The
interest income from these bonds is not subject to federal income tax, making them attractive for certain
financing needs.
5. Tax Planning:
• Debt Capacity: Tax considerations play a role in determining a company's debt capacity. Financial
managers assess how much debt a company can handle based on its taxable income, ensuring that interest
deductions are maximized without jeopardizing financial stability.
6. Country-Specific Tax Regulations:
• Local Tax Regulations: Tax laws and regulations vary across countries, impacting how companies
structure their capital. In some jurisdictions, interest deductibility rules may be more favorable, influencing
the choice between debt and equity.
7. Risk and Tax Efficiency:
• Balancing Risk and Tax Efficiency: While debt provides tax advantages, it also introduces financial risk.
Financial managers must strike a balance between the tax benefits of debt and the potential risks associated
with high leverage.
8. Changing Tax Environments:
• Adaptation to Tax Changes: Companies may need to adjust their capital structure in response to changes
in tax laws or rates. Tax reforms can impact the attractiveness of certain financing options.
Brake even analysis
• Break-even analysis in economics, business, and cost accounting refers to the point at which total costs
and total revenue are equal. A break-even point analysis is used to determine the number of units or dollars of
revenue needed to cover total costs (fixed and variable costs).
The formula for break-even analysis is as
follows:
• Break-Even Quantity = Fixed Costs / (Sales Price per Unit –
Variable Cost Per Unit)
• where:
• Fixed Costs are costs that do not change with varying output
(e.g., salary, rent, building machinery)
• Sales Price per Unit is the selling price per unit
• Variable Cost per Unit is the variable cost incurred to create a
unit
Advantages of a break-even analysis
• There are plenty of advantages to performing a break-even point analysis. Here are a few:
• Smarter pricing. You may discover that your prices simply aren’t enough to cover your costs,
despite the other factors that went into choosing those prices. At the end of the day, profitability is
always the number one driver.
• Full financial understanding. It’s easy to overlook expenses when you have a lot of things to
consider. But a break-even analysis is a detailed look at your business, and often uncovers things
you’ve been missing.
• Precise sales goals. Many businesses learn exactly how many sales they need to make per day,
week, month, etc., as opposed to the general goal of as many sales as possible (which can be
unhelpful when you’re experiencing financial strain!).
• Better business decisions. Sometimes, a new business idea seems like a great path. But once you
do the math, you may learn that it’s not wise financially. A break-even analysis can help you
choose more financially sound options.