The engagement of Non-Resident Indians (NRIs) with Indian companies and businesses is a pivotal facet of the global economic landscape. NRIs, individuals of Indian origin residing abroad, play a crucial role in fostering economic collaboration and investment within India. This interaction is facilitated through a spectrum of formal agreements, each tailored to specific business endeavours. As NRIs increasingly contribute to India’s economic growth, the importance of these agreements cannot be overstated. This introduction sets the stage for a nuanced exploration of the legal frameworks and intricacies surrounding the agreements that bind NRIs and Indian businesses, shaping the contours of their collaborative ventures.
HOW AN NRI FORMS AN AGREEMENT:
Making of an agreement is a very sensitive issue and should be drafted very sincerely considering all the needs of both the parties. There are primarily two ways in which a NRI gets into an agreement, they are:
Making a power of attorney: For people who cannot be present with their NRI rental agreement and signature in India, there is an option to draft a power of attorney in favour of a person. This person should be a trusted one who uses the authority to benefit the NRI. The POA or the Power of Attorney transfers the property’s right of signing and authority to the person.
Making of an online agreement: The Government of India has provided the facility of making online agreements. This provides the party which is not in India the facility of framing an agreement at the comfort of his own house and can free oneself from the hassle of boring and tiring legal paperwork. These agreements are digitally signed and are transferred to the parties. This eliminate the existing geographical boundary.
DIFFERENT TYPES OF AGREEMENT SIGNED WITH NRI’s:
Various types of agreements are signed with Non-Resident Indians (NRIs) to facilitate different business transactions and collaborations. It depends upon the needs and the purpose of the interaction and accordingly terms and conditions of the agreements are framed. The different types of business agreements that the NRIs sign are as follows:
Investment agreements: NRIs have a plethora of investment options in India, ranging from equities and mutual funds to fixed deposits and debt funds. When it comes to equities, NRIs have avenues like the RBI’s Portfolio Investment Scheme (PIS) to explore. This scheme allows NRI investments in Indian stocks, albeit with certain restrictions. NRIs can also delve into other asset classes such as fixed deposits, recurring deposits, and debt funds. These investment avenues provide opportunities to tap into the debt market.
Before engaging in a business transaction, a Non-Resident Indian (NRI) usually forms an investment agreement that specifies the terms and conditions pertaining to the NRI’s financial commitment to the investment. NRIs may enter into investment agreements with Indian companies for investing in shares, debentures, or other financial instruments. A clear understanding of the investment and the related rights and duties between the NRI and the Indian company is the aim of such an agreement. The agreement outlines the terms of the investment, including the amount, shareholding pattern, and any special rights or privileges attached to the investment.
Rental Agreement: Non-Resident Indians (NRIs) entering into rental agreements in India typically sign a lease agreement or rental agreement with the property owner or landlord. This is the primary document outlining the terms and conditions of the rental arrangement. It includes details such as the property address, duration of the lease, rent amount, payment schedule, and any specific rules or regulations related to the property.
Registration of Rental Agreements: It is mandatory to register all house rental agreements lasting eleven months or more. According to Section 49, an unregistered rental agreement is not admissible in evidence. A registered agreement is also considered proof of address, which the tenant can use to get a new phone or gas connection. Rental Agreements can now be even done in online form in various states of the country.
Joint-venture Agreement: The contract or agreement is the binding factor and provides for all types of responsibilities, duties, rights, and obligations expected of both the parties and third parties. The agreement will also define the duration of their legal relationship and will be binding on both parties. Also, in case of any default or breach of terms of the agreement, either party can take the second party to court.
In India, foreign collaboration agreements are being made between Indian and foreign companies through the sale of technology, spare parts, and the use of foreign brand names for its final products. Foreign capital in India is governed by the Foreign Exchange Management Act, 1999 and rules and regulations made by RBI. The key components of the agreement are the name of the parties involved, purpose and objective, its contribution, proportion of ownership and control, management and operations, profit and loss distribution, terms and termination and dispute resolution.
Franchise Agreement: A franchise can be equated with a licence. A franchise may include a contract whereby the owner of a business grants to another person permission to carry on a particular business using the grantor’s know-how and trade mark as the grantee’s own business. NRIs interested in expanding a business model in India may opt for franchise agreements with Indian entrepreneurs. These agreements outline the terms of the franchise, including fees, operational guidelines, and the duration of the franchise arrangement.
Employment Contracts: There are no restrictions on NRIs seeking employment in India, and they are subject to the same laws and regulations as Indian citizens when it comes to employment contracts. Once an NRI has obtained the necessary work permit or visa, they can negotiate and enter into a contract of employment with an Indian company. The contract should clearly outline the terms and conditions of employment, including the duration of employment, job responsibilities, compensation and benefits, and termination procedures. NRIs should also ensure that their employment contract includes provisions that protect their interests and rights, such as provisions for leave entitlements, medical insurance, and dispute resolution mechanisms.
Technology Transfer Agreement: It is a form of an agreement which defines the mutual rights and obligations of the developer or the transferor of the technology and the recipient of the technology. NRIs holding proprietary technology may enter into agreements with Indian companies to license or transfer their technology. These agreements detail the scope of technology transfer, licensing fees, and any restrictions or conditions imposed on the use of the technology.
DOCUMENTS REQUIRED WHILE ENTERING INTO AN AGREEMENT: The specific documents required for making an agreement by a Non-Resident Indian (NRI) may vary depending on the nature of the agreement and the laws of the respective countries involved. However, here is a general list of documents that may be commonly required:
Proof of Identity:
- Passport
- Overseas Citizen of India (OCI) card
- Person of Indian Origin (PIO) card (if applicable)
Proof of Address:
2.1 Overseas address proof (utility bills, rental agreement, etc.)
2.2 Indian address proof (if applicable)
Power of Attorney (if applicable): If the NRI is appointing someone in India to represent them in legal matters, a Power of Attorney document may be required.
Visa and Residence Permit: Copy of the visa and residence permit of the NRI in the foreign country.
PAN Card: Permanent Account Number (PAN) card issued by the Income Tax Department in India.
Tax Residency Certificate: Certificate issued by the tax authorities of the foreign country confirming the NRI’s tax residency status.
Bank Statements: Recent bank statements from the NRI’s overseas bank account.
HOW TO ENSURE TRANSPARENCY AND ACCOUNTABILITY WHILE ENTERING INTO AN AGREEMENT:
Contract negotiation is a complex and challenging process, especially when you have to deal with multiple parties with different interests, expectations, and goals.
There are certain points that needs to be ensured while entering into an agreement so that either of the parties should not be exploited at the hands of the other party. The parties should ensure that, they should;
- Define the scope and objective and the purpose of entering into the agreement.
- Communicate openly about the agendas.
- Document and verify everything.
- Keep a third party to monitor and evaluate the performance.
NEED OF LEGAL ASSISTANCE:
In order to construct an agreement, legal counsel is essential for a number of reasons. Legal experts have the know-how to guarantee precise and compliance drafting, customizing agreements to particular requirements and countries. They recognize possible hazards and take steps to mitigate them. They also create enforceable and transparent terms to lessen the chance of conflicts. In international transactions, legal aid is especially crucial because different legal systems might be complex. Attorneys assist in establishing confidentiality, incorporating dispute resolution procedures, and guaranteeing formality compliance in order to create a well-documented, legally binding contract that safeguards the interests of all parties and reduces the possibility of misunderstandings or legal challenges.
CONCLUSION:
In conclusion, contracts signed by Non-Resident Indians (NRIs) require careful legal analysis. To maintain compliance, manage risks, and negotiate the complexities of international regulations, professional guidance is essential. Legal knowledge aids in the creation of exact, binding contracts that protect the rights of NRIs and other relevant parties, fostering clarity and enabling efficient dispute resolution when necessary.
Need to get in touch with our experts? It’s easy!
Contact us today!