Sept. 5 – As India’s total merchandise trade tripled from US$252 billion in 2006 to US$794 billion last year, the business of import/export with Indian firms has become much more popular. However, the rising monetary numbers have brought with them an increasing number of legal and administrative reforms and considerations for import/export-related businesses.
In this article we will highlight supplier due diligence issues, import/export regulatory updates, the importance of tax residency certificates when selling to Indian companies and other relevant points to consider when setting up an offshore trading company for the India market.
Supplier Due Diligence
When conducting due diligence (DD), it is wise to create a checklist of necessary information that will allow you to make a judgment call on the status of your supplier and their ability to deliver as promised. These documents may include public and private documents such as financial statements, account information, credit checks and checks on legal status, ownership, directors and scope of business.
Unlike China, India maintains an impressive public records system that you can use to ascertain the facts about your potential supplier. As such, it is crucial that you obtain any and all information necessary to establish that your supplier is both creditworthy and in good financial standing.
A typical DD report contains information pertaining to the following, at the very least:
- Company and personnel information (including share capital and taxation issues);
- Corporate structure;
- Directors and shareholders, their interests and conflicts (if any);
- Financial information and status;
- Licenses, permits, approvals and specific statutory compliance;
- Any previous court orders or litigation issues against the company in question;
- Insurance – quality of insurance coverage; and
- Examples of previous clients, such as references.
An India-based professional services firm will be able to help you with these due diligence issues.
