NishithDesai-印度制藥工業(yè)-監(jiān)管、法律和稅務(wù)概述（英）-2024-WN8

MUMBAISILICONVALLEYBENGALURUSINGAPORENEWDELHINEWYORKGIFTCITY

Research

TheIndian

Pharmaceutical

Industry

Regulatory,LegalandTax

Overview

August2024

?NishithDesaiAssociates2024

Research

TheIndian

Pharmaceutical

Industry

Regulatory,LegalandTax

Overview

August2024

DMSCode:30670.1

?NishithDesaiAssociates2024

Rankedasthe‘MostInnovativeIndianLawFirm’intheprestigiousFTInnovativeLawyersAsiaPaci?c

Awardsformultipleyears.Alsorankedamongstthe‘MostInnovativeAsiaPaci?cLawFirm’inthese

eliteFinancialTimesInnovationrankings.

?NishithDesaiAssociates2024

TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

Disclaimer

ThisreportisacopyrightofNishithDesaiAssociates.Noreadershouldactonthebasisofanystatemen

containedhereinwithoutseekingprofessionaladvice.Theauthorsandthefirmexpresslydisclaimallan

anyliabilitytoanypersonwhohasreadthisreport,orotherwise,inrespectofanything,andofconsequen

ofanythingdone,oromittedtobedonebyanysuchpersoninrelianceuponthecontentsofthisreport.

Contact

Foranyhelporassistancepleaseemailusonconcierge@

orvisitusat.

Acknowledgements

TanyaKukade

tanya.kukade@

VarshaRajesh

varsha.rajesh@

EshikaPhadke

Eshika.phadke@

Dr.MilindAntani

Milind.antani@

?NishithDesaiAssociates2024Provideduponrequestonly

TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

Contents

ExecutiveSummary1

Introduction3

IndiaEntryStrategies5

A.InvestmentClimateinIndia5

B.GovernmentProductionLinkedIncentives6

C.India’sPost-TripsIntellectualPropertyEnvironment6

D.FormofTheIndianEntity6

E.CorporateGovernanceinIndia9

F.Anti-CorruptionFramework10

LegalandRegulatoryRegimeinIndia11

A.OutlineofLegalandRegulatoryFramework11

B.RegulatoryFramework11

C.ProposedLawonRegulationofPharmaceuticalProducts14

D.ManufacturingaDruginIndia14

E.ImportingaDrugintoIndia15

F.Manufacture/ImportofNewDrugs16

G.ClinicalTrials16

H.ProductStandards18

I.OTCandPrescriptionDrugs18

J.Pharmacy19

K.E-Pharmacy19

L.Labeling20

M.ShelfLife20

N.GoodManufacturingPractices(GMP)21

O.PricingofDrugsandDrugPriceControlOrder,201322

P.AdvertisementandSalesPromotion23

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TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

TheAnti-TrustRegulatoryFramework27

IntellectualPropertyLandscape29

A.PatentProtection29

B.Trademarks32

TaxRegime36

A.DirectTaxes36

B.IndirectTaxes48

KeyIssuesandChallengesinIndianPharmaIndustry50

A.Promotionandadvertisement50

B.PriceControl50

C.Labelling50

D.EnvironmentalDiligence51

E.GMPRelatedNon-CompliancesandSafetyConcerns51

F.FixedDosecombinations51

G.OverlapwithotherIndustriessuchasBio-PharmaandMed-Tech52

Conclusion53

AnnexureA54

ListofDrugLicensesUnderDCA54

AnnexureB58

TargetedTimelinesforApprovalofLicenseApplications58

?NishithDesaiAssociates2024Provideduponrequestonly

TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

ExecutiveSummary

TheIndianPharmaceuticalindustryhasgainedmomentuminthepastyearandhaswitnessedanincreas

focusonencouragingresearchanddevelopmentandinnovation.Pharmaceuticalcompaniesarefocussin

theirresourcesonbiotechstartupsandpushingforinnovationtoaimforcontinuedgrowthinthesector.

TheindustryisexpectedtogrowuptoUSD130billioninvaluebytheendof2030.2Thedomestic

pharmaceuticalmarketgrewby6.8%in2023.3InFY2023–24,India’sdrugandpharmaceuticalexports

showedanotableincreaseof9.67%reachingUSD27.9billion.4IndiaalsohasthelargestnumberomanufacturingsitesapprovedbytheUnitedStatesFoodandDrugAdministration(USFDA)outsid

oftheUnitedStates5whichisanimportantfactorinboostingtheglobalconfidenceinthedomesticalmanufactureddrugsandpharmaceuticalproducts.

Theindustryistypicallyinvolvedinfourtypesofbusinesses:marketingofgenericmedicines,marketin

ofbrandedgenericmedicines,marketingofinnovatormedicinesandmanufactureandsupplyofactiv

pharmaceuticalingredients,whichareusedasingredientsinmedicinesaswellasfinishedformulations.

ThefocusondevelopmentofnewdrugsbeganwiththeintroductionofamendmentstoIndia’spatentregi

in2005whichpermittedpatentingofpharmaceuticalproducts.Thus,whilemanydomesticcompaniesa

investingsubstantialamountsindrugresearchanddevelopment,Indiaisstillnotaninnovator’smarket.

TheIndianPharmaceuticalindustryiswitnessinghealthyforeigndirectinvestment,amalgamation

andcollaborations(suchaslicensing,co-development,jointdistributionandjointventures).Domesti

manufacturersarelookingtotapintotheinternationalgenericmarketwhichprovidehighmargins

ThenumberofAbbreviatedNewDrugApplications(ANDA)totheUSFDAisalsoincreasingeveryyea

TheIndustryiswitnessingaparadigmshiftasthefocusisshiftingfromthemanufacturingofgenericdr

todrugdiscoveryanddevelopment(Glenmark,SunPharma,CadillaHealthcareandPiramalLifeScience

hadappliedforconductingclinicaltrialsfornumerousnewdrugs).WiththepassageoftheNewDrugsan

ClinicalTrialRules,2019(“CTRules”)theclinicaltrialsectorisalsogrowingsteadilywithmanychoosin

Indiaasoneofthefavourabletrialsiteswhenconductingglobalclinicaltrials.Reportedly,India’sclinica

trialsmarketisexpectedtoreach$3.15billionby2025.6

1TheEvolutionofIndianPharmaceuticalIndustryin2023,UNIMARCK,January29,2024,accessibleat:

/the-growth-of-indian-pharma-industry-in-2023-insights-and-statistics/,(LastaccessedonApril22,2024).

2Indianpharmain2023:Industryexpertsgivebigthumbsuptothesector;here’swhattheyaresaying,BusinessToday,availableat:

https://www.businesstoday.in/industry/pharma/story/indian-pharma-in-2023-industry-experts-give-big-thumbs-up-to-the-sector-heres-w

they-are-saying-357290-2022-12-21,(LastaccessedonFebruary10,2023).

3Pricepush:Domesticpharmamarketgrewby6.8%in2023,showsdata,BusinessStandard,availableat:/

industry/news/domestic-pharmaceutical-market-grew-by-6-8-in-2023-shows-data-124011100758_1.html,(LastaccessedonFebruary10,202

4India’spharmaexportsreachUS$27.9bninFY24,EconomicDiplomacyDivision,April24,2024,accessibleat:

.in/indias-pharma-exports-reach-us-27-9-bn-in-fy24/#:~:text=In%20the%20?scal%20year%202023,3%25%20dip%20in%

total%20exports,(LastaccessedonMay16,2024).

5ReportbyUnitedStatesFoodandDrugAdministrationontheStateofPharmaceuticalQuality,availableat:

https://WWW.FDA.GOV/MEDIA/125001/download,(LastaccessedonFebruary10,2023).

6FortuneIndia,Indianowprimedestinationforbigpharma’sglobalclinicaltrials,:

/enterprise/india-now-prime-destination-for-big-pharmas-global-clinical-trials/107141,

(LastaccessedonFebruary10,2023).

?NishithDesaiAssociates2024Provideduponrequestonly1

TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

ExecutiveSummary

Thepharmaceuticalindustry,likeallindustriesrelatedtothehealthcaresector,isheavilyregulated

Rightfrommanufactureofdrugstoadvertisementandpromotion,eachstepinthedrugmanufacturin

andmarketingprocessisregulated.India’spatentregimealsocontainsspecificprovisionsregulating

pharmaceuticalpatentsandthesectorhasseensomesignificantanti-trustissuesonthesubjectofretails

ofdrugs.

Thecomingdecadeisexpectedtobringnewhighsforthepharmaceuticalsector.Backedbystrongintellect

propertyandregulatoryframework,coupledwithproductionlinkedincentivestheIndianpharmaceutic

industryseemspoisedontheedgeofsuccess.

?NishithDesaiAssociates2024Provideduponrequestonly2

TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

Introduction

TheIndianpharmaceuticalindustryhasbeenwitnessingsignificantgrowthoverthepastfewyearsand

expectedtogrowtoUSD130billioninvaluebytheendof2030.1Generics,overthecounterdrugs,biosimila

andbiologics,aresomeofthekeysegmentsgainingtractionintheindustry.Thebiosimilarsmark

isestimatedtogrowataCAGRof22%tobecomeUSD12billionby2025.2

ForaglobalpharmaceuticalcompanyseekingtoentertheIndianpharmaceuticalmarkettoday,the

opportunitiesareexciting,andthepotentialistremendous.Severalfactorsattractglobalpharmaceutica

companiestoIndia:

§Lowcostofproductionduetoavarietyoffactorsincludingrelativelylowerlabourcostsandrawmater

costs;

§Diversemarketnotonlyforlifesavingdrugsbutalsoforlifestyledrugs;

§PotentialforconductingresearchanddevelopmentactivitiesinIndia–Indiahasmorethan300medic

collegesandover20,000hospitals;

§Existingmanufacturingcapabilitytoproduceactivepharmaceuticalingredients(APIs)aswellas

intermediatesatlowercostwhilemaintainingqualitystandards;

§IndiahasamaximumnumberofUS-FDAapprovedplantsoutsidetheUS;

§EaseofconductingclinicaltrialsandbioavailabilityandbioequivalencestudiesduetoIndia’sability

toprovidespeedierandlessexpensivetrialswithoutcompromisingqualityandtheavailabilityofava

patientpool.

Indiahasalsowitnessedakeeninterestonbehalfofglobalpharmaceuticalcompanies,seekingtoeithe

establishoperationsinIndiaforresearchanddevelopment,manufacturingordistributionortoenterin

collaborationsforthesame.India’slow-costresearchanddevelopmentabilitieshelpcompaniesoptimiz

costsinashrinkingeconomy.

Co-developmentarrangementsbetweenIndianandmultinationalpharmaceuticalcompanieshavecreate

abusyatmosphereinresearchlaboratoriesinIndia.TheIndianpharmaceuticalmarketiswitnessingaris

incollaborationswithglobalcompaniessuchasGlenmarkPharmaceuticals,GlaxoSmithKline(GSK),Me

andEliLilly.In2018,withinaspanofamonth,Glenmarkannouncedanexclusivelicensingagreementw

AustraliancompanySeqirusforanallergydrugandanotherwithChinesebiopharmaceuticalfirmHarbo

Biomedforitsoncologymolecule.PiramalLifeScienceLtd(PLS)andEliLillyandCompanyhavesigne

alandmarknewdrugdevelopmentcollaboration.Separately,RanbaxyandGSKhavelaunchedaNewDru

DiscoveryResearchteamtoadvanceintopre-clinicalinvestigationinthechronicobstructivepulmonar

disease(COPD)andotheranti-infectivestherapeuticareas.PLSalsoinitiateddrugdiscoveryeffortswit

Merck&Co.todiscoveranddevelopnewdrugsinoncology.ZydusLifesciencesenteredintoanewdrug

discoveryanddevelopmentagreementwithEliLillytodeveloppotentialnewdrugstocurecardiovascul

disease.Indiaisalsobecomingahubforlate-phaseresearch.

1BusinessToday,Indianpharmain2023:Industryexpertsgivebigthumbsuptothesector;here’swhattheyaresaying,availableat:

https://www.businesstoday.in/industry/pharma/story/indian-pharma-in-2023-industry-experts-give-big-thumbs-up-to-the-sector-heres-w

they-are-saying-357290-2022-12-21,(LastaccessedonFebruary10,2023).

2IBEF,PharmaIndustry,accessibleat:/industry/pharmaceutical-india,(LastaccessedonJune10,2024).

?NishithDesaiAssociates2024Provideduponrequestonly3

TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

Introduction

Johnson&Johnson(J&J)announceditsplanstomakeIndiaaglobalhubforlate-phasedevelopme

ofitsnewdrugs.Withthisinitiative,allfuturenewdrugsandcompoundsfromJ&Jwillundergofinpre-productiontestinginIndia.Recently,Torrentannouncedenteringintoanon-exclusivepatentlicensin

agreementwithTakedaforsaleofitsdrugVonoprazaninIndia.3Domesticcompaniesaregettingmorinvolvedinsuchcollaborativearrangements.

Foratrans-nationalentityseekingapresenceinIndia,whetherdirectlyorthroughcontractualarrangemen

structuringoftheinvestmentarrangementfromataxandregulatoryperspectiveisverycritical.Thisi

especiallytruebecausetheIndianpharmaceuticalmarkethasbecomethehotbedofM&Aactivity.Th

pastyearwitnessedasurgeinM&Adealsgiventhesaturationofpatentingopportunitiesandmostpaten

ofpharmaceuticalcompanieslikelytoexpireinthenextfewyears,bigpharmacompaniesarelookintomaximizetheopportunitiesthroughdealmaking.Thesectorwitnessedover116M&Adealsworth

USD191billioninthepastyear.4SomeofthenoteworthyonesarethemergerofBristol-MyersSquibbanCelgeneCorporationleadingtothecreationofthelargestbiopharmaceuticalcompanyglobally;acquisitioofBioverativbySanofiinthebiopharmaceuticalspacegiventhatthecompanyisfocusedonrarebloodisorders;etc.

Furthere-commerceopportunitiesinthepharmaceuticalsectorareontherisebringingwithinitsamb

theonlinesaleofpharmaceuticalproductsandcreatinganattractivestreamforinvestmentsandbusines

Doorstepdeliveryofmedicinespavedthewayfore-pharmaciesinthecountrywhichatpresent,runparal

tobrick-and-mortarpharmaciesuntilalegislationinthisregardisintroducedinthecountry.

Onthesurface,Indianlawappearstobeacomplexsetofregulations,notificationsandapprovalrequiremen

However,withstepsthatIndiahasalreadytakentohonoritsWorldTradeOrganization(WTO)commitmen

combinedwiththeliberalizationandtherelaxationoftheimport-exportpolicy,foreigncompaniesseekin

enterthisspacewillexperiencethatmostoftherestrictionsthatexistedonissueslikepricingandlicensi

havenowbeenrelaxedtotheextentthatthereisnowalevel-playingfieldforglobalandIndiancompani

intheIndianmarket.

Inthispaperwehaveoutlinedtheentitystructures,thetaxregime,bothdirectandindirect,affectingth

structuringofIndianoperations,theregulatoryaspectsandtheintellectualpropertyissuesthataffec

thepharmaceuticalandlifesciencesindustry.

3TorrentPharmasignsnon-exclusivepatentlicensingpactwithTakedaPharmaforVonoprazan,ET,June5,2024,(LastaccessedonJune10,20

4Howlifesciencescanmaketherightdealsinatimeofchange,EY,January8,2024,accessibleat:

/en_gl/insights/life-sciences/mergers-acquisitions-?repower-report,(LastaccessedonJune10,2024).

?NishithDesaiAssociates2024Provideduponrequestonly4

TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

IndiaEntryStrategies

AbasicunderstandingoftheIndianlegalsystemisapre-requisitetodobusinessinthepharmaceutic

sectorinIndia.InternationalpharmacompaniesorinvestorsseekingtomakeinvestmentsinIndian

pharmacompaniesshouldstructuretheiractivitiesonthefollowingthreepillars:

StrategyLawTax

§Observingtheeconomicandpolit-

icalenvironmentinIndiafromthe

perspectiveoftheinvestment

§ExchangeControlLaws:Primarily

theForeignExchangeManagement

Act,1999andnumerouscirculars,

notificationsandpressnotesissued

undertheact.

§DomesticTaxationLaws:TheIncom

TaxAct,1961;GoodsandServices

Taxandcustoms,etc.

§Understandingtheabilityofthe

investortocarryoutoperationsin

India,thelocationofitscustomers,

thequalityandlocationofitswork-

force

§CorporateLaws:Primarilythe

CompaniesAct,2013andthe

regulationslaiddownbythe

SecuritiesandExchangesBoardof

India(“SEBI”)forlistedcompanies

inIndia

§SectorSpecificLaws:Drugs&

CosmeticsAct1940andtheDrugs

Rules,1945,ThePatentsAct,

1970andotherlegislations,regu-

lationsandguidelinesthatimpact

thepharmaindustry

§InternationalTaxTreaties:Treaties

withfavorablejurisdictionssuch

asMauritius,Singaporeandthe

Netherlands.

A.InvestmentClimateinIndia

ByandlargeforeigndirectinvestmentsarenowpermittedinalmostallthesectorsinIndiawithoutobtaini

priorregulatoryapprovals(i.e.underthe“automaticroute”)barringsomeexceptionalcaseslikedefens

housingandrealestate,printmedia,etc.(commonlyreferredtoasthe“negativelist”).Iftheinvestmentisn

inaccordancewiththeprescribedguidelinesoriftheactivityfallsunderthenegativelist,priorapprovmustbeobtainedfromtheconcerneddepartment(“approvalroute”).

Incaseofthepharmaceuticalsector,foreigndirectinvestmentispermittedupto100%throughtheautomat

route.ForBrownfieldpharmaceuticalprojects,anFDIofupto74%isallowedthroughtheautomaticrout

beyondwhichanapprovalisrequiredtobesoughtfromtheDepartmentofPharmaceuticals.Itmus

benotedthatanon-competeconditionwiththeexistingshareholdersisnolongerallowedexceptinspeci

circumstancesatthediscretionofthegovernmentregulator.TheCentralGovernmentalsohastherigh

toaddnewconditionstoaninvestmentiftheinvestorproposestoacquiremorethan74%ofanexistin

pharmaceuticalcompany.However,thereisnopriorpermissionrequiredtoincorporateawhollyowne

subsidiaryinIndia.

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TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

IndiaEntryStrategies

B.GovernmentProductionLinkedIncentives

Intherecentpast,giventheincreasedfocusondomesticinnovationandmanufacturing,theGovernmenth

introducedvariousproductionlinkedincentive(“PLI”)schemes.In2020,theGovernmentannouncedtheP

SchemeforPromotionofDomesticManufacturingofcriticalKeyStartingMaterials(KSMs)/DrugIntermediat

andActivePharmaceuticalIngredients(APIs)intheCountrywithafinancialoutlayofapproximatel

USD841milliontoboostIndia’smanufacturingcapacity,elevateinvestmentanddiversifyproductofferi

inthesector.

Further,in2022,theGovernmentlaunchedtheSchemeforStrengtheningofPharmaceuticalsIndustryw

anobjecttoaddressdemandsofsupportrequiredtoexistingPharmaclustersandMicro,SmallandMediu

Enterprisestoimprovetheirproductivity,qualityandsustainability.Thisschemehasafinancialoutla

ofUSD61million.

C.India’sPost-TripsIntellectualPropertyEnvironment

InMarch2005,India’spatentlawwasamendedtoincorporateIndia’sobligationsunderWorldTrad

Organization(WTO)regulationsand,specifically,theTradeRelatedAspectsofIntellectualPropertyRigh

Agreement(“TRIPS”).PriortotheadoptionofTRIPS,protectionofintellectualpropertyrights(IPRsinIndiawasofconcerntoglobalpharmaceuticalcompaniesseekingtoenterIndia.Post-TRIPS,Indiahwell-establishedstatutory,administrative,andjudicialframeworkstosafeguardIPRs.

Apatentedinvention(includingproducts)isnowgiventwentyyearsofprotectioninIndia.Well-know

internationaltrademarkssuchasVolvoandWhirlpoolhavebeenprotectedinIndiathroughjudicialdecisio

evenwhentheywerenotregisteredinIndia.Computersoftwarecompanieshavesuccessfullycurtailedpira

throughcourtorders.Computerdatabasesandsoftwareprogramshavebeenprotectedundercopyrigh

Computerprogramshavingtechnicalapplicationstoindustryandcomputerprogramsincombinationw

hardwarecannowbepatentedinIndia.Thoughtradesecretsandknow-howarenotprotectedbyanylegislat

theyareprotectedunderthecommonlawandthroughcontractualobligations.Thecourts,ontheground

breachofconfidentiality,accordprotectiontoconfidentialinformationandtradesecretsuntiltheProtect

ofTradeSecretsBill,2024ispassedbytheparliament.

India’spatentlawisalsowellplacedtoprovideprotectionforpharmaceuticalproductsdevelopedan

manufacturedthroughinnovativeprocessessuchas3Dprinting.Thisisbecause,Indiarecognizesboth

productandprocesspatentsforpharmaceuticalproducts.

D.FormofTheIndianEntity

DependingupontheproposedoperationsinIndia,theforeignpharmacompaniesmayconsidersettingon

ofthefollowingentities,whichmayeitherbeunincorporatedorincorporated.

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TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

IndiaEntryStrategies

I.UnincorporatedEntities

AforeigncompanycanuseunincorporatedentitiestodobusinessinIndiavia‘offices’ofcertaintypes.Th

optionsareasfollows:

A.LiaisonO?ce

Settingupaliaisonofficeinasectorinwhich100percentFDIisallowedundertheautomaticrouterequir

thepriorconsentoftheAuthorizedDealer(“AD”).1Fortheremainingsectors,RBIgrantsitsapprovalafter

consultationwiththeMinistryofFinance.AliaisonofficeactsasarepresentativeoftheparentforeigncompinIndia.

However,aliaisonofficecannotundertakeanycommercialactivitiesandmustmaintainitselffromth

remittancesreceivedfromitsparentforeigncompany.Theapprovalforsettingupaliaisonofficeisgeneral

validforthreeyearsandcanbeextendedbymakinganapplicationtoADbeforethedateofexpiryofvalidi

ItisanoptionusuallypreferredbyforeigncompaniesthatwishtoexplorebusinessopportunitiesinIndi

B.BranchO?ce

Similartoaliaisonoffice,thebranchofficeofaforeigncompanyinIndiamustbesetupwiththepriorcons

oftheAD2forsectorsunderwhich100percentFDIispermissibleunderautomaticroute,withapprovalundothersectorsaccordedafterconsultationwiththeMinistryofFinance.ItcanrepresenttheforeignparencompanyinIndiaandactasitsbuyingorsellingagentinIndia.However,abranchofficecannotcarryoanyretail,manufacturingorprocessingactivities.Thebranchofficeispermittedtoremitsurplusrevenutoitsforeignparentcompanysubjecttothetaxesapplicable.Operationsofabranchofficearerestricteddtolimitationsonactivitiesthatitcanundertake.Thetaxonbranchofficesis40%plusapplicablesurcharandtheeducationcess.ItisanoptionthatisusefulforcompaniesthatintendtoundertakeresearchandevelopmentactivitiesinIndia.

C.ProjectO?ce

Aforeigncompany,subjecttoobtainingapprovalfromtheAD,maysetupaprojectofficeinIndiaundert

automaticroutesubjecttocertainconditionsbeingfulfilledincludingtheexistenceofacontractwithanInd

companytoexecuteaprojectinIndia.AprojectofficeispermittedtooperateabankaccountinIndiaandm

remitsurplusrevenuefromtheprojecttotheforeignparentcompany.Thetaxonprojectofficesis40perce

plusapplicablesurchargesandtheeducationcess.Projectofficesaregenerallypreferredbycompaniesengag

inone-timeturnkeyorinstallationprojects.

Otherunincorporatedentitiessuchaspartnershipsortrustsarenotusuallyrecommendedstructuresfo

investment,astherearecertainrestrictionsontheforeigndirectinvestmentinsuchstructures.

1ApplicationmadefromcertaincountriesaswellasforcertainsectorsstillrequiresapprovaloftheRBI.Availableat:.in/Scrip

BS_ViewMasDirections.aspx?id=10404#1,(LastaccessedonFebruary10,2023).

2ApplicationmadefromcertaincountriesaswellasforcertainsectorsstillrequiresapprovaloftheRBI.Availableat:https://www.rbi.rg.in/Script

BS_ViewMasDirections.aspx?id=10404#1F,(LastaccessedonFebruary10,2023).

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TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

IndiaEntryStrategies

II.IncorporatedEntities

IncorporatedentitiesinIndiaaregovernedbytheprovisionsoftheCompaniesAct,2013ortheLimitedLiabi

PartnershipAct,2008.

A.LimitedLiabilityPartnership(“LLP”)

AnLLPisaformofbusinessentitythatpermitsindividualpartnerstobeshieldedfromtheliabilitiescreat

byanotherpartner’sbusinessdecisionormisconduct.InIndia,LLPsaregovernedbytheLimitedLiabili

PartnershipAct,2008.LLPisabodycorporateandexistsasalegalpersonseparatefromitspartners.

B.LimitedliabilityCompany

Companiesmayeitherbe‘privatelimitedcompanies’or‘publiclimitedcompanies’.

i.PrivateLimitedCompany

Aprivatelimitedcompanyhascertaindistinguishingcharacteristics.Itmust,initsarticlesofassociation

restricttherighttotransfersharesandprohibitanyinvitationtothepublictosubscribetothesecuritie

ofthecompany.Thenumberofmembersinaprivatelimitedcompanyisaminimumof2andamaximu

of200(excludingthepresentandpastemployeesofthecompany).

UndertheCompaniesAct,2013anaturalpersonwhoisanIndiancitizenandresidentinIndiacanals

incorporateaone-personcompany.However,itshallberequiredtoconvertitselfintoapublicorprivat

company,incasepaid-upsharecapitalofthecompanyisincreasedbeyondINR5millionoritsaverageannu

turnoverexceedsINR20million.

ii.PublicLimitedCompany

Apubliclimitedcompanyisdefinedasacompanythatisnotaprivatecompany.However,privatecompani

thataresubsidiariesofapubliccompanywouldbeconsideredtobepubliccompanies.Apubliclimited

companyisrequiredtohaveaminimumof7members.Thereisnorestrictiononthenumberofshareholde

ofapubliccompanyandapubliccompanymayinvitepublictosubscribetoitssecurities.Apubliclimite

companymayalsolistitssharesonarecognizedstockexchangebywayofanInitialPublicOffering.Ever

listedcompanyshallmaintainpublicshareholdingofatleast25%(withamaximumperiodof12month

torestorethesamefromthedateofafall).

BetweenanLLPandaLimitedLiabilityCompany,anLLPstructuremaybelessfavorableforapharmaceut

manufacturingcompanygiventherestrictionsapplicableonanLLPinreceivingforeigninvestmentund

thepresentforeigndirectinvestmentpolicy.

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TheIndianPharmaceuticalIndustry—Regulatory,LegalandTaxOverview

IndiaEntryStrategies

C.AdvantagesandDisadvantagesofaPrivateCompany

i.Advantages

§Notasstringentlyregulatedasapubliccompany.

§Moreflexibilitythanpubliccompaniesinconductingoperations,includingthemanagementofth

company,issuanceofdifferenttypesofsecuritiesandthepaymentofmanagerialremuneration.

§Fasterincorporationprocess.

ii.Disadvantages

§Restrictionsoninvitationtothepublictosubscribetosecurities.

§Limitedexitoptions.

WehaveobservedthatmostofthepharmaceuticalcompaniesconsiderincorporatingacompanyinInd

basedonthescopeofservicesthecompanyintendstoprovideinIndia.Anothercommontrendobserve

inthepharmaceuticalsectoriswherepharmacompaniesenterintoadirectmarketingandd