Corporate law (also known as business law or enterprise law or sometimes company law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corporations, or to the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation.
While the minute nature of corporate governance as personified by share ownership, capital market, and business culture rules differ, similar legal characteristics - and legal problems - exist across many jurisdictions. In some cases, this may include matters relating to corporate governance or financial law. When used as a substitute for corporate law, business law means the law relating to the business corporation (or business enterprises), i.e. capital raising (through equity or debt), company formation, registration, etc.
The Foreign Exchange Management Act, 1999 was enacted to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. In fact it is the central legislation that deals with inbound investments into India and outbound investments from India and trade and business between India and the other countries.
It was passed in the winter session of Parliament in 1999, replacing the Foreign Exchange Regulation Act (FERA). This act makes offences related to foreign exchange civil offenses. It extends to the whole of India, replacing FERA, which had become incompatible with the pro-liberalization policies of the Government of India. It enabled a new foreign exchange management regime consistent with the emerging framework of the World Trade Organization (WTO). It also paved the way for the introduction of the Prevention of Money Laundering Act, 2002, which came into effect from 1 July 2005.
All financial transactions concerning foreign securities or exchange cannot be carried out without the approval of FEMA. All transactions must be carried out through “Authorised Persons.”
Under FEMA, the adjudicator (an officer with the ED) can impose a penalty three times the size of the contravention involved where the sum is quantifiable. In case the contravention is not quantifiable, the penalty is set at Rs 2 lakh. Further, where the violation is a continuing one, an additional penalty of Rs 5,000 per day of contravention can be imposed.
Specific provision had been done in act to deal with foreign exchange, holding of foreign exchange, Current account transactions Capital account transactions Export of goods and services etc. It helps in better function and keep a flow of money within and outside the country.
It gives powers to the Central Government to regulate the flow of payments to and from a person situated outside the country.
All financial transactions concerning foreign securities or exchange cannot be carried out without the approval of FEMA. All transactions must be carried out through “Authorised Persons.” It is more transparent in its application as it lays down the areas requiring specific permissions of the Reserve Bank/Government of India on acquisition/holding of foreign exchange.
In the general interest of the public, the Government of India can restrict an authorized individual from carrying out foreign exchange deals within the current account.
Empowers RBI to place restrictions on transactions from capital Account even if it is carried out via an authorized individual.
As per this act, Indians residing in India, have the permission to conduct a foreign exchange, foreign security transactions or the right to hold or own immovable property in a foreign country in case security, property, or currency was acquired, or owned when the individual was based outside of the country, or when they inherit the property from individual staying outside the country.
This act is a civil law and the contraventions of the Act provide for arrest only in exceptional cases.
The act is applicable to all branches, offices, branches outside India own and control by person resident in India.
Indeed, FEMA was drafted to create a more liberal foreign exchange market in India. The Act encouraged deregulation of foreign exchange and smooth international trade. FEMA also has a distinct administrative difference from FERA, which sought to impose sweeping regulations on every aspect of India forex transaction. On the other hand, FEMA aimed to manage only certain forex transactions that might have an impact on national security and the wider national economy, and opened up individual forex transactions to the free market.
Tukaram Shrirang Lad of MGM Law College Nerul.