Advocate Aditya Shamlal

Questions Answered by Advocate Aditya Shamlal

Q: Can a practicing lawyer become a shareholder in a business

can a practicing lawyer become a shareholder of a business. can a practicing lawyer become a shareholder and the general counsel of a business.

Advocate Aditya Shamlal answered
A practicing lawyer is not permitted to practice another profession or take up employment with an entity. A practicing lawyer would not be permitted to have a direct employment relationship with the Company. Ownership of the Company by being a shareholder is permissible. As regards 'general counsel', the practicing attorney may provide his legal services to the Company on an independent basis, after making full disclosures as required, under the Companies Act, 2013 and relevant rules thereunder, especially if the practicing attorney is a Director on the Board of the Company.

Q: Can director continue in the board after being arrested

Can a Director continue in the board after his arrest and being in jail for three weeks? Whats the provision as per Companies Act, 2013 ?

Advocate Aditya Shamlal answered
Under Section 164 of the Companies Act, 2013 a person may be disqualified from being a Director if " he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence". Therefore, the legal disqualification happens only upon the 'conviction of any office' and sentenced to imprisonment of NOT LESS THAN 6 months. Taking into account that the Director has been arrested and has been in Jail for 3 weeks, however the arrest may be as an under-trial and not as a part of the ''conviction'. Therefore, first you would have to determine whether this arrest is pursuant to a 'Conviction' for a period NOT LESS THAN 6 months. If it satisfies the criteria, then the Director is automatically disqualified and may be easily removed. However, if the arrest is because of some other situation, such as being placed under arrest during the pendency of a trial, then the same would not amount to a 'conviction' and the automatic qualification may not apply. However, the Articles of Association of the Company in which such person is the Director, may prescribe more stringent criteria for disqualification and the same would have to be reviewed prior to determining whether such Director may be removed from the Board.

Q: Can we based inventory based e-commerce store

Hello: We are planning to start an inventory based e-commerce platform with domestic and international customer. On the platform 30% products would be stocked whereas other 70% would be on back 2 back order from manufacturer or distributors. Is this allowed? Any hassles when doing ecommerce for international market? We are not looking for funds when we say ecommerce.

Advocate Aditya Shamlal answered
Hi, This is definitely allowed. However, you will have to keep a few issues in mind with respect to your international customers - (a) Export Rules - The items you are selling to international customers must comply with India's export rules and you would also require relevant permissions and licenses for exporting goods. Further, certain items may be export restricted and therefore the same would have to be determined and confirmed prior to export of any such goods; (b) RBI - Payments originating from abroad would be subject to certain reserve bank rules and regulations and you would have to comply with relevant RBI Guidelines and notification with respect to the banking channels used for such payments. Coming to the issue of 'inventory based' e-commerce. For the purposes of FDI in order to determine whether it is aggregation or inventory based e-commerce, the determining criteria is whether more than 25% of your sales happens from the particularly entity/distributer/company etc. So whether you keep 30% stock or otherwise, the determining factor is whether any 1 entity is responsible for more than 25% of your sales. If you are such an entity then 'Foreign Direct Investment' would not be permitted within such an e-commerce company. However, since you have mentioned that you are not looking for funds, this does not apply to you immediately, however it would become relevant if you were to attempt to raise such funds in the future in the form of Foreign Direct Investment.

Q: How to start a fundraiser for startups

I want to do a friends and family funding round to start my startup. Is there a template I can use to draft the contract or do I need to involve a startup lawyer?

Advocate Aditya Shamlal answered
Hi. Under the Companies Act, 2013, there are certain compliances required when taking money from third parties as investment towards equity in a Company. You would at the minimum require the services of a Company Secretary (for the ROC Compliances) as well as a corporate/startup lawyer (to record the terms of the investment in a definitive agreement).

Q: How to make a an agreement for distribution of shares

I am developing a new company with my friend,we have agreed that he will exit from the company after two years, i'll hold 72% and he'll hold 28% What is the procedure to make sure it in advance

Advocate Aditya Shamlal answered
You could provide for a vesting period. Basically, make a provision in your Articles of Association that the Partner shall 'vest' his shares with the company and that if he leaves prior to 2 years, the Company or you as the other shareholder shall have the right to purchase his shares from him at the face value of the shares (which in most cases is Rs. 10/- per share).