Keywords

•  Director Liability: The legal and financial responsibility a board member has for the actions or non-compliance of a company.
• Non-Executive Director: A board member who is not involved in the day-to-day management or operations of the business.
• Observer Status: A role where an individual can attend board meetings and receive information but does not have the legal status or liability of a director.
• Shareholder-Level Protections: Rights written into a company’s governing documents that allow shareholders to veto or approve major decisions without being on the board.
• Articles of Association: The public legal document that defines a company’s purpose and the duties and powers of its directors and shareholders.
• Veto Rights (Reserved Matters): Specific high-stakes decisions (like taking on debt or selling assets) that cannot be made without the express consent of certain shareholders.
• Jointly and Severally Liable: A principle of liability involving where the group is liable as a whole and each individual also has full liability.
• Information Rights: Contractual rights that ensure an investor has access to financial statements, bank records, and operational reports to stay informed from the outside.
• Negotiable Instruments Act: The specific law in India which deals with cheque bounces, among others.

Timestamps

– Introduction

– Mitigating director liability risk

– Disclaimers

– Why director liability is a major concern in India

– Legal position under the Companies Act, 2013

– Reality of investigations and proceedings

– MCA circular on non-executive and independent directors

– Key areas of statutory liability

– Liability under company law

– Liability under the Income Tax Act, 1961

– The Insolvency and Bankruptcy Code, 2016

– Negotiable instruments

– Foreign exchange management act (FEMA)

– Criminal liability: Bharatiya Nyaya Sanhita, 2023

– The practical challenge of defending your position

– Case study: 7 years to clear a director’s name

– Why take a directorship? Control and oversight

– Strategic alternatives for investors

– Assess the need for directorship

– Negotiate observer status

– Shareholder approval requirements

– Enshrined rights in charter documents

– Detailed information rights

– Joint management appointments

– Focus on initial structure

– Commercial clarity on objectives

– Final recommendations

Keywords

• China-plus-one: A global supply chain strategy where manufacturers add a sourcing base beyond China.
• Automatic Route: FDI pathway allowing investment without prior government approval.
• PLI Scheme (Production Linked Incentive): Government incentive providing benefits based on incremental sales over a base year, covering 14 sectors.
• Manufacturing Clusters: Geographic concentrations of industry-specific supply chains, skilled labour and infrastructure.
• SEZ (Special Economic Zone): Designated industrial areas offering infrastructure and regulatory advantages, often used for export-oriented manufacturing.
• Contract Manufacturing: Engaging an Indian manufacturer to produce products to specified standards while avoiding direct operational exposure.
• Advance Purchase Contract: A commitment to buy a defined volume of a contract manufacturer’s output to align incentives and reduce entry risk.
• Buy-Out Option: Contractual right to acquire a contract manufacturer once the relationship and business scale are established.
• Technology Tap: A structure where core technology is licensed to, rather than owned by, the Indian entity, preserving parent-level control.
• IP Enforcement: The ability to protect intellectual property through Indian courts, including relief against counterfeiting and trade secret theft.
• Corruption Interface: Government interaction points like procuring licences, consents, utilities etc.

Timestamps

– The Scale of the Manufacturing Opportunity in India

– Growth of FDI and the Production Linked Incentive (PLI) Scheme

– 100% FDI in Manufacturing: Policy and Sector Restrictions

– Strategic Manufacturing Clusters: Pune, Chennai and Beyond

– Practical Challenges and Eligibility of the PLI Scheme

– Navigating Operational Challenges: Land Acquisition and Approvals

– Labor Law Complexities and Workforce Management

– Practical Framework: Starting with Contract Manufacturing

– Structuring Relationships: Equity Stakes and Buyout Options

– Using Joint Ventures and Special Purpose Vehicles (SPVs)

– Protecting Intellectual Property (IP) and Licensing Strategies

– Managing Corruption Exposure and Outsourcing Compliance

– Quality Control through Licensing and Franchise Models

– Summary: Key Takeaways for Mid-Market Manufacturing Investors