Drafting Master Service Agreement for Multiple Wholly-Owned Subsidiaries
A Drafting Master Service Agreement is a corporation entirely owned by another organization. The parent organization or holding Company is the corporation that owns the subsidiary. The parent organization will own all of the subsidiary’s stock.
A wholly owned subsidiary is a company incorporated in India under the Companies Act, 2013. A foreign firm owns 100 percent of the equity shares, subject to the sectoral cap. A WOS is a distinct legal entity that exists independently of the existence of a foreign corporation. In terms of several regulations and tax treatment, it is treated the same as any other Indian corporation.
Companies outside India can establish Branch Offices with the RBI’s prior clearance. A branch office is classified as a Foreign Organisation and is susceptible to a 40% tax rate, increased restrictions, and control by Indian authorities. In India, branch offices are overseen by two regulators: the Reserve Bank of India and the Registrar of Companies (ROC).
Master Services for Wholly-Owned Subsidiaries
The term MSA stands for Master Service Agreement. Such an agreement or contract will be entered into between two or more parties who collectively decide that the terms of the Master service agreement will control future or potential agreements.
While each professional services transaction has its own set of nuances and challenges that must be addressed adequately in the Master service agreement Contract, a few important points of an MSA Contract involve:
- The choice of law and forum.
- Scope of the project.
- Confidentiality.
- Independent contractor connection.
- Intellectual property ownership.
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Selection of Law or Forum
In a dispute, a Master service agreement should indicate the law that would control the interpretation of the contract. Furthermore, choosing a designated place for courts to resolve disputes can sometimes result in a faster resolution. However, if arbitration is favored over a court case, this option should be included in the MSA Contract.
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Work Scope
One of the major common points of contention between clients and service providers is the nature of the work to be completed and how and when it should be provided. A precise scope of work, also known as a statement of work, on the other hand, can assist in eliminating ambiguity and misunderstandings by clearly detailing the service provider’s deliverables, timeframes, and benchmarks, along with when payments are due.
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Protection of Confidentiality
The service provider and client will almost certainly be exposed to each other’s proprietary information and materials during the execution of the MSA Contract. The MSA Contract should compel each party to keep this data confidential and restrict the parties from disclosing or exploiting the other party’s confidential information.
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Relationship with Independent contractor
The MSA Contract is a contract between independent contractors. To minimize any uncertainty between the parties and third-party confusion regarding the connection, the MSA Contract should state that the supplier is an independent contractor, not an employee, agent, or associate of the client.
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Intellectual property ownership
In most cases, the service provider will use its intellectual property (IP) to deliver the service, but it might need to use or access the client’s IP. The MSA Contract shall specify who owns each party’s intellectual property and the restricted license rights granted to each other under the MSA Contract. Furthermore, new intellectual property may be formed as a result of the
What Are the Advantages of a Master Services Agreement?
Master services agreements establish a procedure and uniform terms for future transactions. They simplify and make the prices faster and sooner up the process for the parties to strike an agreement when they expect to conduct several transactions together in the future.
Framework agreements can assist a supplier in establishing consistency by aligning the terms pursuant to which it will deal with various clients. This can make doing business with a supplier easier and aid in achieving economies of scale. Master services agreements can eliminate the need for different procurement processes by establishing the framework for all negotiations.
What Is the Meaning of a Master Service Agreement?
Businesses use MSAs for two primary reasons:
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In order to give indemnity
Indemnification occurs when one organization or party agrees to protect another party from existing damages or prospective losses.
The indemnifying party is the one who commits to pay for any damages that it or any other party has created or may cause in the future. They retain counsel and pay the legal fees involved with the litigation process.
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To distribute risks
Risk allocation involves employing complicated tactics to detect prospective risks and devise a strategy to mitigate them. Before entering the MSA, all parties must be clear on how the MSA interacts with other forms of contracts, particularly insurance arrangements.
What Are the Allowed Operations for a Wholly Owned Subsidiary Company in India?
Foreign investment in the sectors/activities listed below is subject to applicable laws/regulations, security, and other conditions. The onus of complying with the statutory caps on these foreign investments and any attendant requirements must be on the Company acquiring foreign investment.
Foreign direct investment is permitted in the sectors mentioned earlier, subject to the sectoral limits outlined in the RBI Master Direction of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.
- E-Commerce
- Pharmaceuticals
- Infrastructure for Railways
- Sector/Activity
- Animal Husbandry and Agriculture
- Plantation
- Mining
- Defense
- Broadcasting
- Printing Media
- Aviation Civil
- Development of Townships, Housing, and Built-up Infrastructure
- Parks for Industry
- Services in Finance
- Insurance
- Sector of Pensions
- Additional Financial Services
- Lignite and coal
- Mining for titanium-bearing minerals and ores, as well as value addition and integrated operations
- Natural Gas and Petroleum
- Manufacturing
Conclusion
Each party must understand the specific effect that the legislation can have on particular MSA contract elements, particularly those that outline the risks and duties associated with the workplace indicated in the contract, and ensure that all contractual obligations are tracked.
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