Our company is considering the acquisition of shares of a company that has an STP unit enjoying tax benefits under Section 10(A) of the Income Tax Act. After we acquire the shares, can the STP unit continue to enjoy such tax benefits?

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The STP unit can avail tax benefits under Section 10(A) of the Income Tax Act, 1961, if your company acquires not more than 49 per cent of the total voting power in the company that owns the STP unit. The STP unit will continue to enjoy such tax exemptions if on the last day of any previous year, the shares representing at least 51 per cent of the voting power are held by the same shareholders who held the shares representing at least 51 per cent of the voting power on the last day of the year in which the STP unit was set up. The acquisition of voting power greater than 49 per cent will not disentitle the STP unit from tax deduction under Section 10(A) if the transfer results from disinvestment by a VC company or VC fund in favour of your company.

We are a software company and wish to market our software through a shrink-wrap licence method. Will the terms of such a licence be enforceable?

A shrink-wrap licence is enforceable like any other contract if (i) it is made by the free consent of the parties, (ii) the parties are competent to contract, (iii) there was communication of offer and acceptance, (iv) the object and consideration for the licence is lawful, and (v) the licence is not declared void under other provisions of the Indian Contract Act. The main consideration, with respect to a shrink-wrap licence, is the time of acceptance of the terms of the licence. Judicial decisions hold that as long as the person who received the product was made aware of the fact that there were certain conditions governing the transaction, even if these conditions were stated in small print on the product, such person would be bound by the terms thereof. Therefore, a party would be held to have communicated its acceptance to the terms and conditions of the sale and would be bound if he was aware that the software package contained a licence agreement but nevertheless purchased the software.

Our company intends to hold 100 per cent equity in a private company proposed to be set up as an wholly-owned subsidiary of our company. Can we hold beneficial interest in the shares through a nominee in the subsidiary company?

Your company can hold shares in the subsidiary through nominees. If the shares are held by nominees, your company and its nominee(s) will need to file declarations with the subsidiary specifying the particulars of your company as the holder of beneficial interest in the shares, the nature of your company's interest in those shares and particulars of the nominee(s) in whose name the shares are registered. These declarations have to be made within 30 days of the holding of shares by the nominee(s) on behalf of your company. The subsidiary will also have to note these declarations in its register of members and file certain forms with the Registrar of Companies within 30 days of receipt of the declarations from your company and its nominee(s).

We are joint venture partners in a company. Our partner has filed a petition for its winding up due to disputes. Can we request the court to refer the winding up petition for adjudication by arbitration?

Under the Arbitration and Conciliation Act, only disputes or matters on which the arbitrator is competent or empowered to decide can be referred for arbitration. The power to order the winding up of a company is derived from the Companies Act and conferred on the court alone. An arbitrator, notwithstanding any agreement between the parties, does not have the jurisdiction to order the winding up of a company. The court may not refer the winding up petition for adjudication through arbitration.

You can, however, request the court to refer the disputes to arbitration-as under the Shareholders Agreement disputes are subject to settlement by arbitration-and stay the winding up proceedings.

The views expressed here should not be construed as legal opinion and is for reference only. Business Today and/or the author will not be responsible for any decision taken by readers on the basis of these views. Please send in your queries to Legal.bt@intoday.com or Going By the Book, c/o Business Today, F-26, Connaught Place, New Delhi-110001.