Aviation Law and Air Transport Management)
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Centre for Aerospace & Defence Laws (CADL) Directorate of Distance Education NALSAR University of Law, Hyderabad Course Material M.A. (AVIATION LAW AND AIR TRANSPORT MANAGEMENT) Academic Year: 2019-2020; Batch 2018-20 II Year– III Semester 2.3.10. - Aviation Corporate Laws Compiled by: Prof. (Dr.) V. Balakista Reddy Ms. Ruchi Jain, Research Associate (For private circulation only) 2 COURSE OUTLINE The times when only government used to exercise monopoly on the civil aviation sector are long gone and in its place there has been a splurge of entry of private entities and investors in the domestic and international aviation market. Aviation sector in India has been transformed from an over regulated and under managed sector to a more open, liberal and investment friendly sector since 2004. In order to regulate the business of aviation in India, the varied range of corporate laws that are applicable to regular business enterprises are also applicable to aviation business. Corporate Laws provide the business enterprises with a legal form that possesses these five core attributes. By making this form widely available and user-friendly, corporate law enables entrepreneurs to transact easily through the medium of the corporate entity, and thus lowers the costs of conducting business. The dominance of private corporations including the aviation corporate enterprises over our economy and society is such that they have come to colonize our thinking. Aviation Corporate Law deals with the formation and operations of corporations and is related to commercial and contract law. A corporation is a legal entity created under the laws of the state it‘s incorporated within. State laws, which vary from state to state, regulate the creation, organization and dissolution of their corporations. A corporation creates a legal or ―artificial person‖ or entity that has standing to sue and be sued, enter into contracts, and perform other duties necessary to maintain a business, separate from its stockholders. The objective of this paper is to train the corporate law professionals in the legal formation of corporations and to construct joint ventures, licensing arrangements, mergers, acquisitions, and the countless other transactions entered into by corporations. Other areas of practice include business formations, securities law, venture capital financing, business agreements, internal forms, and business tax consultations. It is of paramount importance for the course participants to familiarize themselves with the fundamental law of business before starting an aviation business as it will help you operate your business without the hindrances of ignorance. Hence the first module of the paper deals with the fundamentals of company law. Any discussion on the corporate law is incomplete without deliberating upon the mother of corporate laws in India i.e. the Indian Companies Act 2013. It lays down the fundamental legal provisions on start, conduct and regulation of business. Given the growing trend of mergers and acquisitions in the field of aviation sector, the second module is entirely dedicated towards an elaborate discussion on the issue of mergers and acquisitions. The initial chapters of the second module dwell upon the significance, rationale, procedures and varied forms of mergers and acquisitions. The module thereafter digs deeper in to the cases of mergers and acquisitions in the aviation sector and the contemporary issues that have arisen in the last few years. 3 Another significant aspect of the civil aviation business is related to the competition law and competition norms. Hence the third module contains a detailed discussion on the competition law of India. The second part of this module consists of a detailed discussion on the emerging issues which have arisen due to application of competition law to Indian civil aviation sector. Over recent years the global aviation sector has witnessed the rapid growth of air travel in emerging markets, the continuing growth of low cost carriers across the globe, and regulatory changes to global emissions trading schemes to name but a few developments. Increased FDI inflows, surging tourist inflow, increased cargo movement, sustained business growth and supporting government policies are the major drivers for the growth of aviation sector in India and have opened up new doors of intersection between the business and aviation norms. Domestic airlines have been allowed to fly overseas, forge partnerships with foreign carriers while foreign carriers in turn have been interlining with domestic airlines to access secondary destinations. The fourth module on business opportunities in aviation sector focuses on such new contemporary issues that have arisen due to application of business laws on civil aviation. The module thus discusses these contemporary issues. The final module of the paper briefly throws light on other corporate laws which carry the potential to affect business venture in aviation sector. 4 TABLE OF CONTENTS MODULE I: FUNDAMENTALS OF COMPANY LAW 1.1. Introduction to Company Law 1.2. Kinds of Companies 1.3. Incorporation and Promotion of Company 1.4. Prospectus and Commencement of Business 1.5. Shares and Debentures 1.6. Management of a Company 1.7. Winding Up of a Company 1.8. Corporate Social Responsibility MODULE II: MERGERS, ACQUISITIONS AND JOINT VENTURES IN INDIA 2.1. History of Aviation Mergers and Acquisitions 2.2. Introduction to Mergers & Acquisitions 2.2.1. Various Terminologies 2.2.2. Rationale behind M&A 2.2.3. Mergers v. Acquisition 2.2.4. Types of M&A 2.3. Process of Mergers and Acquisitions 2.4. Mergers & Acquisitions in Aviation Industry 2.5. Alliances and Joint Ventures in Civil Aviation MODULE III: COMPETITION ISSUES IN AVIATION 3.1. Overview of the Competition Act 2002 3.2. Elements of Competition Law 3.3. Competition (Amendment) Act, 2009 3.4. Competition Law and Aviation 3.5. Anti- Competition Law 3.6. Airline Cartelization and Legal Issues 3.7. Emerging Legal Issues in Slot Allocation 3.8. Low Cost Air Carriers - A Global Perspective 3.9. Emergence of Code-Sharing Agreements and Legal Issues MODULE IV: BUSINESS OPPORTUNITIES IN AVIATION SECTOR: RECENT DEVELOPMENTS 4.1. Choosing Between Bilateralism and Multilateralism: Approaches for Improving Market Access in the Indian Civil Aviation Industry 4.2. Aircraft Hijacking: An Analysis Of New Legal Issues 4.3. Aviation Insurance: Have A Safe Flight 5 4.4. Train The Pilots – Brain The Economy 4.5. Fractional Ownership Indian Scenario: A Jurisprudential Analysis 4.6. Emerging Regulatory Issues and Challenges 4.7. Project Finance in Aviation 4.8. Special Economic Zones and Airports 4.9. Aircraft Leasing In India: An Overview 4.10. Economic Regulatory Authority of India 4.11. Financing of Aircraft MODULE V: AVIATION START-UPS: PRACTICAL AND LEGAL ISSUES 5.1. Foreign Investment 5.2. Business Regulations 5.3. Financial Sector 5.4. Tax Framework 5.5. Real Estate Sector 5.6. Legal Framework regulating Start-ups 6 MODULE I FUNDAMENTALS OF COMPANY LAW 7 INTRODUCTION TO COMPANY LAW Industrial has revolution led to the emergence of large scale business organizations. These organizations require big investments and the risk involved is very high. Limited resources and unlimited liability of partners are two important limitations of partnerships of partnerships in undertaking big business. Joint Stock Company form of business organization has become extremely popular as it provides a solution to overcome the limitations of partnership business. The Multinational companies like Indigo Airlines or Spice jet or Kingfisher, etc. have their investors and customers spread throughout the world. The transportation industry also underwent significant transformation during the Industrial Revolution. Before the advent of the steam engine, raw materials and finished goods were hauled and distributed via horse-drawn wagons, and by boats along canals and rivers. In the early 1800s, American Robert Fulton (1765-1815) built the first commercially successful steamboat, and by the mid-19th century, steamships were carrying freight across the Atlantic. Meaning of Company Section 3 (1) (i) of the Companies Act, 1956 defines a company as ―a company formed and registered under this Act or an existing company‖. Section 3(1) (ii) Of the act states that ―an existing company means a company formed and registered under any of the previous companies laws‖. This definition does not reveal the distinctive characteristics of a company. In common law, a company is a ―legal person‖ or ―legal entity‖ separate from, and capable of surviving beyond the lives of, its members. According to Chief Justice Marshall of USA, ―A company is a person, artificial, invisible, intangible, and existing only in the contemplation of the law. Being a mere creature of law, it possesses only those properties which the character of its creation of its creation confers upon it either expressly or as incidental to its very existence‖. According to Haney, ―Joint Stock Company is a voluntary association of individuals for profit, having a capital divided into transferable shares. The ownership of which is the condition of membership‖. From the above definitions, it can be concluded that a company is registered association which is an artificial legal person, having an independent legal, entity with a perpetual succession, a common seal for its signatures, a common capital comprised of transferable shares and carrying limited liability. The word company ordinarily means an association of a number of individuals formed for some common object. When such an association is registered under the Companies Act, it becomes an artificial person with perpetual succession and a common seal. The word ―company‖ is derived from the Latin (Com = with or together; panis = bread), and originally referred to an association of persons who took their meals together. It may be assumed, since human nature does not change that in the leisurely past no less than in the speedy present, 8 merchants took advantage of festive gatherings, to discuss business matters. Now-a-days, the business matters have become most complicated and cannot be discussed at length on festive gatherings.