Foreign investors are increasingly investing in technology startups in India. Many of these startups are e-commerce ventures with very good idea that have been successfully implemented. Foreign investors keep in mind the accounts of these e-commerce and technology ventures to determine the nature and extent of investments in such ventures. While this is a good and commercial criterion yet they are missing a very crucial criterion while investing in these startups.
Most of the technology startups and e-commerce website sin India are not complying with Indian laws. The traditional due diligence exercise fails to catch the techno legal lapses and the foreign investors invest in these startups with all their fallacies and illegalities. As a result both the Indian partner and the foreign partner can be prosecuted under Indian laws.
Perry4Law recommends that while starting an online payment portal or e-commerce website in India, the entrepreneurs must keep in mind the requirements of Internet intermediary liability in India and cyber law due diligence in India (PDF). There are many legal issues of e-commerce in India that various online payment service providers of India must comply with. Perry4Law has already specified the cyber law due diligence requirements for Paypal and online payment transferors in India. Similarly, we have also outlined the e-commerce and online business legal compliances for online payment market of India.
Many foreign companies are exploring Indian market for online and mobile payment segment. For instance, Apple plans to launch mobile payment service through Touch ID and it is most likely targeting India as well. Similarly, Japanese investors have shown their interest in the technology ventures of India especially the mobile payments solutions provider of India. While this is a good decision yet investing without proper cyber law due diligence would be counter productive in the long run.