While managing your business, you have to take into account the statutory, regulatory requirements of your organisation. These regulatory requirements ensure that the organisation is functioning as per the statutory framework of the country. The entry-level players should keep in mind while doing business in India, with more focus on the requirements under the Companies Act, 2013 (New Companies Act) and then on some other key legislations.
The company has to convene regular board meetings in the calendar year and prepare the minutes of the meeting of the Board of Directors and the shareholders meeting, and the same has to be maintained as a permanent document till the life time of the company. Within 30 days from the meeting, the minutes have to be prepared, duly signed, and maintained in a minute’s binder. Like the same way on allotment of shares, the company has to issue share certificates to those who have been allotted shares and the company has to maintain members register and share allotment register.
A company is required to file its balance sheet, profit and loss account, auditor’s report, and annual return every financial year before the due date, with the Registrar of Companies.
In addition to that, there are several instances wherein the company has to intimate the concerned Registrar of Companies, on the timely basis, about the appointments of directors, removal and certain other changes in the prescribed manner.
The New Companies Act has also introduced the CSR (Corporate Social Responsibility) provisions where the corporate entities are obligated to undertake certain philanthropic activities. All companies which satisfy the CSR criteria will have to undertake CSR activities during the given financial year.
The above compliance requirement under the New Companies Act, which a company must comply, is not a comprehensive list. Some companies may also require registration for service tax, VAT, professional tax, shops, and establishment. It is pertinent to note that the responsibility of compliance is not a one-time affair, but in fact a continuous process.
Another important regulation is the Indian Contract Act, 1872, which regulates all the transactions of a company. It lays down the general principles relating to the formation and enforceability of contracts; rules governing the provisions of an agreement and offer; the various types of contracts including those of indemnity and guarantee, bailment and pledge and agency. It also contains provisions pertaining to breach of a contract.
The next important regulation relates to quality management by a firm. Bureau of Indian standards has been set up by the Government for enforcement of quality standards in the country. BIS has adopted the ISO 9000 standards set up by International Organization for Standardization (ISO) for quality control.
Requirements under the Labour and Employment Legislation
Next, businesses with production lines, factories, would also have to consider and comply with a host of statutes such as the Employees' State Insurance Act, 1948; the Maternity Benefits Act, 1961; the Industrial Disputes Act, 1948; The Contract Labour (Regulation and Abolition) Act, 1970; the Trade Union Act, 1926; the Equal Remuneration Act, 1976; the Payment of Gratuity Act, 1972; the Workmen’s Compensation Act, 1923’ the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, etc.
The above statutes govern issues such as working time and conditions of employment of workers, minimum wages and remuneration, rights and obligations of the trade unions, insurance of the employees, maternity benefits, employment retrenchment, payment of gratuity/provident fund, payment of bonus, regulations of the contract labour and such other issues concerning the employees.
The company should ensure that proper compliances of these various statues vis-à-vis its employees are in place and the employee policies are formulated accordingly.
Requirements under the Environmental Law
Environmental and pollution control matters are governed by various statutes such as the Environment (Protection) Act, 1986; the Water (Prevention and Control of Pollution) Act, 1974; the Air (Prevention and Control of Pollution) Act, 1981; Hazardous Wastes (Management, Handling and Trans boundary Movement) Rules, 2008; the Manufacture, Storage and Import of Hazardous Chemicals Rules, 1989; the Indian Forest Act, 1927; the Forest (Conservation) Act, 1980; the National Environment Tribunal Act, 1995; the Public Liability Insurance Act, 1991, etc. A company is required to comply with the provisions of these environmental laws to the extent specifically applicable to the business operations of such company. Consequences of non-compliance with the relevant provisions of any such statutes and rules framed there under are provided in the respective statutes.
Tax and stamp duty
India has a federal tax structure and taxes are levied by the Central Government, the State Governments, and the local regulatory authorities. These taxes are broadly in the nature of (i) Direct Tax (which includes income tax, wealth tax, dividend distribution tax, minimum alternate tax (MAT), share buy-back tax), (ii) Indirect Tax (which includes VAT/CST, Service Tax, Excise Duty, Customs Duty, Entry Tax, R&D Cess), and (iii) Levies on transaction (which includes stamp duty, securities transaction tax, and commodity transaction tax).
All the Indian companies are subjected to payment of tax and stamp duty for their business transactions undertaken during the course of any financial year and on the income generated from such operations. Keep records of all of your income and expenses, and file taxes according to the deadlines of your state and central tax agencies. Non-payment (inadequate and/or untimely payment) of tax and stamp duty may attract moderate to heavy penalty, cause enforceability issue of the document and, in some cases, impounding of the documents by the authority.
Related Link: Ministry of Finance
Central Board of Central Excise (CBEC)
Central Board of Direct Taxes (CBDT)