An Introduction To "What Are Compliance Laws"

An introduction to “What are Compliance Laws”

Every company which comes into existence has a profit base plan. The government policies are enacted to ensure that the profit is made following essential rules and regulations. The benefit should be mutual, to the company and the society. With this objective our constitution provides for enactment of laws, rules and regulations. The Union and state can enact different regulations to be followed by the companies as per the subjects under their territory therefore the companies cannot neglect any of them.

Foreign Investment

For foreign companies and investors ’the foreign direct investment (FDI) policy’ is applicable which is issued annually by the Department of Industrial Policy and Promotion. It works under the Ministry of Commerce and Industry (Government of India). In most investment sectors no prior approval is required to invest in India including but not limited to the investment in a Limited Liability Partnership. Few sectors like financial corporations and insurance are regulated but the government has been liberalising the market and making it more open for foreign investment. Certain terms and conditions are however applicable on all foreign investments.

For a foreign company it is important to know the local laws which needs to be complied with as well as the central laws and before investing and entering in India they should also plan a proper exit strategy.

Some of the instances why the exit strategy should be well formulated are- When there is modification in the nature of business, Financial problems or when dispute amongst partners are not resolved etc.

General laws

Now we shall have a look at the broader picture and see, which are the policies that require mandatory compliance by companies:

Following are some of the important laws the companies need to adhere to:

The Companies Act, 1956, Amended in 2013.

The IT (Information Technology) Act, 2000.

Foreign exchange management act, 1999, FEMA

Environment(Protection) Act and various other laws related to saving environment

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules therein (POSH Laws)

The Industries Act, 1951

The Employees' State Insurance Act, 1948

The Maternity Benefits Act, 1961

The Industrial Disputes Act, 1948

The Contract Labor(Regulation and Abolition) Act, 1970

The Equal Remuneration Act, 1976

The company should regularly audit the HR functions and all the paperwork should be in order and updated so can be audited at any given time.

Dispute resolution

We come to an important point that what happens if there are any disputes within the company or with any of its partners/customers or clients. Going through litigation can take up a long time as our judiciary is already overburdened and there are tiers of systems in place which can be approached before a final verdict is delivered.

The dispute resolution by Arbitration, mediation and negotiation is very effective when there is a civil dispute of corporate nature. It saves time and resolves the issue. Hence before entering into any contract the parties agree to resolve their dispute through Arbitration. As per the Arbitration and Conciliation Act, 1996, the ruling of the Arbitrator is final and binding on the parties.

Conclusion

The field of legal compliance is very vast and very important. The need is to scrutinise the issues alert the company on time if there is any deviation. This will enable the company to correct the deviation. Any penalty that is imposed due to a mere oversight of the rules and regulations is an unnecessary financial burden on the company. Besides the factor of financial burden there is also the necessity of adhering to the fundamental rights of its employees. Various laws and regulations are enacted under the fundamental rights and directive principles of the Indian constitution and the same must be complied by any legal entity.



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