What Are The Mandatory and Regulatory Compliance's For a Business?

To operate any business legally in the country, there are certain requirements which the company have to fulfill. These can be related to the business transaction, labor practices, and safety precautions. Before starting the company or business complete study of the regulation and requirement of the industry is done so that they can know about the essential compliance.

The compliance is divided into two categories:

1. INTERNAL COMPLIANCE: These are the requirements of the company or business. After forming the business it is enforceable internally by the upper staff of the company.

2. EXTERNAL COMPLIANCE: These are imposed and enforced by the state authority.

INTERNAL COMPLIANCE:

The businesses have their own strict requirements. The requirements are like forming BODs, conducting initial and annual meetings of the directors and CEOs, providing stock to the shareholders etc.

But in small businesses, the requirements are not the same as the large corporation. They are advised to keep their record clean and updated. The transaction shall be relevant to the changes made in operation or adjustments. The official documents shall contain sample bylaws or an operating agreement.

The purpose of internal compliance is to ensure that a business is running with integrity and is free from corruption and it is not doing any kind of another illegal element.

EXTERNAL COMPLIANCE:

These are the requirements which are sanctioned by the state and then anyone can run the business.

The following are the mandatory compliances:

1. PROVISIONS UNDER THE NEW COMPANIES ACT:

The companies which are incorporated in India are regulated by the New Companies Act. This act provides provisions related to qualification, appointment, removal, and retirement of the employees and directors, remuneration, conducting meetings of the board members, passing the resolutions, business transaction, maintenance of the records and accounts etc.

After completing the required legal formalities, the certificate of incorporation is issued to the company. After the certificate, the company becomes a separate legal entity under the eyes of the law.

2. PROVISIONS UNDER THE LABOR AND EMPLOYMENT LEGISLATION:

This statute provides provisions related to the working conditions, working hours of the employees, wages and salary, rights and obligations of the trade unions, gratuity/provident fund payment, maternity benefits, employees insurance, bonus payment and some other issues which are concerned with the employees.

The statutes which come under this are:

• Maternity Benefits Act, 1961

• The Trade Union Act, 1926

• The Payment of Gratuity Act, 1926

• The Industrial Disputes Act, 1948

• The Workmen’s Compensation Act, 1923 etc.

3. PROVISIONS UNDER THE ENVIRONMENTAL LAW:

The companies have to comply with this law. These environmental laws are applicable to the operation of the business as extend to their work.

The statues which come under this are:

• The Environment (Protection) Act, 1986

• Storage and Import of Hazardous Chemicals Rules, 1989

• The Public Liability Insurance Act, 1991

• The Air (Prevention and control of Pollution) Act, 1981

• The National Environmental Tribunal Act, 1995

• The Indian Forest Act, 1927 etc.

4. PROVISIONS UNDER TAX AND STAMP DUTY ACT:

All companies are subjected to the payment of tax and stamp duty. This is for the business transactions which are undertaken in any financial year. The non-payment of the tax and stamp duty costs heavy penalty along with the other legal issues.

The statues which come under this are:

• Direct Tax (Income Tax, MAT, Dividend Distribution, Tax, Wealth Tax etc)

• Indirect Tax (Service Tax, Excise Duty, R&D Cess, Entry Tax, Customs Duty etc)

• Levies on transactions (securities transaction tax, stamp duty, commodity transaction tax etc)

CONCLUSION:

There are many other compliances which the company or business have to follow. It is mandatory for all as it prevents the business or company from any kind of unfair trade practices. Over the past years, the rules and regulations for governing the company or business are liberalized and simplified. There are many other compliances which the company have to adhere to it. Failing to do so shall impose heavy penalty and imprisonment of the directors.



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