Legal Aspects for the new Entrepreneurs

Dr. Ramappa

Basic Knowledge of laws helps

To be familiar with regulations To make out of court settlements through civil actions To take preventive measures to keep his assets To design products, product packaging, writing

advertisements and distributing pamphlets To obtain property rights like patents, trademarks or copyrights for himself and build valuable assets To achieve better bargaining power or income or royalties for his assets To be a better negotiator in contract finalisation To protect one own ideas Not to infringe on others properties

Legal Aspects
They reflect the policy framework and the mind

set of the Governmental structure of that country. They ensure that every company is functioning as per the statutory framework of the country. It is necessary for efficient and healthy functioning of the organisation and helps it to know about the rights, responsibilities as well as the challenges that it may have to face.

Few Essential laws

The most important law which regulates all

aspects relating to a company is the Companies Act,1956. It contains provisions relating to

Formation of a company,

Powers and responsibilities of the directors and

managers, raising of capital, holding company meetings, maintenance and audit of company accounts, powers of inspection and investigation of company affairs, reconstruction and Amalgamation of a company and even winding up of a company.

Few Essential laws

The Indian Contract Act,1872, is another legislation

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.

Other major laws in India

The other major legislations are:-

The Industries (Development and

Regulation) Act 1951; Trade Unions Act; The Competition Act, 2002; The Arbitration and Conciliation Act, 1996; The Foreign Exchange Management Act (FEMA),1999; Laws relating to Intellectual Property Rights; as well as laws relating to labour welfare.

The Industries (Development and Regulation) Act 1951

Who Require Licence Every existing industrial undertaking (Not being Central Govt.) in the private sector require licence. When Registration is not Necessary 1. Small Scale Industry 2. Otherwise exempt from the license 3. Not cover in definition of Factory 4. 100%EOU/SEZ

When is Licence Required

1. Licence for manufacturing of New Articles 2. Licence for carrying on Business without

Registration 3. Licence of New undertaking 4. Licence for carrying on business after the revocation of certificate of registration 5. Licence for change in location Power of IDRA Power of Inspection To take over the management of the Industrial Undertaking Give order for control the price and

Power of Central Government after Investigation Sec-16

fix the standard of production

to control the price

to take such step for development of the

undertaking. prohibit any practice which reduce there production

Industrial Licence is compulsory

Alcoholic drinks

Cigar and Cigarettes of tobacco

Defence equipment Hazardous chemicals

Drugs and pharmaceutics

Trade Unions Act;

Development of modern industry in Western

countries traced back to the 18th century. In India commenced from the middle of the 19th century. The first organised Trade Union in India named as the Madras Labour Union was formed in the year 1918. Similarly, entrepreneurs also formed their organisations to protect their interests. In 1926, the Trade Unions Act was passed by the Indian Government. The Act gave legal status to the Registered

Trade Unions Act;

These registered Trade Unions (Workers &

Employers) are required to submit annual statutory return to the Registrar regarding their membership, General Funds, Sources of Income and Items of Expenditure and details of their assets and liabilities, which in turn submit consolidated return of their state in the prescribed proformae to Labour Bureau. The Act gives protection to registered trade unions in certain cases against civil and criminal action.

The Competition Act, 2002

Competition is an amalgam of factors that

stimulate economic rivalry Is a tool to mount market pressure to penalise laggards and to reward the enterprising
COMPETITION POLICY - GOALS

is an amalgam of factors that stimulate

economic rivalry efficiency in production and allocation of goods and services innovation and adjustment to technological change sustained economic growth
(MONOPOLIES AND RESTRICTIVE TRADE PRACTICES

Laws relating to Arbitration & Conciliation

Domestic Arbitration
It is defined as an alternative dispute resolution

mechanism in which the parties get their disputes settled through the intervention of a third person and without having recourse to the court of law. It is a mode in which the dispute is referred to a nominated person who decides the issue in a quasijudicial manner after hearing both sides. Generally, the disputing parties refer their case to an arbitral tribunal and the decision arrived at by the tribunal is known as an 'award.

Laws relating to Arbitration & Conciliation

International commercial arbitration

' means "an arbitration relating to disputes

arising out of legal relationships, whether contractual or not, considered as commercial under the law in India and where at least one of the parties is:An individual who is a national of, or habitually resident in, any country other than India; or ii. A body corporate which is incorporated in any country other than India; or iii. A company or an association or a body of individuals whose central management and control is exercised in any country other than
i.

Laws relating to Arbitration & Conciliation

Conciliation is defined as the process of

amicable settlement of disputes by the parties with the assistance of a conciliator. It differs from arbitration in the sense that in arbitration the award is the decision of the third party or the arbitral tribunal, while in the case of conciliation the decision is of the parties which is arrived at with the mediation of the conciliator.

Laws relating to Arbitration & Conciliation

It repealed the three statutory provisions for

arbitration:(i) the Arbitration Act, 1940; (ii) the Arbitration (Protocol and Convention) Act, 1937; and (iii) the Foreign Awards (Recognition and Enforcement) Act, 1961.

Laws relating to Intellectual Property Rights (IPRs)

Intellectual property(IP) is the creation of human

intellect. It refers to the ideas, knowledge, invention, innovation, creativity, research etc, all being the product of human mind and is similar to any property, whether movable or immovable, wherein the proprietor or the owner may exclusively use his property at will and has the right to prevent others from using it, without his permission. The rights relating to intellectual property are known as 'Intellectual Property Rights.

Intellectual property rights are customarily divided into two main areas:1, Copyright and rights related to copyright: the rights of authors of literary and artistic works

(such as books and other writings, musical compositions, paintings, sculpture, computer programs and films) are protected by copyright. Also, protection is granted to related or neighbouring rights like the rights of performers (e.g. actors, singers and musicians), producers of phonograms (sound recordings) and broadcasting organizations.

Intellectual property rights are customarily divided into two main areas:2, Industrial property, which is divided into two main areas: the protection of distinctive signs, in particular

trademarks (which distinguish the goods or services of one undertaking from those of other undertakings) and geographical indications (which identify a good as originating in a place where a given characteristic of the good is essentially attributable to its geographical origin). Other types of industrial property are protected primarily to stimulate innovation, design and the creation of technology. This category includes inventions (protected by patents), industrial designs

Licensing
Defined as contractual agreement between two

parties where one party has property rights over some information, processes or know-how or technology agrees to give its rights for use of the said intellectual property in return for a royalty or a fee. The licenser is the holder of the intellectual property who in turn gives the rights for use of such IP to a licensee against payment of royalty or specified sum. The licensing helps for growth of business in various countries without actually making any investment in many countries or having experience in those overseas markets.

Product Safety
Product safety and product liability are

responsibilities of the entrepreneur for his new venture to meet the legal requirements of the new product being introduced. An entrepreneur should follow procedures and testing methods so that the product is safe and meets statutory requirements. The product liability generally fall in the following categories:
I.

Misrepresentation: the quality content or manufacture of the product be represented properly to avoid the legal cases of misrepresentation in packing and advertising.

Product Safety
II.

Warranty: if the product does not perform for which it was purchased. There may be warranty issues. The customers or the consumers be warned if there are any possible hazards in use of the product.

III. Negligence: may occur at any stage of the

production such as raw-materials, marketing, quality checks, falsification and the like.

Key Regulations
The most important regulation relates to the

environment.
The environmental regulatory requirements

envisage a wide legislative framework covering every aspect of environment protection. Broadly, it includes the emission standards for air, noise, water, etc. Separate set of laws for emission of hazardous wastes have also been enacted. Every industry has to abide by these guidelines and parameters for environmental protection.

Key Regulations
An organization for its smooth and effective

functioning, must ensure health and safety of its employees. The major legislations relating to Occupational Health and Safety in India are: the Factories Act, 1948; the Mines Act, 1952 and the Dock Workers (Safety,

Health & Welfare) Act, 1986. The Directorate General of Mines Safety (DGMS) and the Directorate General of Factory Advice Service and Labour Institutes (DGFASLI) are the two field organisations of the Ministry of Labour and Employment in the area of occupational safety and health in mines, factories and ports.

Key Regulations
the Government of India has taken steps like,

announcing a competition policy, enacting Competition Act, 2002 and setting up of Competition Commission of India,
in order to ensure a healthy and fair competition in

the market economy. These aim to prohibit the anti-competitive business practices, abuse of dominance by an enterprise as well as regulate various business combinations like mergers and acquisitions.

Key Regulations
For regulation of the export and import of

goods and services an entrepreneur has to abide by the Foreign Trade (Development and Regulation) Act, 1992 and the EXIM policy announced by the Government from time to time.

Laws relating to Doing Business Abroad

An entrepreneur while expanding and growing

his/her business abroad must take into account the basic legal framework of the particular foreign country as well. It is necessary for him/ her to abide by such laws and regulations in order to ensure efficient and healthy functioning of the organisation and face the various challenges that he/ she may encounter abroad.

Laws relating to Doing Business Abroad

In order to encourage capital inflows and provide safe

business environment for all investments abroad, many countries have entered into bilateral investment treaties or agreements. Bilateral Investment Promotion and Protection Agreement (BIPA)
which is defined as an agreement between two countries

(or States) for the reciprocal encouragement, promotion and protection of investments in each other's territories by the companies based in either country (or State). These bilateral agreements have, by and large, standard elements and provide a legal basis for enforcing the rights of the investors in the countries involved. The GOI, so far, signed BIPAs with 82 countries out of which 72 BIPAs (as on July 2012) have already come into force and the remaining agreements are in the process of being

Laws relating to Doing Business Abroad

The most important law which regulates all

foreign exchange transactions including investments abroad is the Foreign Exchange Management Act (FEMA),1999.
It is an investor friendly legislation which aims to

facilitate external trade and payments as well as promote an orderly development and maintenance of foreign exchange market. Under the Act, Reserve Bank of India (RBI) has been authorised to frame various rules, regulations and norms pertaining to overseas investments in consultation with the Central Government.