Compliance Essentials for Indian Start-ups
For the past few years, Start-ups have been the ‘flavor of the season’ in Indian Market. The years from 2007 to 2015 saw the rise of many homegrown entrepreneurs, making their mark in the international start-up ecosystem. With statistically backed predictions promising India to be one of the largest economies after China and the USA in the coming decades, to investors, India is a booming and UN-exploited consumer-driven market with an exponential growth graph. Further, with multiple proactive initiatives by the Indian government, entrepreneurs (start-ups, eminently!) are sure to thrive and prosper.
Compliance issues are mandatory and tricky to maintain. The World Bank’s “Ease of Doing Business 2018” report discusses the challenges that small to midsized businesses face. It highlights that businesses following rules are like rock stars. They call them “compliant businesses.” The business compliance regulations in India need to include permission for location registration. They also need permission for construction and electricity. They should also cover infrastructure and cross-location dealings. This includes enforcing and maintaining contracts, labor regulations, taxation, and investment. The norms of “Companies Act 2013” track these regulations in India. We amended them as ‘New Companies Act 2017’. There are countless parameters for a complete complaint. But a start-up must follow the following compliance issues to grow into a successful business:.
Revenue and Tax norms Though critical to understand, it is a mandate to maintain taxation and Goods and Service Tax (GST) policies both on a national and state level. Yet, taxpayers can file and save GST invoices on the GST website. For tax compliance, you must register with GSTN. You must also link your Aadhar to it. You must also link your Permanent Account Number (PAN) to it. You must also link your Tax Collection and Deduction Account Number (TAN) to it. Furthermore, businesses must enroll for Goods and Services Tax (GST). They must do so when their annual turnover surpasses either INR 20 lakh or INR 40 lakh. It depends on the applicable threshold.
You must register your business as an LLP, PVT, OPC, or corporation with the Registrar of Companies. The type of business determines which registration is required. The vendors and customers you engage with determine your enterprise’s registration category.
Well-documented Service Level Agreement (SLA) – To avoid legal issues, you must have a well-written contract with each vendor and client. These SLAs must also follow the New Companies Act. They must include the time frame and guidelines for each contract.
Compliance with Employment and Labor Laws – The Indian government sets up norms safeguarding employees’ interests. So a business must ensure
- Healthy working hours and conditions
- Maternity benefits and anti-women’s harassment rules
- Framing payrolls under “Workmen’s Compensation Act, 1923’’
- Responsibility and Rights of trade unions
- Providing insurance, gratuity, PF and bonus
- Rules of Regulation and Abolition Act, 1970 and employment downsizing
Cyber and IT Law Compliant – Nowadays, businesses consider IT a pillar of their operations. This is due to the growing use of technology in every type of business. Businesses must follow cyber laws to protect against cyber theft. It’s part of regulatory norms. It must encompass the following issues:.
- Protecting Data and Consumer Privacy
- Cyber Crime
- Digital and Electronic Signatures
- Protection of Intellectual Property
Compliance rules for Management– The top tire management must account for all sorts of ethical and legal conducts. If authorities discover non-compliance, the director faces penalties. They will also imprison them. Compliance norms in India mandate that at least one board member is an Indian citizen. Or, they should have stayed in India for 182 days the previous financial year.
Key to Successful Entrepreneurship – Most budding entrepreneurs intend to grow. They focus their energies and resources on management and production issues. They ignore regulatory norms. Remember, you must follow the laws of micro and macroeconomics. They regulate every market and business. This maintains harmony between investors, your business, and customers.
Tips for making compliance easier
Navigating compliance may seem overwhelming. But, startups can simplify the process in various ways:
- Understand Local Laws: Research the laws and regulations in the jurisdiction where the startup has incorporated. Comprehend and adhere to them. This involves obtaining required licenses, permits, and registrations. It also involves complying with tax and labor laws. Seek advice from professionals like company secretaries, lawyers, and chartered accountants. It ensures compliance with all applicable laws.
- Develop a Compliance Plan: Create a comprehensive compliance plan with set deadlines, tracking it to ensure timely adherence to relevant laws. These plans often involve reviewing the company’s processes. This leads to increased efficiency, reduced waste, and lower costs.
- Stay Informed: Founders should request updates from professionals about upcoming compliance requirements. This foresight enables effective planning, preventing any missed deadlines.
- Guidelines from Professionals: Seek a list of Do’s and Don’ts from professionals to understand best practices and potential pitfalls in compliance.
- Transparent Communication: Maintain open communication with professionals, providing them with all necessary details and data. This facilitates the ongoing preparation of documents. It ensures that compliance is a continuous, streamlined process.
Data Room Maintenance: Establish and maintain a data room in collaboration with professionals and the client company. This ensures a seamless flow of information. It contributes to the smooth operation of compliance activities.
