9 reasons why you should set-up a Compliance Framework for your organisation

Dear Professional Colleague:

I am sure that you will agree with me that the Compliance environment in India seems to suddenly have caught momentum.

Many old laws are being repealed to give way to the new age laws like Companies Act, 2013 (CA2013), Prevention of Sexual Harassment of Women at Workplace Act, Maternity Benefit (Amendment) Act, Model Shops and Establishment Regulations, GST et al. There are also advanced discussions on revamping the labour laws to make them modern and contemporary.

The introduction of a plethora of new laws makes it essential for companies to not only comply with the provisions of the Act diligently but also to ensure that the Company institutes a proper mechanism for compliance with all applicable laws.

Here’s why you should seriously look at setting-up a proper Compliance Framework:

  1. Increased Complexity: While the tone of the nation is towards e-Governance, Self Governance and Ease of doing business, the laws are getting stricter and the monitoring of the same by the government is becoming smarter. Ignorance of law is no excuse. E-Governance is enabling the government to process data, run queries and issue thousands of show-cause notices – all at just one click. Key Message: Comply or Explain!
  1. Increased Penalties: The Companies Act itself has increased penalties in multiples for non compliance of the provisions which shall range from INR 5 Lacs to 25 Lacs on the Company and INR 1 Lac to 5 Lacs on the Officer in Default. Similarly, Non Compliance of Foreign exchange laws, Competition laws, Tax Laws etc. can easily cost the Company a few lacs or crores. The penalties also take the form of interest, continuing penalties as well as are ad- valorem i.e. depend upon the amount involved.Key Message: Comply or face penalties!
  1. Imprisonment: More than 50 Sections in the Companies Act contain provisions relating to imprisonment of Directors and Officer in Default, in case of any non- compliance on the part of such Director or Officer in Default. Similarly, there are umpteen imprisonment provisions in Foreign Exchange Laws, SEBI Regulations, Tax Laws, Labour Laws, Environment Laws & several other Business and Economic Legislations.
  1. Cancellation of License to do Business: Apart from increasing penalties, almost all the new laws like GST, Information Technology Act, Prevention of Sexual Harassment Laws etc. carry a potential threat of cancellation of license to do business.
  1. Mandatory Compliance Reporting to the Board: As per Section 205 of CA2013, one of the key functions of the Company Secretary include reporting to the Board of Directors about compliance with the provisions of Companies Act and all other laws applicable to the company. Key Message: Board is accountable for Compliances.
  1. Directors duties and responsibilities: As per Section 166 of CA2013, the directors are duty bound to ensure compliances and as per Sec 134 the directors certify as part of the Directors Responsibility Statement in the Annual Board’s Report that they have devised proper systems to ensure compliance with the provisions of all applicable laws and, that such systems are adequate and operating effectively.
  1. Liability of Non Executive or Independent Directors: As per Sec 149 of CA2013, Directors are liable for any act or omission which occurs with their knowledge attributable through Board Processes or with their consent or connivance or where they did not act diligently. All Directors may be liable to the Company for a loss that may arise from an unconsidered failure of the Board.
  1. Disqualification of Directors: The obligations and duties upon the Directors for not complying with the provisions diligently can lead to disqualification of such Director for a period of 5 years from the Board of all the companies besides having personal liability for penalties.
  1. Fraud: As per Sec 447 & 448 of CA 2013, any willful mis-statement, mis-representation, concealment of facts and figures in report, return, form, certificate is treated as fraud and may be penalized up to 10 years of Imprisonment and 3 times the amount involved.

We, at eMinds Legal, have pioneered COMPLINITY Governance, Risk and Compliance Software which can help you to manage the Compliances for your organization easily and effectively.

We have helped 100s of Companies set-up their Compliance Frameworks.

Happy to help !




Sumit Pahwa

Co-founder & Partner, eMinds Legal LLP

Simplifying Law

EA Mobile: 98733 02025


Compliance Software by COMPLINITY

Manage your Compliances, Contracts, Litigation, Documents, Legal Advisory, Internal Audit and Internal Financial Controls through Complinity Governance, Risk and Compliance Software.

Call now at 98114 06675 for a scheduling your free online demo or leave your contacts at the above link and we will get back to you !


Tags: ComplianceCompliance FrameworkCompliance ManagementRegulatory compliance

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About Sumit Pahwa

Sumit Pahwa | Partner

A Corporate Lawyer & Company Secretary, Sumit has over 17 years of experience in dealing with the Corporate Legal and Compliance issues of small, medium and large corporates and is the founder partner of the law firm “eMinds Legal”, a Corporate Law Firm based in Gurgaon specialising in Corporate Secretarial, Corporate Legal and Compliances.

Sumit is an expert in Corporate Laws, Governance, Risk & Compliance and has independently led investigations related to Sexual Harassment, Fraud, Cybercrime and whistle blower cases.

Sumit is also the Lead Author of “Corporate Law Referencer” - a leading book on Companies Act, 2013 and LLP Regulations and published by Lexis Nexis.

Sumit is a regular speaker at the Institute of Company Secretaries of India, various management colleges and several small and large corporates on Corporate Laws, Sexual Harassment Laws and Compliances.

Sumit leads the Corporate Legal vertical at eMinds Legal and is supported by a strong team of Corporate Lawyers at eMinds Legal who advise corporates for their routine corporate legal requirements.

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