Corporate Law

10 Laws For Women Entrepreneurs

Equality is not merely limited to equality of rights but also equal opportunity to enjoy such rights and practice them. The societies of the world are trying hard to bridge the gap between gender and the differences in opportunities available to them but still, there are various steps yet to be taken.

When it comes to challenging the role of entrepreneurship which can also be called the building block of human economics and development, women are seen to be lagging behind their male counterparts. The reason could range from societal issues to tradition or economies but we need to understand the legal aspect of the problem.

Firstly we would know what are the laws that are present currently in India that a women entrepreneur should know about and the changes that we need? Take a look at laws for women in business.

1) Equal Pay For Equal Work

It has been the most basic of all the right that the government of any state would be trying to secure i.e. “equal pay for equal work.” With the advent of the industrial revolution women started working in the factories together with males but with a lower payment for the same amount of work owing to the dogma of them being less efficient or physical weak in terms of employment that requires physical labor despite clearly showing no difference in work carried on by both the sexes.

This ideology continues even till now and as a result, we see a gap in the earnings of the two genders however the legislation is already there in this regard known as the Equal Remuneration Act 1976 which clearly states under Section 4 that no discrimination in payment between men and women doing same nature of the job and it caused all establishment to raise the wages of women at par with men as a reduction in wages was prohibited. This law still holds well in modern times.

Apart from this specific legislation our Constitution too give the Fundamental Duty of the state to secure this equal payment for equal work vide Article 39. However, this practice is still to be followed in full fledge as in the non-organized sector we still see the exploitation of laborers and workers so there is no doubt that equal pay would be a farfetched reality for women working there.

Also, it’s not only about the non-organized sector even in the glamorous field of cinema and sports we see the huge difference in pay structure. Any Women entrepreneur therefore must keep in mind this law to secure the right of other women in the field and general development thereof.

2) Equal Opportunity Equal Pay

Same as equal pay for work the same Equal Remuneration act, of 1976 talks about giving equal opportunity to males and women for securing employment, and no discrimination in recruitment is to be made as per Section 5 of the very act.

The act was amended in 1987 to include “condition of service subsequent to recruitment such as promotions, training or transfer” thereby making the ambit wide enough to protect a women’s right not only at the time of appointment but at all subsequent stages so that it doesn’t lose the very essence for which it is drafted.

Indian Constitution again talks about a similar line of right in Article 16 that talks about equal opportunity in work in public offices which is an extended version of the Right to Equality but very well made out into another article to stress its importance. It is to be also made known to all women out there that non-compliance with these provisions would lead to penal consequences.

3) Sexual Harassment at work

In the year 1997 the Supreme Court through Vishakha v State of Rajasthan gave Vishakha Guidelines to be followed at the workplace to ensure the safety of women. These guidelines were removed from effect with the passing of the Sexual Harassment of women in the workplace (Prevention, Prohibition and Redressal) Act, 2013.

It provided the definition of sexual harassment for the first time together with a list of actions that will constitute an act of such harassment and prohibited such acts, especially by those in the workplace who exercise the power of authority over women which is common in organizational structure so as to save them from sexual exploitation whether it is public or private organization.

All working women should be aware of their rights in relation to such activity and therefore so does an entrepreneur.

4) Maternity benefits at work

The Maternity Benefit act of 1961 recently amended in 2017 provides for a period of 26 weeks of maternity paid leaves for women employees expecting their first two children. In comparison, it is very gracious from other nations where periods range from 8 to 17 weeks only.

An entrepreneur must know that this payment for 26 weeks in India is to be borne by the ‘employer only’ and not by the state or any other agency as in the case of France, Brazil, the USA, Canada, or Singapore. This could be a reason for the low selection of women in the first place, especially those who might expect their child in near future, seeing the cost to be borne by the organization for women employees with no work in return.

Government therefore should try to adopt a more balanced approach following the footstep of other country where insurance company and public fund also contribute for these payments borne.

5) Labour Laws

Labour laws are a must-know for all entrepreneurs and women must have a grasp over them too. These laws can be with relevance minimum wages, gratuity, PF payment, weekly holidays, maternity advantages, harassment, payment of bonus and so on. A start-up registered beneath the Start-up India program has the choice to finish self-declaration for nine labor laws within one year and acquire an exemption from the labor review.

The nine laws are as follows: the economic Disputes Act, 1947 The Trade Unit Act, 1926 Building and different Constructions Workers'(Regulation of Employment and Conditions of Service) Act, 1996 the economic Employment (Standing Orders) Act, 1946 The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 The Payment of Gratuity Act, 1972 The Contract Labour (Regulation and Abolition) Act, 1970 The Employees & Provident Funds and Miscellaneous Provisions Act, 1952 The Employees & State Insurance Act, 1948.

Thus to continue with the exemption, the start-up will file the self-declaration for the second and third year conjointly. Also, if a start-up options a well-defined worker policy, then it might give a footing over different start-ups. This policy may facilitate in talent acquisition and retention. Moreover, this may boost the employee’s morale and overall productivity.

6) Company Laws

Company Act in general must be known by all entrepreneurs. Company law is the key for establishment, setting up and closure of business. An entrepreneur would generally be the promoter of the company therefore must have a good hold of Company law so women entrepreneurs should also know this.

The new Company act, 2013 vide section 149(1) has made it compulsory for all listed companies to have at least 1 woman director in its board of director. This must be done within 6 months of date of incorporation of such companies and therefore is an essential piece of law that must be kept in mind by all the entrepreneur out there, especially women.

This was done in order to increase women participation at a higher level and boost the decision making capability of women. Although it has resulted in no significant development as corporations are simply appointing acquaintances as rubber stamps to comply with the provision which must be amended to that effect to include them as independent directors outside the company or relation.

7) Tax Laws

Till the year 2012 there was a difference in the tax slab over income between men and women but it was removed afterwards. However, we still have some concessions for women in other taxes whether it is property tax rebate, stamp duty concession, the lower interest rate on home loans, credit subsidy for houses, etc.

These will benefit women entrepreneurs and therefore must be known to them. A clear understanding of tax law both direct and indirect including the Goods and Services Tax should be known to a women entrepreneur.

8) Contract Laws

Contracts laws are effective to make positive use of the conventional functioning of any project or to supply recourse simply just in case of non-performance Indian Contract Act, 1872, Negotiable instrument act, Partnership Act, Sale of Goods Act etc. are a must-know for entrepreneurs.

NDAs or Non-Disclosure Agreement is another vital contract that a startup may notice helpful. Any startup discusses its ideas with sort of folks from the investors to the employees to customers and because of this, there's a large chance of leakage of the ideas that is wherever NDAs inherit play. This prevents the data from spreading not solely from the folks within however conjointly with the people outside the organization.

9) Intellectual Property Laws

If you have a secret sauce or an algorithmic program then it’s important that you just simply ought to take a note of this law. This law helps you secure your ideas from getting exploited commercially by any other player in the market. By getting a patent of your product or copyright over your work and thus securing Intellectual property right over your idea you simply protect yourself from any future consequences.

In line with this, you may want to patent a trademark than offers you right over commerce beneath a selected name. All this comes beneath property rights.

A Start-up will leverage the ‘Scheme for Start-ups property Protection’ (SIPP) beneath the ‘Start-up India program’. This theme was acknowledged to safeguard and commercialize your property. The facilitators of the theme are impanelled by the Controller General of Patents, logos and class. This panel of facilitators conjointly facilitate the start-up by providing consultative services, aiding in patent filing and disposal.

10) Winding up of Business

It’s not possible that always everything will work out as you planned. With less than 1 percent success rate of Startups, it is but natural that many companies would be forced to shut down its operation. But as a company or any business entity is a legal person it, therefore, follows a legal process even for its closure.

Company law deals with this part as well however a code of Insolvency and Bankruptcy is there for declaring a company bankrupt as per legal sanctions and moving forward with liquidation. The liability of individuals attach to it and the share they might get all depends on this law and therefore women entrepreneurs should also know this very piece of legislation for the long run and success.

Apart from the above-mentioned law, an entrepreneur is expected to have certain basic ideas of the Arbitration and Conciliation Act and Information Technology act. Moreover, a successful entrepreneur is one who knows how to derive maximum benefit from the dynamic societal changes and therefore should always be aware of what is happening around him and in the business environment in which he is working.

Since laws are the guiding principle behind the working of society whether it is a business organization or the economy as a whole, a basic idea of all such laws is a must for them. They need not be an expert in it but surely shouldn’t be absolutely ignorant about it.

---

Tags: labour laws, equal pay act, labour relations act, new labour law, female entrepreneurs, women entrepreneurs, function of women entrepreneurs, role of entrepreneurship, equal pay for equal work, sexual harassment at work

Failed to Perform Your Contractual Duties?

The lockdown due to COVID-19 has brought business activity to a grinding halt, prompting companies to declare force majeure. But, from a legal standpoint, how important is it to include this clause when you enter into a contract with several parties?

The world has hit the pause button. But contractual obligations must be fulfilled unless something extraordinary happens. Given the unexpected nature of the pandemic, businesses are asking whether that “something” is COVID-19? The answer lies in the language of contracts.

The concept of force majeure — a ‘superior force’ — was derived from French civil law and later embodied under Sections 32 and 56 of the Indian Contract Act, 1872. This provision provides for relief to parties when a contract becomes impossible or onerous to perform due to circumstances beyond the control of parties.

Common force majeure events include floods, fire, an act of God or natural disasters, war, labour strikes, epidemics, pandemics, or simply an event beyond the control of parties. However, the extent to which it saves you from consequences of non-performance is contingent upon the language of the contract. Whether a force majeure clause covers a pandemic depends on the language of contracts, which may be broad or restrictive as agreeable to the parties of a contract.

Now, a contract may specify all events that would trigger a force majeure clause, or may loosely define force majeure event as “an event beyond the parties’ control”, leaving room for interpretation. Given the extraordinary circumstances of the emergence of COVID-19, most contracts may not have it listed directly as a force majeure event. In such a scenario, companies must look for relevant language such as ‘disease,’ ‘epidemic,’ ‘pandemic,’ ‘quarantine,’ or ‘acts of government,’ which may be interpreted to include the COVID-19 outbreak.

However, the provision does not provide comprehensive, absolute protection against any non-fulfillment of contractual obligations. So, when public health crises or pandemic events such as the COVID-19 are not explicitly included in the agreements — as is most commonly observed — creative arguments and legal advocacy will be critical in creating the best interpretation of the provision to support a force majeure defence.

Other key pointers while invoking the force majeure clause are as follows: Companies also have the ‘duty to mitigate’ effects arising from such events by taking proactive steps and exercising reasonable diligence. The Indian courts have held, time and again, that the burden of proof for a force majeure defence lies with the party asserting it.

Furthermore, if other factors lead to the party’s non-performance, then a force majeure clause may not be applicable. Alternate remedies to force majeure In contrast to force majeure clauses, parties may invoke other terms such as limitation or exclusion clauses, material adverse change clauses, escalation or price adjustment clauses and study its implications as stipulated under liquidated damages or predetermined compensation clauses in the event of non-performance of contractual terms.

However, a party’s ability to invoke other defences is contingent upon the language of the contract and interpretation of the courts. Further, a party can claim relief under Section 56 of the Indian Contract Act, 1872, commonly referred to as the Doctrine of Frustration.

The doctrine is applicable in cases where the occurrence of an event has made the performance of the contract to be impossible and beyond the control of the promisor — typically, death or incapacity of a party, a frustration by virtue of legislation, or material change of circumstances leads to frustration of a contract. In the present scenario, unprecedented government orders arising from the COVID-19 pandemic —like the prohibition on public gatherings, curfews and travel restrictions — may give rise to a valid impossibility defence.

However, mere government regulation does not excuse non-performance by a party. Parties seeking an impossibility defence must exhaust all reasonable steps for performance before asserting impossibility under a contract.

What now?

Businesses must, in such unprecedented times, collaboratively work with counter-parties to reach a mutually beneficial solution before going down the adversarial route of litigation, arbitration and adjudication. However, if amicable discussions fail companies should assess their rights and liabilities in regards to force majeure, termination and dispute resolution under a fine lens and in due course renegotiate contractual terms to mitigate damages to avoid suffocation of monies involved in these commercial contracts.

Further, parties should assemble and retain all correspondences to insulate themselves from disputes arising in near future.

The pandemic has engulfed over 200 countries and restoration of normalcy appears to be a distant dream in India. Therefore, in a jurisdiction where words of a contract are sacrosanct with little to no intervention by the courts, a deep collaboration between parties to a contract with a shared objective of contractual performance, may be the way forward.

 

---

Tags: contractual duties, force majeure, language of contracts, force majeure clause, majeure, force majeure clause in contract, majeure clause, force majeure legal definition

SEBI Sandbox Policy – SEBI’s Innovation Sandbox Offers

British writer Arthur C Clarke once said, “Any sufficiently advanced technology is indistinguishable from magic.”

Since the advent of technology, human life has undergone considerable changes that may be perceived as nothing short of magic. We saw a transition from a barter system to a cash-dependent economy where citizens have further moved online for gold, savings, gift cards, loans, investments, etc.

This change can be attributed to the confluence of finance and technology, also known as FinTech, a term used to describe new technology that seeks to improve and automate the delivery and use of financial-services.

However, with the advent of technological innovations comes an array of problems, such as determining the legal liability of robo-advisors that provide automated, algorithm-driven financial planning services with little to no human supervision, enforceability issues of smart-contracts, ambiguous and loosely-worded data protection laws, etc.

It is in this backdrop that we need to look at the concept of a regulatory sandbox, and more importantly, at the SEBI Innovation Sandbox. This regulatory sandbox is intended to serve as a testing ground for new business models and technologies that benefit investors, markets and the economy at large.

The emergence of the first regulatory sandbox concept was in the United Kingdom in 2015. By 2018, the concept was adopted in many countries such as Australia, Malaysia and Singapore.

Rapid, unchecked growth in the FinTech industry necessitates the need for regulation while promoting innovation. Realizing this, the Securities and Exchange Board of India (SEBI) announced its approval of a regulatory sandbox for live testing of new products, services and business models by market players on select customers for a specified period of time, to ensure that the sandboxing environment has the minimum regulatory burden.

That said, no exemptions will be granted from existing principles of investor protection framework, know-your-customer (KYC) and anti-money laundering (AML) prescribed by SEBI.

Further, the SEBI lays down several eligibility criteria for testing a project, including a genuine need to test, direct benefits to customers, no risks to the financial system, to name a few. However, testing may not be permitted if the proposed FinTech solution is similar to those already being offered in the markets, or if the applicant has no intention to deploy the FinTech solution in India.

Once the eligibility criteria is met, the FinTech applicants are then given a testing ground for their new business models and are required to submit reports as prescribed by SEBI. Thereafter, concerned departments of SEBI may perform an initial evaluation of the sandbox applications and present their findings to a committee for final evaluation and confirmation. This process enables SEBI to gauge the readiness of the FinTech solution for the market.

While the Indian capital market participants have been early adopters of technology, the SEBI is of the view that adoption and usage of emerging financial technology can be a key instrument to further develop and maintain an efficient, fair and transparent ecosystem.

In fact, this new framework is likely to open a plethora of opportunities for the FinTech players in the securities and exchange market. SEBI’s Innovation Sandbox will help FinTech participants to test their solutions, foresee any hindrances and yet make a difference with innovative technologies. Hence, it allows the FinTech firms to bring their best to the table.

SEBI’s Innovation Sandbox might strike the right balance between encouraging emerging technological advancements and governing them accordingly. It is a step in the right direction by providing an environment of balanced innovation and regulation, which will enable India to emerge as a startup haven.

However, it is important to note that mere existence of a regulatory sandbox is not sufficient for multi-dimensional growth; implementation is the key. Although this appears to be a welcoming step towards encouraging innovation and technology in the financial sector, its effectiveness and success is largely dependent on its execution.

As rightly said by American author Simon Sinek: “What good is an idea if it remains and idea? Try. Experiment. Iterate. Fail. Try again. Change the world.”

---

Tags: innovation and regulation, sebi innovation sandbox offers, sandbox offers, sebi sandbox policy