legal aspects for the new entrepreneurs1
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Dr. Ramappa
Legal Aspects for the new
Entrepreneurs
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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
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Legal Aspects
They reflect the policy framework and the mindset 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.
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Few Essential laws
The most important law which regulates allaspects 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 ofcompany affairs, reconstruction and
Amalgamation of a company and even winding up
of a company.
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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.
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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.
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The Industries (Development and
Regulation) Act 1951
Who Require LicenceEvery existing industrial undertaking (Not being
Central Govt.) in the private sector requirelicence.
When Registration is not Necessary
1. Small Scale Industry
2. Otherwise exempt from the license
3. Not cover in definition of Factory4. 100%EOU/SEZ
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When is Licence Required
1. Licence for manufacturing of New Articles2. Licence for carrying on Business without
Registration
3. Licence of New undertaking
4. Licence for carrying on business after therevocation 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
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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
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Industrial Licence is
compulsory
Alcoholic drinks
Cigar and Cigarettes of tobacco
Defence equipment
Hazardous chemicals Drugs and pharmaceutics
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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 theirorganisations to protect their interests. In
1926, the Trade Unions Act was passed by
the Indian Government.
The Act gave legal status to the Registered
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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.
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The Competition Act, 2002
Competition is an amalgam of factors thatstimulate economic rivalry
Is a tool to mount market pressure to penaliselaggards and to reward the enterprising
COMPETITION POLICY - GOALS
is an amalgam of factors that stimulateeconomic rivalry
efficiency in production and allocation ofgoods and services
innovation and adjustment to technologicalchange
sustained economic growth
(MONOPOLIES AND RESTRICTIVE TRADE PRACTICES
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Laws relating to Arbitration &
Conciliation
Domestic ArbitrationIt 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 quasi-
judicial manner after hearing both sides.
Generally, the disputing parties refer their case toan arbitral tribunal and the decision arrived at by the
tribunal is known as an 'award.
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Laws relating to Arbitration &
Conciliation
Conciliation is defined as the process ofamicable 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.
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Laws relating to Arbitration &
Conciliation
It repealed the three statutory provisions forarbitration:-
(i) the Arbitration Act, 1940;
(ii) the Arbitration (Protocol and Convention)
Act, 1937; and
(iii) the Foreign Awards (Recognition and
Enforcement) Act, 1961.
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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 theproduct 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 othersfrom using it, without his permission.
The rights relating to intellectual property are known
as 'Intellectual Property Rights.
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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, computerprograms 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 ofphonograms (sound recordings) and broadcasting
organizations.
I ll l i h
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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 ofone 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
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Licensing Defined as contractual agreement between two
parties where one party has property rights oversome information, processes or know-how ortechnology agrees to give its rights for use of the
said intellectual property in return for a royalty ora fee.
The licenser is the holder of the intellectualproperty who in turn gives the rights for use ofsuch IP to a licensee against payment of royaltyor specified sum.
The licensing helps for growth of business invarious countries without actually making anyinvestment in many countries or having
experience in those overseas markets.
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Product Safety
Product safety and product liability areresponsibilities of the entrepreneur for his new
venture to meet the legal requirements of the new
product being introduced.
An entrepreneur should follow procedures andtesting 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.
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Product Safety
II. Warranty: if the product does not perform forwhich 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.
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Key Regulations
The most important regulation relates to theenvironment.
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.
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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.
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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 inthe market economy.
These aim to prohibit the anti-competitive business
practices, abuse of dominance by an enterprise as
well as regulate various business combinations likemergers and acquisitions.
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Key Regulations
For regulation ofthe export and import ofgoods 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 totime.
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Laws relating to Doing Business
Abroad
An entrepreneur while expanding and growinghis/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 lawsand regulations in order to ensure efficient and
healthy functioning of the organisation and face
the various challenges that he/ she may
encounter abroad.
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Laws relating to Doing Business
Abroad
In order to encourage capital inflows and provide safebusiness environment for all investments abroad, manycountries have entered into bilateral investment treatiesor agreements.
Bilateral Investment Promotion and ProtectionAgreement (BIPA) which is defined as an agreement between two countries
(or States) for the reciprocal encouragement, promotion andprotection 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 ofthe 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 forceand the remainin a reements are in the rocess of bein
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Laws relating to Doing Business
Abroad
The most important law which regulates allforeign exchange transactions including
investments abroad is the Foreign Exchange
Management Act (FEMA),1999.
It is an investor friendly legislation which aims tofacilitate 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) hasbeen authorised to frame various rules, regulations
and norms pertaining to overseas investments in
consultation with the Central Government.