Since 1991, India has followed the policy of LPG- Liberalisation, Privatisation, and Globalisation. These are three important reasons for the evolution of the Legal regime in the task of regulating businesses. India had to do so for various reasons, namely:-
- Now that the entry and exit barriers were removed for most of the businesses, a need was felt for some laws to regulate the functioning of these businesses to safeguard the consumers.
- While the Government was selling shares of its own entities, it had the onus to at least make sure that the work being done under its own nose was legitimate, and that what would be done under the future owners is too.
- With Globalisation, there was an increase in exports and imports, trade activity, flow of Foreign Investment in the country, etc. To ensure that our own country’s economy does not get crushed by the competition faced by the entry of new firms, a proper Legal system had to be put to use.
Some of the laws and legislations that came up are:
- Foreign Trade (Development and Regulation) Act, 1992
- Foreign Exchange Management Act, 1999
- Information Technology Act, 2000
- Competition Act, 2002
- Limited Liability Act, 2008
- Companies Act, 2013
Non-compliance implies failure to comply with the rules or laws laid down to regulate businesses. Corporate compliance involves adhering to a wide range of laws and standards designed to protect a business’ agents, employees, and other stakeholders. From obeying safety guidelines to following standards for the payment of wages and pensions, businesses must comply with local, state, and central laws at all times.
While the main focus of every enterprise is to earn maximum profit, it becomes of little significance if the government compels you to dissolve your company for failing to comply with legal requirements. Because of the vast number of government guidelines for compliance, it can be easy for business owners to find themselves in violation, leaving their companies open to penalties and even dissolution. Having a complete and thorough understanding of corporate compliance is crucial to protecting your business in the years to come. If you do not, it is feared you might fall victim to some of these consequences:
- Burdened with lawsuits
If you violate any law or do not conform to some regulation concerning your business, remember a Legal Action will follow. Lawsuits not only involve waste of money but also precious time and efforts of the business. We have examples of Vijay Mallya of United Spirits Ltd., and Subrato Roy of the Sahara Group, etc. Lawsuits tarnish the image of your company reducing the trust factor of the stakeholders in the future of the company. Powerful Lawsuits may even cause the company to dissolve.
- Scrutiny by Government officials
Regulatory action can hurt the share price of a firm and damage its relationship with investors. Additional regulatory powers could also now result in firms being required to increase liquidity or capital, putting them at a disadvantage to their more compliant peers.
- Monetary costs
The operational consequences of non-compliance are expensive and disruptive. The increased cost of recruiting and retaining high-quality compliance resources and implementing past business reviews and customer redress programs may require costly third parties or skilled persons.
How to Protect Your Business From Non-Compliance Claims?
Compliance requirements can be complex, and business owners may not always be fully educated about the latest rules and regulations. If you’re concerned about your company’s compliance status, consider hiring an expert like volody.com to protect your business’s legal and financial standing. After all, when it comes to non-compliance issues, ignorance of the law is no defense.
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volody is a leading software provider to Listed Companies and Practicing professionals like Chartered Accountants, Company Secretaries, and Lawyers. volody uses cloud-based technology to provide the best new-age software for automation and compliance management.