Labour Laws then and now

The relics who work in the factories,the predominants who we see working by the construction sites and lower labour class that makes the raw material possible,these are the key group of workers  that help fasten the production of an economy.The primary set of people,and not only these,even the top mangerials who are the spinal chords of every manufacturing units,requires a courtroom that protects them from any sort of nuance.Who embellishes there working interest,hours and flexibility.

Hence to restore the interests of employers,Trade Unionism was first born in Great Britain,Later the movement felt its ignitions in India too.Its History can be explained into three periods-Period Prior to First World War , Period upto Independence,and Post Independence Period till now.In this Article we will be focusing majorly on the Post Independence Period,the laws that came into being,the issues faced in adherence of these laws,the challenges faced from those times till now,the changing norms and abolition of Laws in recent time due to the spread of COVID pandemic and recent commotion in the respect of the same.

 

There is always a struggle located at root level,that gets converted into the buoyant force to get itself noticed.There definitely has been certain struggles or mis-behaviours felt by the workers world-wide that led to the enforcement of such Labour Laws.One major concern comes from the fact of ever increasing Globalisation.It is clearly contributing to increased integration of labor markets and closing the wage gap between workers in advanced and developing economies, especially through the spread of technology.Due to lack of ample of jobs at villages or suburbs ,labourers migrate in search of work,and still companies were not restoring there wage standards,due to which they have felt themselves stuck in deep quagmire.The organisations were not flexible in timings and were not catering to the needs of the clients located at different time zones.Theses and many more were the key factors that has given birth to the enforcements of the Labour Laws.

 

Labour Law comes into play which connects workers,employing entities , trade unions and the government under the umbrella of certain global standards.Collective labour law relates to the tripartite relationship between employee , employer and union. Individual labour law concerns employees' rights at work also through the contract for work.

 

The entire adherence of the Labour Laws come with the courtroom that helps make the Global Labour Standards.Now,What are the Global Labour Standards,these are the standards that are stated in our laws,or prescribed by the International Labour Standards or those that are perceived by the Buyer.The ILO has made it obligatory to compete for a brighter future in the world of work and requires masses to understand and prophesize the drives that demands changes,and mend the laws already in operations,ensuring which,we as a team would be ready to respond to rapidly changing events.International Labour Standards has worked diligently and came up all the way long back in 1919 with the International Labour Standards which forfoldedly deals in promoting and restoring the oppertunities to labours to make them enjoy the decent and productive work in conditions of freedom,equity , security and dignity.The core labour standards have been crystalised to nine major issue based on the eleven conventions of the International Labour organization,the UN’s Universal Declaration of Human Rights and the Convention on Rights of the Child.These 9 major issues are  Social Accountability 8000 (SA-8000) Standards-No Child Labor,  No forced Labor,  Health and safety, Freedom of Association and Right to collective bargaining,Discrimination,  Discipline,  Working hours ,Compensation ,Management Systems.The entire standards revolve around these mark points which dictates  barring of the worker’s exploitation. 

 

As the standards have been made and marked,later masses felt the dearth of compliances to made to adhere to these standards.Therefore,in India, a company has to make a wide variety of compliances periodically.Labour Law Compliance is considered of great importance to any organisation having a business place in India.In this era of ulterior development,India is the most popular business landmarks of the world.The impact of corporate culture on the society is so substantial that even the laymen is now trying there hands on setting up there own business,and why not,our government has now emphasised aggressively over such provisions.Therefore, to regulate such setting up of businesses and corporate sector,amendments have been made in corporate laws of India from time to time.No matter whether the company is public or private; it has to adhere to the Indian corporate laws. The Compliance includes the Industrial Safety and Health,it deals with the proper and hygienic work environment for the employee that do not   harm the mental and physical well-being of its workers.The Industrial Relations that are to be maintained should not be in a vivacious form.The wages given to the workers should be adhered to the Wages Laws. The prohibition for Protection of Unorganised Labour should be mandated.There should be compliance and due diligence of the laws mentioned.Amongst these,the most important one to throw light at is the Wages Act.

 

Let us now skim through the most important Wage Code adhering to which an employer should treat their workers. With the growth of industries in India, problems relating to payment of wages to persons employed in industry took an ugly turn. The industrial units were riot making payment of wages to their workers at regular intervals and wages were not uniform. The industrial workers were forced to raise their heads against their exploitation.. The tensions were kept before the Royal Commission on Labour which was appointed in 1929.In 1933 the Payment of Wages Bill, 1933, was introduced in the Legislative Assembly and circulated for the purpose of-eliciting opinions.The Payment of Wages Bill, 1935 having been passed by the Legislative Assembly received its assent on 23rd April, 1936. It came on the Statute Book as THE PAYMENT OF WAGES ACT, 1936 (4 of 1936).It was enacted with a view to ensuring that wages payable to employed persons covered by the Act were disbursed by the employers within the prescribed time limit and that no deductions other than those authorised by law were made by them.Since then , when the enactment of this law has started,spectrum of amendments kept there way up to eradicate the issues that were felt over the years.The amendments were made and the Laws kept coming to keep pace with ever increasing demands and competition in this arena.

The Minimum Wages Act 1948,giving both the Central government and State government authority in fixing wages. The act is legally non-binding, but compulsory. Payment of wages below the minimum wage rate amounts to forced labour.

The Equal Remuneration Act, 1976 is done at two levels.The Act is being implemented by the Central Government in relation to any employment carried on by or under the authority of the Central Government or a railway administration, or in relation to a banking company, a mine, oil field or major port or any corporation established by or under a Central Act.

The Payment of Bonus Act, 1965 provides for the payment of bonus to persons employed in certain establishments, employing 20 or more persons, on the basis of profits or on the basis of production or productivity and matters connected there with.The minimum bonus of 8.33% is payable by every industry and establishment under section 10 of the Act. The maximum bonus including productivity linked bonus that can be paid in any accounting year shall not exceed 20% of the salary/wage of an employee under the section 31 A of the Act.

And now,the recent amendment has been made to ensure the proper restoration of interests of the workforce in the Form of The Code of Wages 2019,this was introduced in Lok Sabha by Ministry of Labour on July 23,2019.It seeks to reflect on the wage and bonus payment in all the industries,manufacturing units or trades.The Code replaces all the aforementioned laws stated above.The Code apply to all employees.  The central government makes wage-related decisions for employment such as railways, mines, and oil fields, among others.  State governments make decisions for all other employment. According to the Code, the central government fix a floor wage, taking into account living standards of workers.  Further, it may set different floor wages for different geographical areas.  Before fixing the floor wage, the central government obtain the advice of the Central Advisory Board and may consult with state governments. The Code prohibits employers from paying wages less than the minimum wages.The central or state government may fix the number of hours that constitute a normal working day.  In case employees work in excess of a normal working day, they will be entitled to overtime wage.

Although these standards and laws are made universal.But there exist some ground level reality that by default keep arising as these laws get practised by the masses.There exist some existential loopholes that are faced by the industries at large.The Approval that the factory needed to be get for the Industrial Safety , Health and Welfare are tedious. The entire blueprint that needs to come into account for the organisation's goals and culture ,  manpower planning and recruitment  and manpower outsourcing plans have to be made lucid enough to provide transparency.

 

Labour Law Compliance is an important pedestal for the businesses of all sizes. The fast pace of changing the laws and regulations have always represented a quagmire for the companies. Henceforth, failure to keep up with these dynamic rules can carry significant headaches. Let us just focus over certain issues as to what happens at the roots to enact the successful labour laws. One major concern comes from the fact of ever increasing Globalisation. It is clearly contributing to increased integration of labor markets and closing the wage gap between workers in advanced and developing economies, especially through the spread of technology.

Extension of due date for holding AGM due to COVID 19

Extension of due date for holding AGM

MCA has extended the time frame for conducting AGM by the companies, which are following Financial Year as 1^st January to 31^st December. The revised due date is September 30, 2020, instead of June 30, 2020. As per Companies Act, 2013, all the companies are required to conduct AGM within 6 months from the end of Financial Year (except 1^st AGM). The relief comes in response to several representations received by MCA from stakeholders with regard to difficulty in holding AGM due to COVID-19 related social distancing norms and consequential restrictions linked thereto.

Read Circular at-

http://www.mca.gov.in/Ministry/pdf/Circular18_21042020.pdf

COMPLIANCE CHECKLIST FOR HOLDING AGM THIS YEAR.

 

SECTION	ACTION
	MEETING OF THE BOARD
Section 173	Call and Hold a Board Meeting by giving a seven days notice to all the directors for finalization of Board Report and Financial Results.
	Make the following documents ready: 1.       AGM  Notice 2.       Board Report 3.       Statutory Auditor’s Report. 4.       Financials.
Section 101	Send the notice of the said AGM at least 21 clear days before the date fixed for the meeting.
Section 101(3)	The notice of every meeting of the company shall be given to-   (a) every member of the company, legal representative of any deceased member or the assignee of an insolvent member; (b) the auditor or auditors of the company; and (c) every director of the company.
	HOLDING THE AGM THROUGH VIDEO CONFERENCING OR ANY OTHER AUDIO VISUAL MEANS
General Circular No/.14/2020 dated 8th April,2020	In such meeting, other than ordinary business, only those items of special business, which are considered to be unavoidable by the Board, may be transacted.
	Convenience of different persons positioned in different time zones shall be kept in mind before scheduling the meeting.
	The facility for joining the meeting shall be kept open at least 15 minutes before the time scheduled to start the meeting and shall not be closed till the expiry of 15 minutes after such scheduled time.
	Attendance of members through VC or OAVM shall be counted for the purpose of quorum under Section 103 of the Act.
	Only those members, who are present in the meeting through VC or OAVM facility and have not cast their vote through remote e-voting and are otherwise not barred from doing so, shall be allowed to vote in the meeting.
	The facility of appointment of proxies by members will not be available for such meetings.
	At least one Independent Director (where the company is required to appoint one), and the auditor or his authorized representative, who is qualified to be auditor shall attend such meeting through VC or OAVM.
	Where institutional investors are the members of a company, they must be encouraged to attend and vote in the said meeting through VC or OAVM.
	FILING OF THE RESOLUTIONS PASSED IN THE SAID MEETING.
General Circular No/.14/2020 dated 8th April,2020	All resolutions passed in accordance with this mechanism shall be filed with the Registrar of Companies within 60 days of the meeting.
	AFTER THE AGM
Section 118 of the Companies Act,2013	AGM minutes to be finalized.
Section 139(1) of the Companies Act, 2013	Filing of the Form  ADT. 1 within 15 days of AGM. (Ratification of appointment of auditors.)
Section 117 (1) of the Companies Act,2013	Filing Form MGT.14 as applicable within 30 days of AGM.

Fresh start scheme for defaulting companies

Fresh start scheme for defaulting companies

As India is under lockdown for a week now, Ministry of Corporate affairs launched a scheme “Companies Fresh Start Scheme,2020” vide circular dated 30^th March 2020. The purpose of the scheme is to give chance to the companies which defaulted in filing mandatory forms with the Registrar of companies earlier and to make their default good without paying the additional fees and thus bring back businesses to life. Basically, this scheme is for condoning the delay in filing the forms which the company missed/ defaulted in. Also, it enables inactive companies to remain on the register of companies with minimal compliance requirements.

In addition to filing of belated documents/ forms, the defaulted company can also file form for obtaining the status of Dormant Company without paying additional fees.

Amid the Corona crisis, this is good news for defaulting companies. Defaulting companies can opt for fresh start scheme starting from 1^st April 2020 until 30^th September 2020.

Benefits of Companies Fresh Start Scheme 2020

1)    To waive off additional fees

2)    To grant immunity from launching prosecution

3)    To grant immunity from proceedings for imposing penalty on account of delay associated with filings

Forms which can be filed under this scheme

1)    eForm MGT 7 i.e. Annual Return

2)    eForm AOC 4 i.e. Financial Statements

3)    eForm PAS 3 i.e. for Allotment of securities

4)    eForm MGT 14 i.e. for filing resolutions

5)    eForm ADT 1 i.e for appointment of Statutory Auditors

6)    Any other forms

Please note that MCA is going to upload on 2nd April, 2020, a list of 76 forms which can be filed under this scheme

Forms which cannot be filed under this scheme

1)    eForm SH 7 i.e. for increase in Authorised share capital

2)    eForm CHG 1, CHG 4, CHG 8 or CHG 9 i.e. related to Charges

Eligibility Criteria to opt for this scheme

Any company which has Active status can take benefit of this scheme except in the cases as below;

1)    Companies which have received final notice from ROC for striking off the name of the company

2)    Companies which have voluntarily applied for striking off their names from the register of ROC

3)    Companies which have amalgamated under the scheme of compromise and arrangement

4)    Companies which have applied for Dormant status already before the launch of scheme

5)    Vanishing companies

6)    Companies where there is any increase in Authorised capital or charge related documents

Process to opt for this scheme

In order to take benefit of this fresh start scheme, the inactive company is required to do the following steps

1)    File belated forms without paying additional fees; and

2)    File

a.    Apply for dormant status or;

b.    Apply for voluntary Striking off

3)    File declaration for obtaining Immunity certificate mentioning the details of belated forms filed (Like SRN, fees paid etc.)

There is no fees associated with CFSS form for getting immunity from prosecution and proceedings.

Independent Director: The Unbiased Decision Maker

Independent Director: The Unbiased Decision Maker

Governance is the action or manner in which a state or a country or an organization is governed. Through Governance, policies & decisions are taken which may concern the well being & operational growth of that state, country or the organization. To put it in simple terms, Governance is a way in which things are done by those on whom power to take decisions is vested upon.

In a company, decision making process is enacted through various types of meetings conducted by the Board. It may be done either through mutual consensus, in absence of which a Majority vote is weighed upon. This decision is then documented in the next issue of Board meeting. Wherever the question of taking a decision arises , there is always a chance of having either conflict of interests or having a vested interest in the matter to be resolved. Such decisions may sometimes not be optimal for shareholders or stakeholders interests.

Hence there is always a statutory requirement to include someone in the Board, who is literally an outsider, having no personal interest in the matter to be resolved at such meetings. She/he is generally a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship that, in the opinion of the company's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. This ensures not just Governance but Good Governance. Such a person / position in the Board room , is generally termed as an ‘Independent Director’

Another point of view of having an Independent Director on Board is that we have seen Businesses run within a family for over a decades, whereby generations to generations have been acting as Board Members in order to generate wealth in abundance for that family who owns the business since its inception. This in a way is a good control to ensure a financial well being of that particular family, but on the other hand, there always lies a question of having biased actions being taken at the cost of good corporate governance. We may also have skill sets deficiency due to the torch of Directorship being passed to a family member without a check on His/ Her Academic qualifications. That is again a different zone to be thought upon.

It became the need of hour for such Companies, run by families, to move & hunt towards outer circles in order to comply with good corporate governance. It also ensures the needs of the company are different from the needs of a family. Having an Independent Director on such Boards can not only ensure the decision making process as unbiased one , but also on the other hand, assist in scaling up the company’s operational efficiency as such Independent Directors may posses excellent skills with a profound experience & exposure to the industry in which the said company operates .

Companies can also depend upon Independent Directors when it comes to forming tactical strategies at Board Meetings. New Opportunities can spring up anytime through Independent Director’s networks.

From the shareholders interests perspective, Independent Directors are the ones who may raise queries as to where & how the company’s assets & surplus profits are being utilized.

Even External Auditors find a comfort in obtaining findings & evidences of a possible fraud or a wrong done , especially in a business run by a family. Relying upon Independent Directors Report is indeed a safe harbor for such Auditors.

It is to be mentioned here ,that there has to be a criteria to determine ,whether a director is actually an Independent one .Various definitions have been chalked out by various international regulatory & statutory bodies which in a way filters down to few basic criteria such as a person :

1.    Not being connected to company’s advisors/ auditors or senior employees or for that matter not being a friend or a relative of an existing board member;

2.    Has never entered into a material business transaction with the company in recent years

3.    Or has never represented a shareholder holding significant percentage of shares of the company in which s(he) is to be appointed as an Independent director.

4.    Is or has never received anything over & above director’s remuneration.

There are many other such criteria’s to be taken into account before appointing an Independent director. The basic objective is to ensure the level of Independence that person possesses w.r.t the Board & the company as a whole while performing his / her duties as an Independent Director. There is a large divergence in reality to understand & interpret the true meaning of the word ‘ Independent’  Hence in many countries, it has been made a regulatory requirement more,  than just relying on the precise criteria, which may differ from country to country , depending upon the regulations & statute the abide to.

To conclude, it is due to the gloomy performance under the financial crisis , that has led to this position of having an independent director. Many Policies & guidelines have been framed in order to ensure better management control & to protect the rights of shareholders / stakeholders. There is again a reservation as to how to maintain a balance between having an Independent Director & the accountability with which they shall perform their duties. We conclude here by some questions for our readers:

1.    How far can we assure dependence on such Directors [ complying with the regulations] , when it comes to major decision making like having a Venture Capital Investor on Board / sharing of Confidential strategies to such an outsider  ?

2.    What if such Independent Director is not actually Independent? i.e: S(he) himself is a party to some undetected misconduct / fraud ?

3.    Are Family run Businesses ready to give up controls to an outsider, just for the sake of complying with a regulation? What is the Net effective Cost of such an action? Is governance the only parameter to run a company?

There may arises many other uncertainties / view points regarding the need of having an Independent Director. You may share these by mailing us at : csnehaseth@gmail.com .

Should one sell the company or wind up the inoperative company

Should one sell the inoperative company or wind up the company? This is the question which is in the minds of those who registered their company a year or some years back with a vision in mind to grow their businesses. However, unfortunately they didn't succeed for one or other reason maybe because of slowdown economy. 

In order to advise or answer that first question, various factors are to be assessed;
  
1. What is the paid up share capital, main objects and date of registration of the company?
2. Are there any accumulated losses/ Reserves?
3. Are there any IPR, Litigation, Regulatory issues?
4. What are the number of years of business done
5. What is the current state- running or dormant?
6. What is the average cost of running and closure?
7. What will be expected amount for sale?

With the amendment in incorporation rules i.e. Spice+ web based form, there has been ease of doing business in India. Given the cost of registration is reasonable now, person needs to evaluate cost vs benefit of buying v/s incorporating.

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Independent Director-under Companies Act, 2013

Independent Director-under Companies Act, 2013

Independent director is a non-executive director of a company who helps the company in improving corporate credibility and governance standards. He/ She does not have any kind of relationship with the company that may affect the independence of his/ her judgment.

They act as a guide, monitor, and guard and keep a balance on the conflicting interest of the stakeholder. Their roles broadly include improving the corporate credibility and governance standards functioning as a watchdog, and playing a vital role in risk management.

Independent directors play an active role in various committees set up by company to ensure good governance. Independent directors must also play a pivotal role in professionalizing board operations.

Other important role he does is to be part of succession planning, evaluating the performance of board and management of the company, scrutinizing, monitoring and reporting management’s performance regarding goals and objectives agreed in the board meetings, take an active part on issues such as strategy, performance, risk management and resources. Their ultimate aim should be to safeguard the interests of all stakeholders.

The companies which are required to appoint independent directors:

-Every listed public company shall have at least one-third of a total number of directors as independent directors.

-Unlisted Public Company shall have at least 2 directors as independent directors, in case

• Its paid-up share capital of Rs. 10 crores or more.
• Its turnover is Rs. 100 crores or more.
• Its aggregate outstanding loans, debentures, and deposits, exceeding  Rs. 50 crores

There was an Amendment in the provision of the Independent Director of the Companies Act, 2013 in November2019 which has come into force with effect from December 1. 2019.

The amendment says

 a)Every individual, who has been appointed as an Independent Director in a Company shall within a period of three months from the commencement of the said Rules, or who intends to get appointed as an Independent Director in a company after 01/12/2019 shall before such appointment, apply to the 'Indian Institute of Corporate Affairs (IICA) for inclusion of his name in the data bank for a period of 1 (one) year or 5 (five) years or for his lifetime as the case may be.

The major impact of this amendment is on the individuals who are already appointed as the independent directors, i.e. existing independent directors. They have to get themselves registered in the Data bank of the IICA on or before February 29, 2020.

Currently the fees for 1 year subscription is Rs. 5000 plus 18% GST. Fee plan for 5 years is yet to be notified.

b)It also says that the Membership has to be renewed within 30 days from the date of expiry of the above period of 1 year, 5 years or lifetime as the case may be.

c) Every independent director to submit a declaration of compliance with these rules to the Board, each time he submits the declaration required under sub-section (7) of section 149 of the Act.

d)Also the individual shall pass an online proficiency self-assessment test conducted by the institute within a period of one year from the date of inclusion of his name in the data bank, with minimum score of 60%, failing which, his name shall be removed from the databank of the institute.

After this amendment, companies can appoint the independent director only amongst the individuals registered under the Databank of the IICA and the companies has to do the self due diligence of the person before his/her appointment as the independent director.

This is a new beginning on accountability and eligibility and will curb promoters placing their own ineligible candidates and family members on the listed companies’ boards which have public money also invested in the company.