Companies through the activities they perform transact with the government and the individuals in society. And to regulate the way they work, the parliament has made several legislations that apply to these companies. These legislations aim at creating a predictable environment, necessary for the smooth functioning of the economy. It is necessary for an individual linked with a company in any manner to know the laws applicable to the specific company, to understand his rights and liabilities towards the company, and vice-versa. And since these legislations also provide for penalties and punishments in case of an offense being committed, it becomes a much greater concern for those controlling the Company, to know these laws.
The author in this article has discussed some of the major legislations applicable to Companies in general, for awareness. However, the legislations discussed are not exhaustive.
Be it a Lawyer, an owner of a Company, an employee, or any other person transacting with a Company, they must understand the laws applicable to the company. As several laws govern an individual’s behavior and ascertain his rights and liabilities. Similarly, the government has enacted several laws that control the functioning of a company and ascertain its duties and obligation concerning others. These laws are necessary to ensure accountability and transparency in the working of the company.
They provide a specific way in which a company should act and the course a company should follow in a given situation. Non-compliance with these lead to punishment and penalization. Since the law makes the companies act in a specific manner, it gets easier for those who know these laws, to understand what is expected from the company or them by the company.
These laws facilitate the enhancement of the relationship between the employer and the employees and provide directions in these regards. They also ensure the protection of the interest of the public and promote an environment to reduce anti-competitive practices.
Several Legislations apply to a Company in India, however, as all of them can not be discussed. Some major legislation is discussed below:
· Companies Act, 2013
In India, the companies are mainly governed by the Companies Act, 2013. It regulates the setting up, management, and even dissolution or winding up of the companies. The Act contains several provisions that talk about appointment, removal, duties, and liabilities of the directors; maintaining and preparing books of accounts; allotment of securities; notification and payment of dividends; shareholder and board meetings; revival and restoration of sick companies, NCLT and Appellate Tribunal, etc. Punishments and penalties in case of non-compliance with or breach of a provision are also provided in the Act.
The Act not only applies to private and public companies but also one-person companies. The Act also requires the companies that satisfy the CSR criteria to fulfill their Corporate Social Responsibilities in a given year.
· Income Tax Act, 1961
The Income Tax Act of 1961 as amended by the Finance Act, 2020 is clear legislation that consolidates the laws related o Income Tax and governs taxation in the country. In India, the income tax is not only paid by the individuals on their income, but also by the Companies, corporate firms, associations, and bodies of individuals, HUFs on their profits. As per Section 2(17) of the act a company includes any Indian Company, any corporate body established under the law of any other country, anybody, institution, and/or association assessed under the Indian Income Tax Act or declared so by the Board to be a company. The Act consists of 298 sections in its 28 chapters and covers various aspects of taxation. It among other things regulates the tax dealings of capital profits, dividends, mergers, acquisitions, etc.
Before April 2016, the Wealth Act 1957 also applied to the Companies but was abolished by the Union Budget of the financial year 2016-2017.
· Goods and Services Tax Acts
The Central Goods and Services Tax and the Integrated Goods and Services Tax, together form the basis of the Goods and Services Tax. These Acts contain provisions to levy and collect tax on trade (goods or services) between states by the State and Central Government. The Acts promote the implementation of GST by imposing an indirect tax on sale, manufacturing, and consumption of goods and services. And repeal/ replace the earlier applicable acts such as the Central Excise Act (except in respect of some goods), Additional Duties of Excise Act, Central Excise Tariff Act among others. The Central Goods and Services Tax has 21 Chapters containing 174 Sections. The provisions under its majorly deal with Input Tax Credit, Accounts, Refunds, Inspections, Seizure, Search, and Audits. Under Chapter 19 of the Act, several offenses and their penalties are discussed.
·Employees State Insurance Act, 1948
The Employees State Insurance Act aims at creating a social security scheme under which the interest of the workers can be protected in cases of emergencies such as illness, disablement, maternity, etc. The Act aims at providing the benefits not only to the employee but his dependants also. The Act applies to non-seasonal establishments with 10 or more employees (when using power, and 20 or more when not using power). The employees entitled are those who earn less than or equal to Rs. 21,000 a month.
To make it clear on how this act applies to companies, it is worth mentioning that the employer is required to contribute 3.25% of the wages in the scheme. Under the Act, the suitable government is it state or central has the power to extend the Act to other establishments as well, thereby increasing the companies covered under the Act.
·Employees Provident Fund and Miscellaneous Provisions Act, 1952
The Act has 22 sections and aims at creating an institution for pension, insurance, and provident fund. It provides for the EPF scheme managed by the Board of Trustees comprising of representatives of the government, employee, and the employer. Under the scheme, 12% of the salary is contributed by both the employee and the employer every month, then given to the employee at the time of his retirement along with the interest earned on the principal amount. Similar to the abovementioned Act the employer is under an obligation to contribute a given percentage of the employees’ salary to the fund. The Act applies to specific factories and establishments that employ 20 or more employees and to those establishments as are notified by the Central Government from time to time, thereby increasing the Acts extend. 
There are various types of provident fund schemes namely, Recognised PF, Unrecognised PF, Statutory PF, and Public PF. The recognized PF is the one registered under the Employees Provident Funds Act whereas the unrecognized PF is the one initiated by the employer and the employees in a company. The Statutory PF is registered under the Provident Fund Act, 1925, and applies to the government employees. And the Public PF is covered under the Public Provident Funds Act, 1968, and every person whether working or not is entitled to invest in it.
Companies in India are under a legal obligation to take steps to protect the environment and comply with the Environmental Laws. To function properly the companies must adhere to the provisions given in Environment related Legislation to the level, that these laws apply to the working of such company.
Some major Environment Laws include Air (Prevention and Control of Pollution) Act, 1981; Water (Prevention and Control of Pollution) Act, 1974; Environment Protection Act, 1986; Public Liability Insurance Act,1991; National Environment Tribunal Act, 1995, etc.
The punishments and penalties for non-compliance with these Acts are given under the respective Acts.
Companies in India are also required to comply with several Labour Legislations. Since these laws are covered under the Concurrent List of the Constitution of India, the Government, both Central and State, in India have the power to enact legislation necessary to govern and protect the interest of the workforce. Therefore, like the central government that has made several acts to protect the interests of the workforce, the State governments have also made several Acts to coordinate with the Central Laws. These legislations cover wide areas including wages, compensations, maternity laws, working conditions, etc, and can broadly be divided into two categories, namely services and working conditions, and employer-employee relationships. The Acts in the first category include the Factories Act, Minimum Wages Act, Payment of Wages Act, etc. In the second category, acts such as the Trade Unions Act, Industrial Disputes Act, etc exist. Also, to support and ensure the proper functioning of these Acts, several rules and regulations have been developed by the Central and State governments. These rules and regulations along with the primary Acts also apply to the companies.
·Securities and Exchange Board of India Act, 1992
The Act aims at governing and promoting the development of the Security Market and protecting the interest of investors. The act contains provisions to prohibit the use of misleading and manipulative devices, insider trading; conduct audits; provide punishment and penalty for offenses. The regulations and guidelines issued by SEBI are also applicable to the Companies. The companies need to comply with the regulations of SEBI to fulfill the minimum listing requirements or to relist a delisted company on the Bombay Stock Exchange. Similarly, the companies to use the name of a stock exchange in its prospectus, submit a letter of application, get trading permission, etc are also required to follow the SEBI guidelines and regulations.
·Competition Act, 2002
The Competition Act aims at promoting fair competition in the economy. It contains provisions to stop activities that harm the economy and promote proper competition in the market. It ensures freedom of trade and protection of the consumer’s interest.
The Competition Act is the successor of the Monopolies and Restrictive Trade Practices Act of 1969, which curbs anti-competitive corporate activities. The Act has been amended several times since its inception and focuses on setting up a Commission to fulfill its objective. It prohibits dominance, acquisition, merger, and contracts that can have a bad impact on the customers and the economy.
·Indian Contracts Act, 1872
The Indian Contract Act, 1872 is based on the English law and it regulates contractual relationships between parties. These parties can be a person or even a company having a separate legal entity. The Act has 10 chapters containing 238 sections. It deals with almost every aspect of a contract such as formation, the validity of a contract, bailment, indemnity, pledge, guarantee, contingent contract, and breach or revocation of contracts. It provides for the rights and liabilities of both parties to ensure the smooth functioning of the business. However, the act is not exhaustive and several other Acts also apply to depend on the context.
The Acts mentioned above are not exhaustive and several other legislations also apply to the Companies in general. Various industry-specific laws apply to companies working in a particular industry. These laws, therefore, differ from one industry to another. The legislation applicable to the companies in the Banking Sector include the Negotiable Instruments Act, Prevention of Money Laundering Act, Banking Companies Act, Banking Regulations Act, and Rule, etc. Similarly, the companies working in the Real Estates are governed by The Transfer of Property Act, Land Acquisition Act, Indian Registration Act, etc. Companies in the power industry are regulated by the Electricity Act and Rules, National Tariff Policy, Energy Conservation Act whereas the companies in the Oil and Gas Sector are governed by the Petroleum and Natural Gas Rules, Petroleum Act, Oilfields Act, etc.
The Parliament of India has tried to ensure that every activity and work of a company is governed by the necessary legislations, appropriately and adequately. Therefore, it is not possible to cover all the laws applicable to the Companies in India.
Frequently Asked Questions
- Why is it necessary for the people connected to a Company, to know about the applicable laws?
- Which law governs the Companies in India, primarily?
- What are some of the major legislations applicable to Companies?
- How are the social welfare legislations such as ESI and EPF applicable to Companies?
- Name some industries and their applicable industry-specific laws?
-  –, ‘Importance of Rule of Law to Business’ Lardbucket, available at https://2012books.lardbucket.org/books/business-and-the-legal-and-ethical-environment/s04-04-importance-of-rule-of-law-to-b.html
-  –, ‘ Companies Act 2013’ Toppr, available at https://www.toppr.com/guides/business-laws/companies-act-2013/
-  –, ‘Income Tax Act 1961’ AegonLife, available at https://www.aegonlife.com/insurance-investment-knowledge/income-tax-act-1961/
-  The Central Goods and Services Tax Act, 2017
-  Sunil Dhawan, ‘New ESI contribution rate’ Financial Express, available at https://www.financialexpress.com/money/insurance/esi-act-applicability-benefits-eligibility-and-new-contribution-rates-from-july-1/1607435/#:~:text=effective%20from%2001.07.-,2019.,employees%20and%2012.85%20lakh%20employers.
-  The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
-  –, ‘Employment Law Overview’ Leglobal, available at https://knowledge.leglobal.org/wp-content/uploads/sites/2/LEGlobal-Employment-Law-Overview_India_2019-2020.pdf
-  The Competition Act, 2002