SAVING CONTRACTS ONLINE: WHAT IT MEANS
The technological advancement of this era has transformed a great portion of human transactions into online form from actual physical form. Letters have given way to mail and chat messages, library references have given way to online information services, shopping is done at the click of a finger; and in the fast-moving world, Govt regulations and services have also largely been made available through technological interface. Many Govt applications can now be submitted online, like PAN, Aadhar, Passport, Electoral ID, etc. and most of the Govt agencies have online query/complaint/grievance registration systems, and a large number of electronic records are stored in e-format.
Similarly, it is quite legal to enter into contracts online, and they create just as much rights and obligations as offline contracts, and are enforceable in a Court of law, provided that the legal requirements are met with. Since most of the communications between people, sometimes separated by distances of half the world, take place online without them meeting each other in person, it is palpable that a large proportion of business/employment/sale/other contracts are entered into online. Offer, acceptance, and legal formalities essential for a contract can be entered into online, and an e-contract is valid subject to the provisions of the Indian Contract and the Information Technology Act. It is also possible to enter into the contract offline, and save all the documents online in digital format, which comes with several advantages to the parties. Contract management is now largely undertaken by several companies using cloud computing systems and online data management interfaces.
THE PROS OF SAVING CONTRACTS ONLINE
- Time Saving: The process of finding documents online is much easier as it used search engines, and you can find any document in a matter of seconds, using key words, dates, party names, etc. It is a stark contrast to the traditional documentation system where a person has to fish through many registers and papers to identify a document. A mammoth task gets done in a click. Also, uploading it into a central system of a Contract Management Service instead of individual data systems helps to make sure it is not lost or misplaced.
- Security & Confidentiality: While hard copies of files would have to stacked in locked drawers to maintain secrecy of the matter, it is much easier to simply upload the data into an online system with in-built safety mechanisms that give access only to authorized personnel; using authentication mechanisms like passwords or pin numbers. To cover the risk of forgetting the password, you may use back-up mechanisms like answering a pre-determined question, or linking it with your Mail ID to retrieve the password.
- Flexibility and Ease of Access: Data saved on online platforms can be accessed easily from anywhere and at any time, enabling flexibility to work from any place using the resources and information as and when needed. This facilitates employees to avail work-from-home or for multiple persons at remote locations to work simultaneously in a group.
- Mobility: Data including contracts, stored online can be moved from a storage location to any other location with much practical ease. Copying and transferring online material is much easy, and in case of a need for change of storage location from one drive to another, or sending a copy to another person for contract review, it can be done quite easily.
- Easier Inspection: The contracts and related documents of a company may become liable to inspection by Regulatory Authorities at any time, and proper documentation and storage would help save a lot of time and confusion; availability at a central depository would do away with the rush to consolidate contractual documents and details from various storage locations. It also helps in internal and external audits.
- Reduces Cost: Storage in online spaces like Cloud or Dropbox or even Google Drive is free of cost, and saves the cost that would accrue to the management if they were to store it on papers in registers kept in draws. The number of contracts entered into by companies would require a lot of office stationary if all these were to be stored in hardcopy. Also, online storage services do not involve the expenses of setting up individual servers at companies for data storage; the servers would come with maintenance costs in addition to the cost of setting up.
RELEVANT STATUTES (INDIAN KANOON)
- Information Technology Act
- Indian Contract Act
THE COMPANY LAW BOARD
The CLB was a quasi-judicial body that exercised jurisdiction over matters stipulated in the old Companies Act of 1956, especially with respect to dispute resolutions. It had its Principal Bench in New Delhi, and regional benches in New Delhi, Kolkata, Mumbai and Chennai. The CLB Regulations of 1991 laid down the procedures for filing of petitions, counter affidavits, calling for information, taking evidence, etc. in addition to matters such as composition of the Board, powers of the Secretary and Registrar, etc. The CLB has now been replaced by the National Company Law Tribunal and the Appellate Tribunal, and all matters and disputes relating to the new Companies Act (2013) now lie within the jurisdiction of the NCLT and the NCLAT.
SOME MAJOR PROVISIONS OF THE CLB REGULATIONS, 1991
- The Bench consists of a Chairman, who in turn has the power to decide on the number of members and the matters to be heard in the Principal/Regional Benches.
- The Annexures to the Act specify the geographical jurisdiction of the Regional Benches, and the language and sitting hours of the Bench.
- The Regulations mandate that every petition must be in writing, also prescribes the format.
- The petition has to be made on the Form annexed with the Regulation, and must be presented at the Bench. A copy has to be sent to the respondents as well, before being submitted to the Bench.
- The petition must be accompanied by an Affidavit as per the provisions, and if all documents are in order and without defect, the same would be accepted by the Registrar at the Office. In case of defect, a chance to rectify may be given to the applicant.
- The petition must contain details of the company such as the name of the company, date of incorporation, address of its registered office, authorized capital, details of shares, etc. and must state in details the grounds for the petition, and the relief sought.
- If an interlocutory application is filed, it has to be in Form II of Annexure II of the Regulations.
- The application must be accompanied with an index page, a brief synopsis and a brief of date of events.
- The party may appear in person or through an authorized representative or lawyer. The Regulations stipulate in detail, the manner of serving notice to the other party.
- The Respondents must file a reply to the Bench, indicating the admission, denial or explanation of the plaintiff’s averments. The petitioner may file a counter reply to the facts stated by the respondent. The Bench may also seek further information from either of the parties.
- The Regulations detail that the Petition may be dismissed/ decided ex parte if either party fail to appear on the designated date; and also that such Order may be set aside if the defaulting party shows sufficient cause before the Bench within the given time.
- The Order of the Bench is to be in writing, and the decision must be based on majority of opinion.
- The Secretary is the principal officer of the Board, and has powers such as custody of the records of the Principal Bench, custody of the Official seal of the Board, right to collect information, etc.
- The Bench Officer also has powers and duties like receiving petitions and applications, dispose matters relating to service of notices, etc.
- The Bench is deemed to be a Court for the purposes of prosecution and punishment for wilful disobedience of Orders.
THE CURRENT POSITION
The Ministry of Corporate Affairs has replaced the CLB with the NCLT and NCLAT with effect from 1-6-2016, under the new Companies Act of 2013. 11 (eleven) Benches of the NCLT have been constituted by the Central Government, two in New Delhi, and one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai. The NCLT and the NCLAT are bound by their own Rules and Regulations.
STATUTORY REFERENCES (INDIAN KANOON)
- Companies Act, 1956 (old)
- Companies Act, 2013 (present)
It is the primary legislation relating to the incorporation, composition, functioning, and compliance requirements of companies in India. The previous Companies Act of 1956 had to undergo numerous amendments over the past several decades, especially after the post-liberalization era that came after the 1990s. The Central Govt subsequently enacted the new Companies Act in 2013, to replace the old one and with an object to consolidate and amend the relating to companies. It is the primary legislation that you have to refer to, if you are planning to incorporate a company in India.
A SUMMARY OF THE KEY PROVISIONS
- The Act has 29 Chapters, divided into 464 Sections, and 7 Schedules.
- A company comes into being by way of its incorporation, and it has to follow the requirements and mandates under the Act, such as the application to be made to the Registrar of Companies (RoC), the creation of the Memorandum of Association and Articles of Association, the issue of certificate of Incorporation by the RoC, setting up of a Registered Office, etc. before it can commence its business.
- Once it is all set to commence business, the company now has to raise capital, and the Act provides for this to be done by offering its securities either to the public, or through private placements. The general public are entitled to purchase shares of a Public Ltd Co. only, and a Pvt Ltd Co. cannot offer its securities to the public. The Act lays down strict provisions regarding the manner and eligibility to make an offer to the public, such as a number of detailed disclosure to be made in the Prospectus, the regulatory requirements to be satisfied to make such issue, etc. (also refer ICDR Regulations, 2009). On the other hand, a Private Placement is an offer of securities to certain specified persons only, without making it open for the general public, and the regulatory controls are less stringent here.
- The raising of capital can be done by issuing either Shares or Debentures of the company. A Share in a company gives a certain membership status to the purchasers, and they pay money in return for the Shares. Shares are further divided into Equity Shares and Preference Shares, and the equity shareholders get dividends out of the profits made by the company, and not any fixed amount of payment; while preference shareholders get a fixed dividend from time to time. Debentures are instruments wherein a creditor lends money to the company, and receives in return, a Certificate acknowledging the debt, and on the stipulated time, the debt will be paid back with interest. The Act provides for the different requirements and procedures under each of these.
- The Company may also accept deposits from its members, or take a loan from a credit by creating a charge on the assets of the company, in accordance with the provisions of the Act.
- The mode of management of the company, including the requirement to file Annual Returns, need to file declaration of any beneficial interest of any member in any Shares, maintenance of Records, Voting Rights and its procedure, kinds of Resolutions passed in meetings, etc. are also enumerated in the Act.
- The manner in which dividends are to be declared and paid to the shareholders.
- The mandates regarding maintenance of accounts of the company; and the appointment of auditors and manner of audit are given in the Act.
- The company must have a Board of Directors, and their appointment, qualifications, duties, and prohibitions are enumerated in the Act. The Board of Directors must hold meetings from time to time, and pass resolutions on certain matters; the Cat provides for the powers of Directors, Related Party Transactions, etc. The appointment and remuneration of managerial personnel is also provided in the Act.
- A company is liable to be under an inspection of document or an inquiry/investigation by the authorities.
- After having dealt with the manner of functioning of companies too, the Act lays down detailed Chapters on the winding up (voluntary or by Tribunal); compromise/arrangement/amalgamation with another company; revival and rehabilitation of sick companies, etc.
- Special provisions regarding Govt companies and Companies incorporated outside India. The Act also provides for the setting up of NCLT, Appellate Tribunal, and Special Courts.
HIGHLIGHTS OF THE 2013 ACT
- Maintenance of documents in electric form allowed
- Corporate Social Responsibility made mandatory
- One Person Company allowed
- Independent Directors and Women Directors made mandatory in some cases
- Whistle-Blower policy facilitated; ethical corporate behaviour promoted
- Better protection to minority shareholders – Exit option made available
- NCLT established to hear company related matters; replaced the Company Law Board
RELATED STATUTORY REFERENCES (for company compliances) (INDIAN KANOON)
- ICDR, 2009 by SEBI
- SEBI ACT
- LODR by SEBI
- Depositories Act
- SAST Regulations, 2011 by SEBI
REGISTRATION OF YOUR COMPANY – WHAT AND WHY?
If you are looking forward to becoming an entrepreneur and wish to start up a private ltd company in India, you must familiarise with the requirements of registration of company and the mandatory legal compliances, in the default of which you may face prosecution. Incorporation of a company gives several advantages such as an independent corporate existence, limited liability of members, transferability of shares, etc. A company may be formed for any lawful purpose of three types:
- Public Company: by 7 or more persons
- Private Company: by 2 or more persons
- One Person Company (OPC): by one person only
Registration of company is obtained by filing an application with the Registrar of Companies (RoC), along with the Memorandum of Association, Articles of Association, copy of the Agreement with any individual to be the Director or Manager (if any), and a declaration of compliance with provisions of the Act. When the Certificate of Registration is granted, it marks the birth of the company as a legal person. But the requirements of law certainly do not end there, and there are post-registration compliances that are to be met, as we shall see below.
- Application for Commencement Certificate: An Application stating that the prescribed amount of share has been paid to the company by the shareholders.
- Registered Office: Within 15 days of incorporation, and during all times thereafter, the Company must have a Registered Office, to receive all communications and Notices.
- Board Meeting of Directors: The first one must be held within 30 days of incorporation.
- Appointment of Auditors: To be done within 30 days of incorporation of Company, using Form ADT 1: an Auditor is appointed for a period of five years.
- Share Certificates: Document evidencing that a particular person holds a specific amount of share in the Company; to be issued with a valid seal of the Company.
- PAN/TAN Application: To be done within 30 days of incorporation; apply to the Income Tax Authorities.
- Information to RoC: When a resolution is passed in the Board Meeting such as issuing securities, borrowing money, investing finds of company, etc.; or Special Resolutions are passed for alteration of AoA, conversion of Pvt Ltd company into OPC, etc.; intimation has to be given to the RoC within 30 days, via Form MGT 14.
- Additional Compliance for Pvt Ltd Companies:
- File Form INC-1 with RoC: Stating that each subscriber to the MOA has paid their value of shares, and paid-up capital of the Enterprise is not less than Rs. 1 Lakh.
- Register Bank Accounts and Tax Returns
- Disclosure of Director’s interest: Directors are required to disclose their concern or interest in other Companies, Bodies Corporate, other Firms, etc.; also have to declare that the Directories are not disqualified under the Act. This has to be made from time to time, and is a standing compliance.
- Annual General Meetings: Once in every Calendar Year; within 6 months after the end of each Financial Year.
- Additional compliances for OPC:
- OPC Bank Account
- Financial Statements
IMPORTANT STATUES TO BE KEPT IN MIND (INDIAN KANOON)
- The Companies Act, 2013
- SEBI Act
- Income Tax Act
- ICDR Regulations
- LODR Regulations
- Common Seal
- Statutory Register
- Paint/Affix address of registered office in all other Branches
- Corporate Identity Number
What is a Contract?
A contract is an agreement between two or more parties, involving the exchange of something of value, and creating some obligations and corresponding rights on both the parties as against each other. A valid legal contract is enforceable in Court, meaning that if one party refuses to abide by the terms, or defaults on his duty, then the other party can approach the Court to enforce his rights against the defaulting party. But for this, the contract between the parties must be legally valid, and it must be carefully drafted to ensure that the terms and conditions are favourable to you.
POINTS TO WRITE A FAVOURABLE AND SECURE CONTRACT
- Include all necessary information, and detail the purpose of the contract, and the clear identity of all the contracting parties.
Eg; If you are entering into a contract to purchase a car, then specify the car’s details (year, model, make, etc.) and the name and addresses of the seller and buyer (yourself), the amount you have agreed on, etc.
- The specifications and descriptions required to be entered into the contract will vary depending on the nature of the contract: whether it is a contract of employment, a contract of sale, a contract of insurance, etc. the details must be entered accordingly, and must properly describe the subject matter, the terms and conditions, the amount to be paid (specify if the contract is for some other non-monetary consideration), and the mode of payment.
- Before bringing the contract into writing, ensure that you have discussed the terms and conditions with the other party and are in agreement, and there is clarity on both sides as to the nature and extent of obligations. This will help to prevent later disputes and disagreements, and will help both the parties to do their parts of the contract well.
- Include clauses regarding the conditions that are to be fulfilled, in the execution of the contract, and warranties in relation to the subject matter. Eg: If you are buying a car from a person, try to negotiate and include a warranty regarding the good working condition of the car. On the other hand, if you are selling your used car, it is favourable for you to not include any personal warranty, and state that it is “sold as is”.
- Ensure maximum level of clarity and specifications in the language, to explicitly state your intent and the limit of obligations you agree to, and try to leave no room for broad interpretations.
IMPORTANT STATUTORY PROVISIONS (INDIAN KANOON)
DO (s) AND DON’T (s)
- Maximum Clarity; no vague statements, conditions, or terms
- Ensure that the other party is a major, of sound mind, and is legally capable of entering into the contract
- Include an arbitration clause, if possible
- Agree on a jurisdiction where claims can be brought in case of disputes
- Ensure that all parties enter into the contract in good faith, understanding the rights and obligations
- Avoid mistakes to the best possible level
- Read the document carefully before signing
Provident Fund (PF) – Meaning and Law
Public Provident Fund (PPF) is the scheme of the central government formulated under the Public Provident Fund Act, 1968. It is a long-term small savings scheme which facilitates people to attain a security for retirement while saving tax by investing in the scheme. Interests are provided on such deposits.
How to withdraw PF
- Fill up Form 19 which is available with the employer or on the EPFI website.
- Submit it to the regional EPF office.
- Apply for PF withdrawal if you have the Universal Account Number (UAN) which the employer will know. You have to get the number from him.
- If you don’t have UAN, submit your application directly to the regional EPF office. But you have to get it attested by a Bank Manager or a gazetted officer or magistrate/Post Master/Sub Post Master/Notary Public.
Withdrawal without attestation from the employer
- Link your Aadhar Card on EPFO web portal. (Your aadhar card should have already been verified by your employer and your bank account)
- Download and fill up Form 10, 31 and 10C.
- Attach a cancelled cheque and submit the form to the nearest EPF office.
- Download and fill up Form 19, 31 and 10C.
- Get it attested from the authorities mentioned above (on every page of the Form).
- For reason of direct withdrawal of PF, mention the reason “Non-cooperation from ex-employer).
- Attach an indemnity bond on 100 Rs stamp paper.
- Attach copies of appointment letter, payslips, Form 19, your company ID card and KYC document and submit them to the nearest EPF office.
How to transfer the PF account from one company to another
- With the UAN number, visit the website http://www.members.epfoservices.in/home.php and create a UAN based login ID.
- Fill out the required spaces like UAN, details of current employer such as establishment number, account number, mobile number, etc.
- Check your transfer eligibility. Locate the state and then the employer from the list.
- Submit a photo ID proof such as driving license, aadhar card, etc.
- You will receive a PIN on your mobile number and you have to verify it.
- Then you will be redirected to the claims portal. Provide your document ID and mobile number for log-in.
- Request for transfer of account and fill-in the required details such as bank account details, details of old PF account and current PF account, etc.
- After filling in the information, check the preview and go with it. The transfer process would be initiated.
Important Things to Remember
- PF withdrawal is not a good idea unless you have emergency financial constraints;
- When switching job, don’t withdraw the PF but transfer it to new employer;
- Attach your employment letter with the application under Form 19;
- Get attestation from that Bank Manager in whose bank you have maintain an account;
- Form 19 is for making PF withdrawals while Form 10C is for pension benefits withdrawal;
- Bank account in which you want the PF should match the bank account details under UAN;
- For more details, visit http://www.epfbng.kar.nic.in/ or epfindia.gov.in
Full and final settlement from employment – Meaning
When the employment of the employee terminates, it is time to get all the dues settled from the company. This whole process of money recovery from the employer is considered as the full and final settlement from employment.
The dues are the salary of the employee – it may be of one month or more than one month’s salary. The settlement may be carried out at the last day of the employment of the employer or at a later decided date.
Elements used to compute the final settlement
- Unpaid salary including all (leave travel) allowances;
- Arrears of salary (calculation – number of days for which salary is to be paid multiplied by the gross salary divided by 26);
- Unpaid bonus;
- Payment for unused leaves (calculation – number of days of unused leaves multiplied by gross salary divided by 26);
- Gratuity (if the employee worked for more than 4 years and 240 days);
- Pension (minimum 6 months of service with the current employer alongwith 10 years of pensionable service);
- Deductions including profession tax, provident fund, income tax.
Period of settlement
Settlement process should commence atleast by the last working day of the employer because it would take around 30-45 days in the crediting of amount.
For gratuity, it may take upto 30 days alongwith bonus according to the specified year.
The basic steps to go for settlement
- Get all the formalities and clearances from all the departments (as per company policy);
- Keep a copy of all such clearances;
- If dues are still not credited, write to the HR department;
- If they do not respond in a few days, write to the HR manager;
- If still no response, forward the mail to the CEO and other top management people of the company;
- Last resort is the suit for money recovery under service law. Talk to an advocate.
Contents of the Letter to HR
- The letter should be addressed to HR alongwith the company name.
- Mention the subject “Full & Final Settlement of Dues”.
- State that you have not received the final salary dues and allowances and request for the same.
- Ending with regards, don’t forget to mention your name and address.
Important Things to Remember
- The number “26” refers to the paid days in a month;
- To show the 10 years of pensionable service, provide a scheme certificate after retirement (58 years of age);
- Illegal termination of employment will definitely award you a lot of money. So if the termination notice was not on time or compensation is not adequate, you can claim all of them;
- Conditions of illegal termination would also depend upon the terms and conditions of the employment contract.