The recently enacted Companies Act, 2013 is a landmark piece of legislation and likely to have far reaching consequences on all companies incorporated in India. The New Act substantively raises the bar on governance and thrusts greater responsibility and obligation on the Board of Directors and Management in Indian companies.
While the bar for corporate governance has been raised, the penal consequences have been exponentially increased with a large number of sections reserving provisions for the prosecution of directors, officers in default and key managerial personnel. Therefore, it is imperative for the organizations to develop a Robust Legal Compliance System which will achieve excellence in Corporate Governance and inculcate healthy compliance culture within the organisation.
Considering Indian scenario and requirements as per of new Companies Act (Section 134(5)f) -“Directors needs to ensure that they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively”.
This means Legal Compliance Program or System in Indian context needs have following elements:
- Devising the Proper System: The term devising the proper system will include fundamentals of designing, development and implementation of Proper system which would ensure on-going monitoring of Legal Compliance is in place and would acts as defence against any prosecution.
- All Applicable Laws: This would mean identifying all Laws applicable to all business locations and creating comprehensive legal compliance checklist India under all applicable laws.
- Adequate system: The term would mean that theLegal Compliance System or Program covers all Legal Entities, Business Divisions, Business activities and Business Locations.
- Effectively operating system: This would mean that the Legal Compliance System or Program is being used by the users appropriately and on-going monitoring and review is conducted to take Legal Compliance System or Program to next level.
Apart from statutory requirements, there are various reasons for the companies to focus on Legal Compliances such as:
- High pressure from Regulators, Media and Shareholders
- Non-compliance leads to huge penalties, reputation loss and sometime closure of business operations
- Cost of non-compliance is higher than cost of compliance etc.
Therefore, it has become imperative for the organizations to develop a robust Legal Compliance System which will meet the statutory requirements and also achieve excellence in Corporate Governance and inculcate healthy compliance culture within the organisation.
In a smaller organization – it may be possible to have a compliance checklist or register designed and maintained for all the compliance and periodically checking. However, the large organizations with multi location operations with many branches, the maintenance of physical register may not be possible and also impracticable due to complexity of multiple laws requiring compliance, therefore an IT enabled Legal Compliance System would be of great help and serve the purpose.
In order to design an IT enabled Legal Compliance System that can achieve the outcome it is important that measures are put in place to ensure that everyone inside the organisation knows what they should be doing. Further, those who are responsible for Legal Compliance System must be able to know what is going on, whether the desired results are being produced, and if not, where the problems are and how they are being attempted to be addressed. In summary, the compliance system needs to have a clear objective with clear goals and outcomes that are required to be obtained.
LexCare Global is a specialised Company in developing and implementing robust Legal Compliance System or Program for Organisations in India and Abroad. They have in-house team of Lawyers, Subject Matter Experts and IT professionals. LexCare Lawyers has created Comprehensive LegalCompliance Checklist or Repository under all Indian and International laws. Considering the requirements under Companies Act, 2013, practical suggestions provided by business users and top general counsels, They have also developed robust IT enabled legal Compliance System/Solution in India which will meet requirement of any size of company. Their Legal Update team captures changes in laws on daily basis and provide detailed analysis of legal updates and patches to update system on weekly basis.
Go through the link below to understand methodology, features and pricing of Legal Compliance System /Solution.