Legal Environment Of Business

By

Mayur

Nisar

Preethi

Sandeep

Saranya

Siddesh

Sunitha

Swetha

Vinay

:Securities And Exchange Board of India:

• The Securities and Exchange Board of India (abbreviated SEBI) is the regulator for the securities market in India.

• SEBI was first established in the year 1988 as a non-statutory body for regulating the securities market.

• It became an autonomous body on “April 12, 1992” in accordance with the provisions of the SEBI Act, 1992.

• SEBI is headquartered at “Bandra-Kurla complex in Mumbai” and “Chandrasekhar Bhaskar Bhave” is it’s current chairman.

• One member from RBI.

:SEBI:

Objectives:• To develop the securities

market. • Promotes Investors Interest.• Makes rules and regulations

for the securities market.

Functions:• Regulates Capital Market.• Checks Trading of securities.• Checks the malpractices in

securities market.• It enhances investor's

knowledge on market by providing education.

• Regulates the stcok brokers and the sub-brokers.

:Financial Instruments in secondary market:

• Equity Shares• Rights Issues• Bonus Shares • Preferred Stock/ Preference shares • Cumulative Preference Shares • Cumulative Convertible Preference Shares • Participating Preference Share • Bond • Zero Coupon Bond • Convertible Bond • Debentures • Commercial Paper • Coupons • Treasury Bills

:Guidelines for issuing IPO’s:

• Any company is required to file a draft offer document with SEBI for its observations.

• The company has to open its issue within three months from the date of SEBI's observation letter.

• Disclosure of credit rating

• There are 3 Entry Norms :1. EN I2. EN II3. EN III

:Guidelines for Mutual Funds:

• NFO’s will be open for only 15 days.• NFO’s can be only invested at the end of NFO

period.• The ASBA process (Application Supported

by Blocked Amount).• Dividends can now only be paid out of actually

realized gains.• To reveal all commission paid to it’s sponsor or

associate companies, employees and their relatives.

• RFOF (Regarding the Fund-of-Fund).

Patents Act

Features

• The eligibility, procedure and conditions for grant of patents

• Inventions & other subjects not patentable• Rights and obligations of patentee• Grounds for revocation of patents• Matters related to working of the patent

and compulsory licensing• Rights of government regarding patented

products

Taiwan firm accuses Apple of patent infringement

• Taiwan's Elan Microelectronics Corp. sued Apple- infringing two of its patents

• Infringment on Elan patents in its iBook, PowerBook and MacBook portable computers, the iPhone smartphone and the iPod Touch

• "Each of these devices includes a touch-sensitive input device capable of detecting the simultaneous presence of two or more fingers or other capacitive objects using the structure and methods claimed in (Elan's) 352 patent,"

Trade marks

Meaning

• Trade mark is a brand or part of a brand that is given legal protection because it is capable of exclusive appropriation

• Example:

Mumbai-based Aftek Infosys Ltd and Kolkata-based Jupiter Infosys Ltd 

SALES TAX ACT

Definition of sales tax

sales tax is the amount collected by the seller from the buyer for selling the goods or services.

Characterstics of sales tax• Sales tax is consumption tax charged at

the time of purchase for the certain goods and service.

• Sales tax are collected from the buyer by the seller.

• Many sales tax are charged on sales of service.

• It is calculated by applying a percentage rate to taxable price of a sale.

TYPES OF TAX

• Gross receipts tax

• Excise tax

• Use tax

• Value added tax

Customs and excise duties

Introduction

• An excise duty may be defined broadly as an inland tax on the production for sale; of sale of a specific good or narrowly as a tax on a good produced for sale, or sold, within the country.

• Typical examples of excise duties are taxes on tobacco, alcohol and gasoline.

• Excises are distinguished from customs duties, which are taxes on importation. Excises, whether broadly defined or narrowly defined, are inland taxes, whereas customs duties are border taxes.

Introduction

• Customs and Excise is the section of the South African Revenue Service (SARS) responsible for the collection of revenue at all points of entry into the country.

• Revenues collected at points of entry include import tariffs, dumping duties and value-added tax (VAT) on imports.

• Customs and Excise is also responsible for the collection of other duties on certain goods produced locally or imported. These include ‘sin’ taxes, duties on luxury goods and the fuel.

• Customs and Excise plays an important role in protecting the economy and implementing policies set by Department of Trade and Industry (DTI).

• It assesses the impact of the policies that govern Customs and Excise in general terms as well as the practical of these policies.

• SARS launched the Customs Transformation Programme (CTP). This was part of the overall SARS programme to increase revenue by improving efficiency and stamping out corruption and fraud.

• The imposition of tariffs on imports has been an important way in which countries throughout the world have protected their economies from competition by goods from other countries.

• Tariffs are set at different rates on different goods.

Automobile-negative

Key announcements Impact

What came in?

Hike in excise duty by 2% Negative for all manufacturers

Increase in ad valorem duty on large cars, MUVs and SUVs

Negative for M&M, Tata Motors and luxury car manufacturers

Higher allocation to NREGS Positive for M&M, Hero Honda and Maruti

Higher deduction on expenditure incurred on in-house R&D from 150% to 200%

Positive for automobiles and auto ancillary manufacturers

Hike in excise duty on petrol and diesel Negative for all manufacturers

What did not come?

Extension of accelerated depreciation for CVs Negative for Tata Motors and Ashok Leyland

Company Name Impact Impact factors

Hindustan Motors Limited A, B, C

Hyundai Motors India Limited A, B, C

Honda SIEL Cars India Limited A, B

Mahindra & Mahindra Limited A, B, C, D

Maruti Udyog Limited A, B, C

Tata Motors Limited A, B, C

Federation of Automobile Dealers Associations

Impact Factors

 • (A )The reduction in import duty on steel from 15 per cent to 10 per cent will result in a cut in the cost of

production for car and utility vehicle manufacturers, as along with the benefit of reduced prices on steel used directly as inputs, the benefit on component manufacturers will also be largely passed on to the OEMs.

• (B) The increase in excise duty on steel from 8 per cent to 12 per cent will not impact OEMs, as the increase in excise on input will be modvatable against the excise paid by companies on their final product. Combining both the factors, the impact will be positive for car and utility vehicle manufacturers.

• (C) The increase in tax deduction for research and development expenditure to 150 per cent will marginally benefit companies such as Tata Motors, M&M and Maruti Udyog.

• (D) Mahindra & Mahindra will also benefit from the cut in excise duty on tractors from 16 per cent to 0 per cent. The company is likely to partially pass on the benefit to the consumers. This will positively affect the margins of the company.

• (E) The imposition of education cess on cars and utility vehicles will marginally increase prices, as the companies will pass on the increase to the customers. Since the price increase will be marginal, the demand growth is not likely to be affected.

FOREIGN EXCHANGE ACT

An Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.

MEANING

“foreign exchange" means foreign currency and includes,-

(i) deposits, credits and balances payable in any foreign currency,

(ii) drafts, travelers cheques, letters of credit or bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency

(iii) drafts, travelers cheques, letters of credit or bills of exchange drawn by banks, institutions or persons outside India, but payable in Indian currency;

Objectives of Foreign Exchange Management Act (FEMA):Among the various objectives of the Foreign Exchange Management Act (FEMA), an important one is to revise and unite all the laws that relate to foreign exchange.

Further FEMA aims to promote foreign payments and trade in the country.

Another important objective of the Foreign Exchange Management Act (FEMA) is to encourage the orderly maintenance and development of the foreign exchange market in India.

STATUTORY PROVISION SECTION 1 Short title,extent ,application and

commencementSECTION 2 DefinitionsSECTION 3 Dealing in foreign exchangeSECTION 4 Holding in foreign exchangeSECTION 5 Current a/c transactionsSECTION 6 Capital a/c transactionsSECTION 7 Export of goods and servicesSECTION 8 Realisation & reparitation of foreign

exchangeSECTION 9 Exemption from realisation &

reparitation of Foreign exchange

SECTION 10 Authorised personSECTION 11 Reserve bank’s power to issue

direction to authorised personSECTION 12 Power of Reserve Bank o

inspect authorised personSECTION 13 PenaltiesSECTION 14 Enforcement of the orders

Adjudicating AuthoritySECTION 15 Power to compound

contraventionSECTION 16 Appointment of Adjudicating

AuthoritySECTION 17 Appeal to special directorSECTION 18 Estbd. Of Appellate TribunalSECTION 19 Appeal to Appellate Tribunal

SECTION 20 Composition of Appellate TribunalSECTION 21 Qualification for appointment of

chairperson, member and Special DirectorSECTION 22 Team of officeSECTION 23 Terms and conditions of servicesSECTION 24 VacanciesSECTION 25 Resignation and removalSECTION 26 Member to act as chairperson in

certain circumstancesSECTION 27 Staff of Appellate Tribunal and

Special directorsSECTION 28 Procedure and Power of

Appellate Tribunal and Special directors

SECTION 29 Distribution of business among benches

SECTION 30 Power of chairperson to transfer cases

SECTION 31 Decision to be by majoritySECTION 32 Right of Appellate to take

assistance of legal practitioner or CA & of govt.SECTION 33 Member etc to be public servanSECTION 34 Civil court not to have

jurisdictionSECTION 35 Appeal to high courtSECTION 36 Directorate of enforcementSECTION 37 Power of searches,seizure,etcSECTION 38 Empowering other officersSECTION 39 Presumption as to documents in

certain casesSECTION 40 Suspension of operation of this

act

SECTION 41 Power of Central govt. to give direction

SECTION 42 Contravention by companiesSECTION 43 Death and insolvency in certain

casesSECTION 44 Bar of legal proceedingsSECTION 45 Removal of difficultiesSECTION 46 Power to make rulesSECTION 47 Power to make regulationsSECTION 48 Rules and Regulation to be laid

before ParliamentSECTION 49 Repeal and Saving

THE EMPLOYEES’ STATE INSURANCE ACT, 1948

OBJECTIVE

The object of the Act is to secure sickness, maternity, disablement and medical benefits to employees of factories and establishments and dependents’ benefits to the dependents of such employees.

APPLICABILITY

1. To all Factories & establishments employing 20 or more employees.

2. Every employee drawing wages upto Rs. 10,000/- per month.

Contribution under ESI Act,1948

1. Employees : 1.75% on total monthly wages

2. Employer : 4.75% on total monthly wages

Benefits under the Act

Six kinds of benefits are provided under the Act:

Sickness benefit Maternity benefit Disablement benefit Dependents’ benefit Medical benefit and Funeral expenses.

COMPETITION

“a situation in a market in which firms or sellers independently strive for the buyers’ patronage in order to achieve a particular business objective for example profits, sales or market share”

Competition Law

It is a tool to implement and enforce competition policy and to prevent and punish anti-competitive business practices by firms and unnecessary Government interface in the market.

Competition Law generally covers 3 areas:o Anti-Competitive Agreements o Abuse of Dominant position by enterprises o Regulations of Mergers and Acquisitions

Competition Policy

It includes Reforms in certain Policy areas to make these more pro-competition:

Industrial policy Trade policy privatization/Disinvestment Economic Regulation State aids

Objectives

• Protecting consumers from the undue exercise of market power

• Facilitating economic liberalization, including privatization. Deregulation and reduction of external trade barriers

• Preserving and promoting the sound development of a market economy

• Protecting the ‘public interest’ including in some cases considerations relating to industrial competitiveness and employment

• Protecting opportunities for small and medium business

Status of the Competition Commission

• It is a body corporate • It has Regulatory and quasi-judicial powers; functions

through Benches• Each Bench shall consist of at least two members and

one of such members must be a judicial member

Suo Moto Inquiry• Commission has suo moto power to enquiry whether an

Anti-Competitive Agreement or Abuse of Dominant Position causes an appreciable adverse effect on competition

• This power must be exercised within 1 year from the date combination has taken effect

CCI orders against Anti-Competitive agreements

• Penalty equal to three times the amount of profit made out of such agreement or 10% of average turnover of the cartel for preceding 3 years whichever is higher

• Modification directed to the agreement

Powers of Competition Commission as Regards Agreement

After the inquiry into the Agreement, Competition Commission can:

• direct parties to discontinue the agreement • Prohibit parties from re-entering • Direct modification of the agreement • Impose penalty upto 10% of average

turnover of the enterprise

INDUSTRIAL DISPUTE ACT 1947

Any dispute or difference between employers and employers, employers and workmen or workmen and workmen, which is connected with the employment or non-employment or terms of employment or with the condition of labor of any person.

Causes for dispute

• Wage demand• Union-rivalry• Political interference• Unfair labour practices• Too many laws

How to solve disputes ?????

COLLECTIVE BARGAINING• It occurs when representatives of union

meet with management.• The bargain is said to be collective in the

sense that chosen representatives act as bargaining agent for all employees in dealing with management.

CODE OF DISCIPLINE

• Defines duties and responsibilities of employees and workers.

• It ensures that employees recognize the obligations and rights of one another thus promotes cooperation.

GRIEVANCE PROCEDURE

• Section head ->Departmental head->Division head-> complaint is referred to the union

ARBITRATION

Procedure in which the third party studies the bargaining situation, listens to both the parties and gathers information and then makes recommendations that are binding on both the parties .

CONCILIATION

Representatives of workers and employees are brought together before a third party with the view to persuade them to arrive at an agreement by mutual discussion between them.

ADJUDICATION

Refers to mandatory settlement of an industrial dispute by a labor court or a tribunal. Generally Government refers a dispute for adjudication on the failure of conciliation proceedings.

CONSUMER PROTECTION ACT,1986

An Act to provide for the better protection of the interest of consumers and for that purpose to make provision for the establishment of consumer councils and other authorities for the settlement of consumers’ disputes and for matters connected therewith.

The act was passed : 1. In Lok Sabha on 9th December,1986. 2. Rajh Sabha on 10th December, 1986. 3. Assented by the President of India on 24th December, 1986. 4. Was published in the Gazette of India on 26th December, 1986.

The Consumer Protection Act 1986 is a social welfare legislation which was enacted as a result of widespread consumer protection movement.

The aim of the Act is also to ensure the rights of the consumer.

The Act extends to the whole of India except the state of Jammu and Kashmir.

OBJECTS OF THE ACT

Better Protection of interest of Consumers

Protection of rights of Consumerso To be protectedo To be informedo To be assuredo To be heardo To seek redressalo Consumer education

Consumer Protection Councils

Quasi-judicial machinery

CONSUMER PROTECTION REGULATIONS

The Bureau of Consumer Protection is divided into

several divisions, each with its own areas of expertise:

The Division of Advertising Practices

The Division of Enforcement

The Division of Financial Practices 

The Division of Marketing Practices 

The Division of Planning and Information 

The Office of Consumer and Business Education (OCBE) 

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