Statutory Complaince and Due dillegence services

Statutory Compliance – A startup’s guide to start.

In the emerging Start-up ecosystem in the country, compliances scalability is emerging as an important parameter in determining the success or failure of the organisation! In the past, owing to many social and technological advancements, there has been a significant rise in the number of start-ups in a bid to affirm their identity in the industry.  All the successful start-ups in India, such as SWIGGY in food delivery, OYO in hospitality, OLA in travel and PAYTM in finance, have had robust Statutory Compliance support, for their success. 

In theory, regulatory compliance indirectly shapes and supports the goal that organisations aspire to achieve and the steps taken to comply with the relevant laws and regulations. In India, it is always a tricky part to comply with all the laws and regulations in every aspect. 

To stay abide by all the laws with the ever-increasing number of regulations & their compliances – it is easier said than done for the young entrepreneurs when they are aware and up to date with the latest laws governing their business and market if that’s a lot to do it’s better when consulted the right person or an organisation who are skilled to do the same. Versutus is a leading pan-India management service provider that regulates companies Factory/establishment setup services, statutory compliance Management, Due-diligence management, Tax compliance management service and more. 

For any Start-up, the law and regulations depend on the nature and size of the business. It starts with the Pre-incorporation compliances to start a new business goes forward with various terms of laws and regulations as and when your business expands to other cities, states, and countries. The start-ups have overlooked the procedure or the process compliances maybe due to lack of knowledge but in the long run, this behaviour would cause injuries to the business. 

Also, from the government of India, the “Start-up India” has made compliances precise by bringing in leverages to the Start-ups in terms of rules and regulations of the compliances. 

So where do Startups start from and what are the compliances applied on the way? 

The legal aspects and compliances differ from industry to industry; but to start with, the registration that would be required are- 

1. Incorporation related Compliances – Every Start-up starts with an understanding of how the business needs to be registered. Where an enterprise’s legal entity can be registered under: 

  • The Companies Act, 2013 – for private, public, not-for-profit and one-person companies.
  • Indian Partnership Act, 1932
  • Limited Liability Partnership Act, 2008


Companies do register the business under various other schemes given by the government for instance MSME ACT, Start-up India Scheme and more.

2. Applying for Business Licences – As licences are an integral part of running a business, it is determined by the nature and size of the business. Well, the common licences that are applied to most of the businesses are Shop and Establishment license which is applicable on all premises where trade, business or profession is carried out. There are other various licences like – 

  • Food and safety Licences 
  • Labour and employment laws
  • Import – Export Laws 
  • SEBI / RBI Regulations
  • FDI Policies 

And more, also there are different regulations when it comes to the mode of business like – for an e-commerce business 

  • GST Registration
  • Registration as an e-commerce operator
  • Professional Tax & Trade registration

Registration and obtaining licences are the most crucial part of the business before starting the operation, whereas in the case of it being ignored, it leads to costly lawsuits and unwanted legal repercussions. 

3. Taxation based Compliances – Taxes are always a part of any business that comes under different varieties such as state tax, central tax or the local tax applicable on various operating sectors, which is mainly segmented as direct or indirect tax. for instance 

  • Under Income Tax Act, 1961 – filing Income Tax Returns, Tax Audit Reports, TDS Returns, assessment of tax liability. (Direct Tax)
  • GST Act, 2017 – Registration of establishment under the GST Act, Filing of monthly, quarterly and annual returns. (Indirect Tax)

As a recent initiative from the Government of India, the “ Start-up India, Stand-up India” has bought in the lot expected leverages in the Income Tax regime like – 

  • Under Section 80-IAC, three year tax holiday in seven years 
  • Under Section 54EE, tax exemption on Long Term Capital Gains (LTCG)
  • Tax exemption on the investment above the fair market value
  • Tax exemptions to individual/HUF on LTCGs from equity shareholding (if started under MSME Act 2006) 

India as a country is filled with Startups, but not every Start-up can avail the benefits from the government in terms of tax reduction, tax exemption or tax incentives. These benefits are given under various brackets and depend on the Start-up’s eligibility to avail it. For instance, to name a few eligibility criteria.

  • The company must be incorporated anytime between 1 April 2016 and 1 April 2021 (as per the Finance Act of 2018)
  • The Company must not have a total turnover that exceeds Rs. 100 crores
  • The Company has to be certified by the Inter-Ministerial Board of Certification as an eligible business. 
  • An eligible business is generally defined as one that involves the development, innovation, deployment, or the commercialization of products, services, or processes that are either driven by intellectual property or technology. 
  • The Company cannot be the one recently formed by splitting up an existing company or business. 

As per any business concerns, it’s always better to maintain the right documentation and books of accounts, whereby as a company when guidance is required we at Versutus will pitch in the part to make your registration process seamlessly easier and ensure that you meet the standards to have all the compliance sorted out from the initial stage of the company. 

4. Adhering to labour Laws – Once you are in the employer zone, it’s important to know your responsibilities. As a business, you are subjected to labour law regardless of the size of your team. 

Labour laws are regards to minimum wages, gratuity, PF Payments, weekly Holidays, maternity leaves, bonus payments and more. Labour law compliances are enforced by the state and the central government if an establishment has more than 20 workers employed in the organisation. This is where Versutus could be adding a lot of value to your organisation. Also, in case the establishment is a casual workplace and whereas an employer you have not registered under these laws it is suggested to register under basic labour compliances in order to avoid litigation and bring in the co-ordinal working relationship with the management and staff. 

The labours act in India is segmented as per the nature of work, for instance, few acts are enforceable only by certain work environments, meanwhile on the other hand there are acts that are fixed for all nature of work. 

Listing a few Indian labour laws here- 

  • Minimum Wages Act, 1948
  • Payment Wages Act, 1936
  • The Payment of gratuity Act, 1972
  • Employees Provident Fund 
  • Employees State Insurance, 1948
  • The Payment of Gratuity Act, 1972
  • The Industrial Employment Act, 1946
  • Maternity Benefit Act, 1961

The Nine labour laws exempted under Start-up India Scheme is – 

  • Industrial Dispute Act, 1947
  • The Trade Unit Act, 1926
  • Building and Other Constructions Workers’ (Regulation of Employment and Conditions of Service) Act, 1996
  • The Industrial Employment (Standing Orders) Act, 1946
  • The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
  • The Payment of Gratuity Act, 1972
  • The Contract Labour (Regulation and Abolition) Act, 1970
  • The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
  • The Employee State Insurance Act, 1948

To Conclude

Adhering to laws and regulations of the country is a crucial responsibility, rather than a burden, of any business. And the abovementioned are the compliances that require greater notice in the initial stage of the business. Many large corporations have their own legal team to take care of the compliances, but for starters like young Startups and MSMEs who would feel it new into the process, when outsourced to an expert like Versutus in the field it reduces possible difficulties and saves on the much tiring legal costs.

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