Identifying Laws Applicable to Various Industries and their Initial Compliances

Contracts lie at the crux of running any business. A contract is required to ensure the smooth functioning of work and is a great mechanism to ensure recourse in case of non-fulfilment of work.

Having basic knowledge about various aspects of contract management can prove to be useful for entrepreneurs. As per the Indian Contract Act, 1872, all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration with a lawful object, and are not expressly declared to be void.

Employee contracts are one of the most crucial aspects to be looked into while starting a venture.

Founders many a time collaborate with their own trusted circle of friends in the beginning and while this ensures a certain ease and efficiency to business operations, outlining and formalizing employee contracts with details about salary, scope of work and stock options (if any) with even your first few employees is always recommended. Having this clarity from the very beginning helps the new businesses to reduce risks at a later point in time.

Contract management involves overseeing agreements made with suppliers, customers, partners and employees. Effective oversight is critically important because sales can be lost and regulatory penalties can ensue from poor contract management. In the early stage of operations and post operation too, there are various contracts that a company has to abide by, therefore, the adherence to contract law is one of the most important requirements for the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4(c) (Syllabus 2022).

With progressive de-licensing of the industries, only four industries have been retained under compulsory licensing under the Industries (Development & Regulation) Act, 1951:

•Electronic Aerospace and Defence Equipment

•Industrial Explosives

•Specified Hazardous Chemicals

•Cigars and cigarettes of tobacco and manufactured tobacco substitutes In the present case the collaboration with the German based Company is for manufacturing of defence equipment. Hence, Industrial License will be required.

Procedure to apply for Industrial License

1.All applications for Industrial License under IDR Act, 1951 can now be applied online on G2B Portal in Form FC-IL/FORM FC-IL - Composite form for Foreign Collaboration and Industrial License.

2.The Applications are scrutinized for their completeness. Information in respect of incomplete applications is sought from the applicants.

3.If the applications for grant of license are complete in all respect with necessary documents, DPIIT circulates them to concerned administrative ministries, Ministry of Home Affairs, Concerned State Government and other concerned agencies for their comments.

4.After receipts of Comments from the concerned Ministries/Agencies, files are processed and submitted to the Licensing committee for consideration.

5.Licensing committee can recommend for grant of license/rejection of proposal/deferment of the proposal, based on the comments received and deliberations in the Committee. After recommendation, the approval of the Minister in charge of DPIIT is obtained for grant of licenses or otherwise.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 3(d) (Syllabus 2022).

Segregation of laws applicable on the Company into the Industry specific and general is essential for Secretarial Audit. After considering the following factors the auditor should make the segregation of the same based on the laws being applicable on the Company

•Key financial parameters such as turnover, paid-up share capital, net worth,borrowings, etc.

•Geographic location of registered office, units / divisions / plants / branches,etc.

•Status of company such as listed / unlisted

•Types / class of company such as Private, Public, Holding, Subsidiary,

•Foreign, Nidhi, Producer, Section 8, etc.

•Registration with various authorities such as SEZ, Sectoral Regulators, etc.

•Segment such as manufacturing / trading / service / e-commerce andindustry classification thereof.

•Agreements governing rights, obligations of shareholders such as Jointventure, shareholders’ agreements

•Number, class and category of employees / workers such as women,contractual employees, etc.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 4A(iv) (Syllabus 2022).