India is the new start-up nation! With third highest start-ups launched in the world after US and UK in the year 2015. To build the investors’ confidence and brand reputation, to drive the top line growth and protect the bottom line, it’s imperative for any start-up to be ready! As startup our plan should focus all three aspects of a business i.e. Commercial, Financial and Compliance.
Product Catalog Bandung Home Decor Design Furniture
Are you a compliant start up?
1. Are you a compliant start up?
India is the new start-up nation!With third higheststart-ups launched in the world after US
and UK in the year 2015.To build the investors’ confidence and brand reputation,to drive
the top line growth and protect the bottom line,it’s imperative for any start-up to be ready!
As startup our plan should focus all three aspects ofa business i.e.Commercial,Financial
and Compliance.Startups are known for bringing in innovative business ideas,process,
products etc. Hence it becomes more critical to analyze the regulatoryimpacton such
ideas,process and products.E-commerce companies are bestexample wherein since
pastfew months they have been under tremendous pressure ofReserve Bank of India,
DIPP, VAT departments for adhering to various compliances including ofthose who are
selling through their platform.Startups have contributed tremendouslyin improving
consumer experience.Butit also essential thatif you are introducing any new concept then
that should be within the four walls ofIndian law. So it is pertinentto have regulatory
validation along with commercial validation atthe beginning,when stakes are low and
plans are more flexible.
Compliance is all aboutthe knowledge of rules that regulate your kind of business and complying with them.Owing
to little knowledge and complexityof applicable statuettes,owners ofSTARTUPs shy away from it thus missing on a
very importantmanagementtool that ensures security,quality and the potential expansion of the bus iness.
Indian Central and State governmenthas lately been trying to simplifythings for STARTUPs so that projects like
‘Make in India’ are a success.‘Start-up India’ initiative, One Person Company(OPC), Goods and Sales Tax (GST),
online registration platforms like ebiz.com are some steps to ease the effort of running a business in India.However
looking at the diversity of STARTUPs, their magnitude and the distinctenvironmentto operate and quaintinputs
required,it’s necessarythat focused measures are taken.
BENEFITS
A Compliantstartup can enjoythe following benefit:
1. Absence of regulatory risk which can be operational,monetaryand imprisonment;
2. Better chances of attracting investors;
3. High Consumer confidence;and
4. Enhances Goodwill.
COMPLIANCE ASSESSMENT
Ordinarily, a companyoperating in the Indian regulatory environmentneeds to complywith Central,State and Local
legislations depending on the following:
1. Business ofthe Company;
2. Operational Process followed to do such business;
3. Locations where such business is being carried on;and
4. HR involved in the process.
The compliances which are required to be executed under these acts can be broadlydivided into the following
category:
a. Due Date Based Compliances:Every business entityhas to follow and report various statutory compliances i.e.
monthly, quarterly, half-yearly, annuallye.g. Income tax return, TDS return, depositofTDS, VAT, Service tax etc.
These types of compliances are referred to as Due date based Compliances.
b. Ongoing Compliances:As the name itselfsuggests,apartfrom the due date based compliances,every act
prescribes certain setofmandatorycompliances which are to been assured bya corporate at any and every given
pointof time e.g. maintenance ofBooks of accounts,displayofabstracts of HR rules and regulations etc
c. Event based Compliances:These are compliances which are triggered due to a corporate action e.g. if you are
2. opening a new office or starting a new productthen you need to get various registration/modifyregistrations ofShop
and Establishment,VAT, CST, Service Tax. Like-wise a simple actofchange in an Executive Director can impact
more than 10 Acts in a startup and more than 30 acts in a manufacturing company.These are Event based
compliances which can impactvarious divisions within an organization.
As per a research conducted by LexComply.com team , if we consider top thirty mostcommonlyapplicable laws then
due date based compliances are less than 10%,ongoing are almost50% and event based compliances ,which are
mostlyignored,are almost40% of the total compliances.Further non compliances ofsuch cases mayresultin
imprisonment,operational closure or monetarypenalty. As per the research there are provisions ofimprisonmentin
almostof60% cases.
Ignorance or lack of experience is also one of the reasons thatthe compliance culture is notnurtured but if you are
running a business,ignorance can’tbe your defense.Financial blockades,litigations and finallyend of the enterprise
are the aftermath of such callousness.
Realizing the financial and legal implications ofbeing non-compliant,compliance qualifies to be in the top to-do listof
all start-up founders.The think tank of a start-up should always consider establish a compliance managementsystem
which has facilitates the following features:
Identification of applicable laws;
Allocation of responsibilities to various team members;
Educate and train the team about the same;
Review regulatoryimpactof a business decision;
Ensure that requirements are incorporated into business processes;
Integration of departments,consultants and management;
Enables adoption to regulatorychanges;
Act as repositoryof statutes,forms , challans and compliance supportdocuments;and
Facilitates review operations to ensure responsibilities are carried outand requirements are met.
HOW STARTUPs CAN BECOME COMPLIANT?
PROFESSIONAL SERVICES
Startup can create a communityof practicing professionals who can mentor the STARTUPs teams in-house.These
practicing professionals are no third parties butthe Chartered Accounts, CompanySecretaries,Labour Law experts,
Fire and safety experts etc already working with the STARTUPs. These mentors can help STARTUPs to identify the
applicable Statutes thatthey have to abide as per the nature of their business and sensitize them aboutthe
compliances relating to licenses,approvals,returns records/registers,statutorydues and other compliances.
Additionally also motivate to lay down strong internal controls and processes thatensure thatSTARTUPs meetnot
only the national standards butalso complyto the International standards ofquality and security, thus, opening
various new avenues of growth and expansion.
ADOPTION OF TECHNOLOGY
Compliance is a crucial function where STARTUPs should integrate technology.Visualize an automated compliance
managementsystem thatidentifies the applicable and relevantcompliances,assigns the due tasks,tracks and
monitors the progress ofthe pending tasks and reports the status ofall due compliance tasks.Compliance
Managementtools take the ease of compliance to another level by building comprehensive libraryof acts and laws
and complete repositoryof the required documents thatcompliance becomes simple and efficient.
Compliance Managementtools like LexComply.com with the mentoring ofexisting Practicing Professionals attached
with the enterprises can help in providing a platform to integrate the communityof Practicing Professionals and
STARTUPs by way of:
1. Creating a Compliance Hierarchy,
2. Standardization of Statue wise compliance check list;
3. Reminding the due/upcoming compliances;
4. Task Management;and
5. Training of in-house team.
3. These tools are costeffective as it does notrequire any Capex on the server or creating library. These tools can be
accessed 24X7 from anywhere.
So if startups use such tools and make an effective integration of external professional and in-house team,then it will
certainly help in improving compliance environmentwith minor changes in budgets.Ifan enterprise is adhering
productrelated regulations like Food Safety, BIS, Legal metrology etc then their products are more acceptable not
only in domestic butalso in international marketsegment.So is an enterprise diligenton labour laws will have
improved HR relations and reduces costofstrikes,lockouts or high staff turnover. STARTUPs also have the
opportunity to acts job workers to Big Brands or are deemed exporters provided they not only maintain high product
quality standards butalso are sensitive towards regulatorycompliances.A compliantenterprise ifin rightmarket
segmentwill have numerous alternative means ofincreasing the business and having access to funds.
Presentlycompliance is complexfor startups.But this disadvantage can be turned around and changed into an
opportunity by having the bird’s eye view of the whole tangle of regulations and adopting focused measures.The
tech-savvy STARTUPs can make compliance a key differentiator in improving their efficiencies,reducing costs,
gaining insights to strengthen their credentials,products and more importantlypositioning themselves strategicallyin
new geographic markets.