How to register your company on your own?

By Nevin Clinton, Flywork.io TeamFlywork.io. 

    Whenever one starts a company, it is mandatory to get it registered. Forms of business like sole proprietorship and partnership can be unregistered, but if one wants his/her company to have a legal existence of its own, registration is a necessity. The process of registration is a bit time-consuming but the benefits outweigh the burden. This is because registration ensures that there is protection for the company in case of crisis, lawsuits, or bankruptcy. Further, it ensures that money can be raised more easily through private equity. And most importantly, registration ensures that the company will go on irrespective of whether a founder, director, or member quits. So very clearly, registration is a process that is of paramount importance and hence, it is essential to understand how to do it.

Steps to register a company

  • DIN and DSC: To register a company, first and foremost, it is essential to apply for and obtain the Director Identification Number (DIN) and Digital Signature Certificate (DSC). The former is a unique identification number given to the director who is applying for registration while the latter is a digital key that has details about the director and the company. This can be done on the official website of the Ministry of Corporate Affairs (https://www.mca.gov.in/content/mca/global/en/home.html) where these options can be found under ‘MCA Services’. Various details will be required such as identity proof, residence, contact details, passport, and so on. 
  • Name of the Company: After obtaining the DIN and DSC, one must get the name of the company approved. For the same, eForm 1A which can be found on the website must be filled. There are a total of six names that can be selected in order of preference. These names must be chosen carefully and it must be ensured that there is no overlapping with an already registered company. The provisions of the Prevention of Improper Use Act, 1950, and its directions on names must also be adhered to. Rs. 500 must be paid as a fee here and a digital signature must be attached.
  • MOA, AOA, and Certificate of Incorporation: After getting the name approved from the Registrar of Companies, one must fill in Forms 1, 18, and 32 within 60 days to obtain the certificate of incorporation. The Memorandum and Articles of Association must be drafted in this period and they must be printed and stamped. They must also be signed by at least two subscribers. These must be sent as a physical copy to the concerned Registrar of Companies. Once every detail is verified, the Certificate of Incorporation will be provided by the RoC.
  • Commencement: After registration, Form 19 has to be filled and the prospectus must be attached. There is an alternative in this regard which is to file Form 20 and provide a statement instead of the prospectus. Applications for GST number, Permanent Account Number, and Tax Deduction Account Number can then be made. A certificate of commencement will finally be issued following which the company can begin functioning. 

The process might vary depending on the nature of the enterprise

     It is noteworthy that the procedure discussed above is for a private company and the documents to be submitted and the various compliance mechanisms vary depending on the nature of the enterprise. For example, entities covered under Part IX of the Companies Act, 2013 must file two extra forms for registration – eForm 37 and 39. Meanwhile, for smaller entities like micro, small and medium enterprises (MSMEs), just furnishing details of PAN and Aadhaar Card is sufficient to register. In the case of a sole proprietorship, there is no need for registration and it is the same with partnerships. 

MCA21 V3 provides for ease of registration

      For ease of use, the MCA has planned to revamp its website (MCA21 V3) to ensure that it is user-friendly and all the forms required for the registration of a company are easily available and accessible. A tutorial document has been released in this regard (https://www.mca.gov.in/bin/dms/getdocument?mds=mSnkNJBMIaj3qhkshCvlhA%253D%253D&type=open) and the changes are expected to be made very soon.

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A Complete Guide on Power of Attorney

Nevin Clinton, Flywork.io TeamFlywork.io. 

    A Power of Attorney (hereinafter referred to as POA) is an important document that allows a person to appoint an attorney or an agent to act on his behalf. The agent can then make decisions on behalf of the principal on matters like finances, medical care, property, etc. Now, there are various types of POAs and each one gives varying degrees of power or control to the agent. 

Definition of Power of Attorney

     Section 2(21) of the Indian Stamp Act, 1899 defines ‘Power of Attorney’ as one that includes any instrument (not chargeable with a fee under the law relating to court-fees for the time being in force) empowering a specified person to act for and in the name of the person executing it.

Types of POAs

      POAs are of two types broadly –

General and Specific. In the former, a vast amount of power is given to the agent whereas in the latter he is empowered in just a particular aspect. Therefore, the power granted to the agent is expressly limited in specific POAs. There are also other types such as durable POAs. Here, the principal empowers the agent to act on his behalf even if he reaches a stage where he can’t communicate. This can be due to serious illness or injury. Yet another type is a medical POA. These empower the agent to make decisions on behalf of the principal specifically in cases of medical illness. 

Uses of POA

 Following are the decisions and legal aspects for which a Power of Attorney can be used.

  • Agreements: A POA can empower an agent to enter into contracts and to sign, execute or deliver any agreement.
  • Property: An agent upon being empowered by a POA can make decisions on the properties of the principal. He can lease, sell, collect rents, and so on. He can also execute contracts in this regard. 
  • Stocks: An agent can sell and buy stocks and enter into contracts for the same.
  • Tax: Filing and signing of tax returns and other tax-related documents can be done by the agent. 
  • Banking: An agent can execute cheques and security agreements on behalf of the principal. He can also deposit and withdraw funds. 

Pros and cons of POAs

    A Power of Attorney helps make things simple for the principal. With a trustworthy agent to take care of important aspects relating to property, tax, and contracts, the principal need not go through the burden of having to take care of each of the above. Further, even if there is scope for misuse of power by the agent, a POA can always be revoked.

    A disadvantage as mentioned above is the possibility of misuse of power by the agent. If the POA is not drafted well or the agent decides to go rogue, several risks are involved. But then, it is worth noting that even if an agent commits fraud, the principal cannot be held responsible for it. 

Points to remember while drafting POAs

  • Complete details on agent and principal: A POA must have the name, address, property owned, and such details on the principal and the agent. It must also be signed by both and there must be two witnesses of sound mind. 
  • Granting power: The POA must then have details on what powers the agent will have and can exercise on behalf of the principal. While granting such powers, the POA must be strictly construed. Thus, there must be complete clarity and no room for ambiguity. 
  • Registration: Registering a POA is not compulsory, but it is advisable. The Registration Act, 1908 mandates that it is the Sub Registrar who must authenticate it. 

Revocation of POA

     The principal has the right to revoke a POA through a written statement. Further, the death or bankruptcy of the principal would also lead to the automatic revocation of the POA. Also, in cases of specific POAs, if the objective for which the agent was appointed is satisfied, it would be revoked by itself. There can also be a mutual agreement between the principal and agent agreeing that the POA will get revoked to broaden the happening of an event. 

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Withdrawal of safe harbour for failure to comply with IT rules: What it means for Twitter and its users

Nevin Clinton, Flywork.io TeamFlywork.io. 

    There is a huge conflict that has been brewing for quite some time between American social networking giant Twitter and the Indian government. A lot of this has to do with the failure of the company to comply with certain provisions of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (hereinafter referred to as ‘IT Rules’). This has led to the government withdrawing ‘safe harbor’ provisions under the Information Technology Act, 2000 (hereinafter referred to as ‘IT Act’) for Twitter, meaning that the site will now be directly responsible for all the content that it displays. News portals including ANI and the Minister for Law & Justice, Communications, Electronics, and Information Technology Ravi Shankar Prasad have confirmed the same and this could have a plethora of serious implications.

What caused the current standoff?

    First and foremost, it is essential to understand was the situation before the current standoff. Twitter was officially recognized by the Indian government under Section 79 of the IT act as an ‘intermediary. An intermediary can’t be held liable for information that is provided or made available on its platform unless the platform itself initiated the said information in question.

    The IT Rules were then announced in February 2021. With various other obligations like identifying the originator of particular content and taking down flagged content, it required all technology companies in India to appoint three officers. This was because of increasing cases of false information, rumours, and propaganda being spread on social media. It was mandated that these three people who are appointed – a chief compliance officer, nodal officer, and grievance officer must be Indian employees of the company. There was also a warning issued by the central government that if this rule was not complied with, the companies would lose their status as an intermediary with the possibility of a criminal action also being open in case of complaints being filed.

    After this ruling, tech companies like WhatsApp and Google complied with the IT rules and appointed the three officers. Twitter however did not do so and asked for more time. Even after the completion of the extra time allotted, Twitter appointed just one person as a nodal and grievance officer. Further, it was alleged by the government that the person appointed was not an employee of the company but was clarified to be a contractual employee. But with no appointment of a grievance officer, the company lost its status as an intermediary.

What this means for Twitter and its users?

   The withdrawal of the ‘safe harbour’ status of an intermediary has serious implications for Twitter. The platform is now open to a lot of penal action as it will become responsible for its users' posts. Let’s say there is a tweet that is put up by an anonymous account defaming the government. Twitter will then be responsible for the tweets and liable for penal action. However, this does not mean that the user won’t be responsible. Nothing changes with regard to the responsibility of Twitter users, but there is an added responsibility on the site and a huge one at that.

After the statements by Minister Ravi Shankar Prasad, actions against the company have already started in full swing. One such action came about on the 16th of June when an FIR was filed against Twitter for not removing ‘misleading tweets’ that incited communal disharmony with regard to an incident where a Muslim man was allegedly beaten up at Loni in Uttar Pradesh. 

What next?

      It is expected that Twitter will comply with the IT Rules very soon as the burden of appointing a compliance officer is far lesser than being responsible for each and every tweet on the site. There could be sanctions for the delay in the appointment for Twitter and till the same is done, it will not be recognized as an intermediary, meaning that it will be exposed to action that can be taken for the content on its site. Therefore, the quicker Twitter acts, the more damage it will save itself from. This saga has turned out to be one with serious implications and it remains to be seen how it pans out in the future. 

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Income Tax Law in India in 2021

The interim budget got announced in January by Finance Minister Piyush Goyal had seem to have bought series of changes in Tax Rules. The changes can be seen from a full rebate on personal income up to ₹ 5 lakh in a year to a 25% hike in standard deduction threshold.

He was quoted saying, “This is not just an interim budget, this is a vehicle for the developmental transformation of the nation.”

Making a bold move, the government proposed a full tax rebate to individual upto ₹5 lakh income/year. The move made to benefit “the great Indian middle class” in words of Arun Jaitley will cost Government ₹18, 500 crore.

Income Tax Act: The provisions of income tax are contained in the Income Tax Act, 1961 which extends uniformly to the whole of India and has been effective since 1962. The act contains provisions for determining taxable income, tax liability, procedure for assessment of penalties, etc.

1. Annual Amendments – Since the Income Tax Act is a revenue law, it requires amendments whenever the government wants to make changes in it. Under the annual amendment of existing revenue generation requirements, the Government proposes its finance bill, which directly decides the threshold limits for various tax rates which are commonly referred to as Income Tax.

2. Income – Income in broad terminology is defined as any receipt in the form of money or money’s worth which occurs with a certain regularity or expected regularity from a definite source.

key takeaways from the income tax changes proposed in budget 2020-20:

1. “Straight” income tax rebate of Rs. 12,500

The most breaking announcement has been the Government’s decision to full rebate to individuals with annual income up to ₹5 lakhs/ annumn.

Though the income-tax slab applicable to other individuals remain same.

Government has clarified its stance as to the move was made to strengthen the purchasing power of the middle-class who holds the key to India’s future.

According to existing income tax rules, applicable till Assessment Year 2020-20, personal annualincome up to ₹2.5 lakh is exempt from Income Tax. Section 87A of the Income Tax Act provides option for a rebate to individuals on income up to a certain limit.

The Income Tax Department will give a ‘straight rebate’ of ₹12,500 to those having an annual income of ₹5 lakh from the beginning of next fiscal year. It will nullify their tax-liability.

CBDT clarifies that for those earning more than ₹5 lakh annually, the oldtax rates will continue.

Here is an example to explain what the income tax proposals mean for assesses below 60 years of age:

Budget 2020 tax calculation examples

Taxable annual income in rupees (after adjusting deductions) 3,50,000 4,00,000 5,00,000 10,00,000
Tax 5,000 (@ 5% on 1,00,000) 7,500 (@ 5% on 1,50,000) 12,500 (@ 5% on 2,50,000) 1,12,500 (@5% on 2,50,000, 20% on 5,00,000)
Rebate under Section 87A of I-T Act 5,000 7,500 12,500 NA
Tax liability 0 0 0 1,12,500
Cess @ 4% 0 0 0 4,500
Tax payable (after cess) 0 0 0 1,17,000
         

 

2. Standard deduction hike

The second change that was talked about is that standard deduction limit in which employees & pensioners are given a straight relief from taxable income – from ₹40,000 to ₹50,000in a year.

As per the new rules prevailing in assessment year 2020-20, persons having gross income up to ₹6.5 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc.

Taxable income will be derived by adjusting all exemptions & deductions applicable under the income tax laws against the gross income.

Besides deduction available under Section 80C of the Income Tax Act, which provides for tax relief against a variety of investments – such as life insurance and savings scheme Sukanya Samriddhi , Section 80D (medical insurance), Section 80E (education loan) and Section 80TTA (savings account interest) provide for a range of deductions to the assesses.

3. TDS (tax deducted at source) relief

The interim Budget 2020-20 also proposed a four-fold increase in the limit for TDS applicable on interest income (from post office/bank deposits) to ₹40,000 per annum. The move is calculated to benefit Senior Citizens and small depositors who depend on interest income from deposits in banks and post offices.This will benefit small depositors and non-working spouses.

4. Hike in TDS threshold on rent

The Government proposed to increase the TDS limit applicable to rental income by 1/3rd to ₹2.4 lakh, compared to the existing threshold which means households earning income in form of rent are likely to benefit, say financial advisors.

According to current rules applicable in assessment year 2020-20, the lessee – or tenant – is required to deduct TDS on annual rent above ₹1.8 lakh. This tax is applicable to lessees other than individuals or Hindu Undivided Families (HUF), unless the entity is subject to tax audit.

5. Relief on notional rent

Government proposed to allow house owners to claim relief on a second property as self-occupied. This means the assesses will not have to pay tax on the second property on the basis of notional rent. As per current rules applicable in assessment year 2020-20, assesses having more than one house have to pay income tax on the basis of notional rent.

6. Long-term capital gains relief

The Government proposed to allow a profit of up to ₹2 crore from sale of residential property to be invested in not one but two properties to avoid paying tax on capital gains, subject to certain conditions.

The benefit of rollover of capital gains under Section 54 will be increased from investment in one residential house to two residential houses for a taxpayer having capital profits up to ₹2 crore.

According to the current rules applicable in assessment year 2020-20, individuals are allowed to utilize the gains from sale of property on purchase or construction of one new property to avoid tax.

7. Easy processing of income tax refunds

Making the conclusion out of the budget speech it is very clear that Income tax refunds will be processed within 24 hours and released immediately.

Non-Disclosure Agreement and It’s essentials

Nevin Clinton,Flywork.io TeamFlywork.io. 

    A non-disclosure agreement (hereinafter referred to as NDA) is an agreement where the parties agree to not disclose content or the information in the agreement. Such agreements can be entered into between two companies, individuals, an individual and a company, and so on. NDAs are customary around the world when information is required to be kept confidential. In India as well, the agreement is quite common. It is governed by the Indian Contract Act, 1872 here and such an agreement becomes valid and enforceable when stamped. 

Why is a non-disclosure agreement signed?

An NDA is signed in order to protect trade secrets while entering into business deals. This becomes extremely important especially in the case of protecting intellectual property rights and more so for modern-day startups. Let’s assume that a company has to hire an adviser from outside the company to help give inputs for a novel product. In such a case, the adviser can be asked to sign an NDA so that he does not disclose information about the product to the company’s competitors or anybody else. 

An NDA could be unilateral, bilateral, or multilateral

An NDA can be both unilateral where just one party agrees not to disclose sensitive information and bilateral where both parties agree to maintain secrecy. There can also be multilateral NDAs that are signed by three or more parties. These help in doing away with the need for multiple agreements. Also, it does not have to be only business deals where an NDA can be signed as it can be signed even between an employee and employer of a company or a non-disclosure clause can be inserted in just about any contract. 

Essentials of a non-disclosure agreement

  • Must be an agreement: First and foremost, an NDA must have all the essentials of an agreement. For this, broadly, there must be an offer, acceptance, creation of a legal relationship, and consideration. 
  • Protected information: With regard to the non-disclosure part of the agreement, it must have the information that is protected. The parts of the agreement to be kept confidential also have to be mentioned. This can be done so by marking certain documents as ‘confidential. Along with the same, a time period must also be mentioned up to which the agreement must be maintained.
  • Imposition of duties: Certain duties can be imposed with regard to the information in the agreement. For example, mentioning how to convey sensitive information and whom to. Consequently, failing to adhere to the said duties must result in punishments and the same must be mentioned as well. Certain exceptions can also be given where sharing the information would not attract consequences. 
  • Dispute resolution: Referencing as to how to settle disputes arising out of the agreement can be provided, though it isn’t of too much importance. Here, a ‘jurisdiction clause’ that mentions the court to have jurisdiction in case of a dispute can also be inserted. There can also be clauses mentioning that disputes must be settled through arbitration only and so on. It is worth noting that such jurisdiction clauses are not ‘essentials’ as such as an NDA can do without them as well, but including them can make things easier if a dispute arises in the future.

Importance of a well-drafted non-disclosure agreement

Firstly, a non-disclosure agreement is important as it helps maintain the confidentiality of information that could be misused. Further, such agreements help in building trust and confidence among the parties thereby further benefiting the business. This is because they help in knowing obligations and adapting to them. If confidentiality is kept, there is bound to be an increase in trust. 

    Due to the importance of NDAs, it is important that they are well-drafted. If such an agreement lacks sharpness, it could result in a lack of clarity leading to the confidentiality being broken or causing a confusing situation. If that happens, it could result in lengthy litigation to resolve the issues. This is exactly why legal personnel should be the ones to draft a Non-Disclosure Agreement. It is an absolute must for the parties concerned to read and understand each and every term in the agreement. If there are terms that are difficult to understand, they must be clarified as this might lead to a number of issues or disputes in the future. 

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Gratuity under the Social Security Code, 2020 and its implications 

Priyasha Sen Gupta, Flywork.io TeamFlywork.io. 

Introduction

The term ‘Labour’ falls underneath the Concurrent List of the Indian Constitution. The Code on Social Security,  2020 arose from the recommendations of the 2nd National Commission on labor, which stated in its report that the existing labor laws must be amalgamated based on the subject matter. The Code came into effect in  December 2019, while the Parliamentary Standing Committee submitted its report on July 31, 2020, and subsequently proposed a new draft law, the Code on Social Security 2020, which aims to review and integrate the Social Security Law in order to extend social security to all employees and workers, be it organized, unorganized sectors or any other sectors. Another major objective of the Code is to promote technology to ensure compliance and enforcement of its regulations are easily achieved. 
Currently, unorganized workers are not covered by the Employee Provident Fund and Employees' State Insurance.  According to the Social Security Code, 2020, the Central and State Government will issue the special schemes to ensure that the gig workers and others in the non-organized sectors have tangible social security and benefits in the form of pensions, benefits for accidents at work, funeral allowances, etc. 

Amalgamation and Improvement of Various Laws regarding Gratuity

One of the nine laws that the Code subsumes is the Payment of Gratuity Act, which is a major retirement benefit for employees in India and applies to all organizations with more than ten employees (including unorganized workers) (i.e., MNC, schools, and other companies) because employees sacrifice the prime moments of their lives for the development, prosperity, and betterment of their employers, an employer pays his employee gratuity as a  graciousness or gift. Gratuity is a statutory obligation of the employer to promptly tip their employees when they are due. Previously, gratuity was applicable only to employees who had worked in the company for five consecutive years, based on their 15-day salary for a full year. In the event of death, disability, etc., it can deviate from the five-year rule. 
The mandatory minimum five-year gratuity was abolished in the Bill of the Social Security Code, but different threshold structures were introduced for various categories of employees. The prerequisite for this is that the regular and permanent employees must have worked for at least five years to be eligible. Although no such restriction applies to employees with fixed-term contracts, the employer pays gratuity on a pro-rata basis i.e., it is linked to their tenure of the employment. If an employer fails to pay any amount of gratuity to which an employee is entitled,  he shall be sentenced to imprisonment for a term which may extend to one year or with a fine which may extend to Rupees fifty thousand or with both. 

Current Scenario

This move is in sync with the changing dynamics of the Indian labor force. Since the duration of service has generally been reduced, most workers are now employed on a contractual basis. Further, it additionally allays the concern raised by trade unions, that certain employers retrenched employees before the completion of 5 years,  solely to avoid making gratuity payment. 
Under the existing Payment of Gratuity Act, wages include the basic salary and dearness allowance and exclude all other allowance. However, under the Social Security Code, a new concept of deemed wages has been introduced, which means that if an employee receives more than 50% of the total remuneration in the form of allowances and other amounts not included within the definition of wages, then the excess amount would be considered as wages for the purposes of contributions towards Employee Provident Fund. The prospect of social security would, as an immediate consequence, increase the financial burden on employers and also reduce workers' cash. However, this could be mitigated if the Central Government stipulates a lower contribution rate for employees within the framework of the provisions of the Social Security Code. 
Gratuity is exempt from taxation, as long as every full year of service does not exceed 15 days salary, calculated based on the last salary received (up to Rs.2 million). It should be noted that employers can pay additional gratuity to employees, which is known as ex-gratia and is a voluntary contribution. Ex-gratia is subject to tax.

Conclusion 

Overall, the enactment of the Code on Social Security, 2020 is a welcome step by the Labour Ministry, which has made it easier to understand the scope and the ambit of the social security laws by consolidating the preexisting laws. The Code also defined various terms such as gig workers, unorganized workers which were not previously defined. This will help increase employment opportunities by engaging workers on a temporary basis and also make organizations responsible for the social security of these segments of workers, which will help combat exploitation while improving their overall compensation.

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Essentials of a Sale Deed

Nevin Clinton, Flywork.io TeamFlywork.io. 

    A sale deed is one of the most important documents in any deal involving housing or property. It is the document that proves one as the owner of the property. It is drafted when the sale is done and it is the one that completes the sale. It does so by transferring the ownership rights to the buyer. Provisions of the Transfer of Property Act, 1882, and the Registration Act, 1908 are the acts that govern the said sale deed. 

Now, once this deed is drafted and signed, the rights get completely transferred. Due to this, a sale deed is of paramount importance and it is essential that it is drafted in a well-organized and effective manner. Firstly, it is necessary to look at when a sale deed comes into the picture and to whom it is applicable. Simply put, the sale deed becomes essential when there is a sale of a property. It is thus applicable to both the seller and the buyer and acts as proof of transfer of ownership and hence, the ownership of the buyer. 

Sale deed and sale agreement are different terms

It is important to understand that a sale deed is not the same as a sale agreement. While the latter is merely an agreement to transfer the property later, the deed actually transfers the property. Naturally, for a sale deed, there are certain essentials that must be kept in mind to ensure that the deed is legally binding and to remove any difficulty which is dealt with below.

What are the essentials of a sale deed?

  • Details on parties: While drafting a sale deed, first and foremost, it is absolutely necessary to mention the name and the details such as an address, age, contact, occupation of the parties involved i.e. the buyer and the seller. It is a must that these details are bonafide. There must then be a description of the property with complete details on its dimensions, registration number, construction details, location, neighborhood, and so on. 
  • Consideration of sale: The sale deed must contain the exact consideration of the sale which is the price at which the property is being transferred. It must be mentioned in both words and numbers. Along with the same, the mode or method of payment must also be specified. Similarly, if the payment is being made in installments, full details on the same, the regular payment, and the time duration must be specified. There must also be complete clarity on the delivery of the property and how and when it shall be transferred. 
  • Other important clauses: Apart from the details of parties and consideration, there are certain details or ‘clauses’ that are must-haves in a sale deed. For example, there is a ‘Transfer of Title’ clause which is a key component as it expressly states the intent of the seller to transfer ownership of the property to the buyer. Further, Encumbrance clauses and Indemnity clauses are also essentials in this regard. The former is one that ensures that the seller has freed the property and hence the buyer of all existing charges like taxes, arrears, and so on. If there are any such charges, the indemnity clause takes effect as it indemnifies the buyer against them as well as any legal dispute relating to the property arising due to the prior actions of the seller.
  • Default clause: Finally, a sale deed must contain a default clause were details on how the penalty has to be paid by either the buyer or seller on defaulting can be elaborated. It can also include details on how to resolve disputes arising out of the same. 

Apart from these, there can be various other details and clauses that can be added as long as they are legally valid and fair. All of the aforementioned essentials must be kept in mind and included while drafting a sale deed.

The sale deed is of huge importance and therefore must be drafted by a legal personnel

The sale deed is of huge importance as it is a legally binding document that acts as proof of ownership. Since it contains a plethora of details on the transfer of the property, it provides clarity to not only the parties themselves but also to others who could be interested in the same such as an investor in case of resale. Thus, such a valuable document requires utmost care in drafting. Lapses in drafting could have huge repercussions and to avoid such a situation, care is required. This is exactly why drafting must be done preferably by legal personnel who are trained in doing it. 

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Employment Policy – Need, benefits, and essentials

Nevin Clinton, Flywork.io TeamFlywork.io.

An employment policy is a key aspect of any business or company and also one of the most vital ones. It helps increase the understanding between the employer and the employee and establishes the nature of the relationship between the two. There can be various facets to an employment policy which can be included all in the same document or there can be separate ones. Examples include a disciplinary policy, grievance redressal policy, absence management, non-disclosure of confidential information, data protection, equal opportunities, and much more. These policies help in informing the expected appropriate behavior in the workplaces thereby making clear what is expected and what is not. 

Need for a well-drafted employment policy and its benefits

If an employment policy is drafted effectively, coupled with systematic procedures for complaints and a lack of discrimination, it can pay rich dividends in ensuring employee satisfaction. Such a policy helps in increasing confidence in the employees and also helps in ensuring that the employees don’t have any room to behave inappropriately or exploit the employer by any means. On the other hand, if there is no proper employment policy in place, there could be confusion and a lack of clarity especially when there are complaints to be filed. This is exactly why it is of paramount importance to frame an employment policy robustly.

Further, it is important to keep changing an employment policy with time as newer challenges, requirements and legal standards come up. For example, in today’s digital world, it becomes essential to frame a data protection and social media policy. Such aspects were unknown back in the day and it is necessary to evolve with time.

Now, having dealt with the need for an employment policy, concerning the benefits, they are there for the world to see. Any policy that is framed well and is fair is beneficial because it gives rise to clarity. With employment policy also having various facets such as disciplinary policies, absence management, opportunities and so much more, it becomes hugely beneficial and one of the key aspects of the very identity of a company.

Essentials of an employment policy

An employment policy can be as detailed or as concise as it can get, but the fact of the matter is that it must contain certain ‘essentials'. First and foremost in that regard is the code of conduct or a disciplinary policy. A complete procedure concerning the expected standard of conduct and the action that would be taken for not adhering to the same must be given. This can include policies on sexual harassment at the workplace, exploitation, and so on. Guidelines on the usage of alcohol, tobacco, and drugs inside the premises can also be included here or as a separate policy as well. Secondly, there must be a policy that lays down the hierarchy and the modes of communication. Guidelines on the usage of technological devices on the job and the like can be elaborated here. In that regard, a policy on privacy especially concerning data has become all the more important. 

Next up, a policy on non-discrimination or equality must be provided. This can lead to increased confidence in the employees and can also dissuade them from engaging in discriminatory conduct. Moving on, yet another crucial policy is working time and absence management. Provisions on maternity and paternity leave can be given here. A financial policy dealing with pay, bonuses, and so on is also essential. Grievance redressal is another key policy that helps in laying down how and through whom redressal must be done. Yet another key policy is that of health and safety. Ensuring the same through a sound policy will go a long way in employee satisfaction.

Depending upon the nature of the company, there could be several other policies that could be introduced. If all of these are drafted soundly, they are bound to be of help to both employees and employers.

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Consumer Protection (E-Commerce) Rules, 2020 and their impact on consumers and e-commerce entities

 By Nevin Clinton, Flywork.io Team, Flywork.io.

The Ministry of Consumer Affairs, Food, and Public Distribution issued the Consumer Protection (E-Commerce) Rules, 2020 last year, and the Rules coupled with the Consumer Protection Act, 2019 have some important implications for consumers and e-commerce entities. E-commerce here refers to the buying and selling of goods or services, including digital products over the digital or electronic network. The Rules also define an e-commerce entity as any person who owns, operates, or manages a digital or electronic facility or platform for electronic commerce, but does not include a seller offering his goods or services for sale on a marketplace.

The 2019 Act brought in an important change by including e-commerce entities under consumer laws when it added an explanation under Section 2(7) stating that the expressions "buy any goods" and "hires or avails any services" include offline or online transactions through electronic means. It is noteworthy here that even before the Act was passed, there were rules on e-commerce released by the government in both 2018 and 2019. The 2020 rules are still significant as there are plenty of important changes that have been introduced. 

Concept of ‘user’ defined

  First and foremost, the e-commerce rules have brought in the concept of ‘user’ which is a wider term than ‘consumer’. Here, all persons (individuals or companies) who make use of a computer resource of an e-commerce entity are covered. This is important because, in all the rules where an obligation is imposed on the entities, it is that which has the corresponding right to be informed and not the ‘consumer’. Thus, the rules have brought in entities that have users or consumers on the internet under the purview of consumer laws.

E-commerce entities to disclose information

  Under the e-commerce rules, every e-commerce entity has to provide various information on its platform that is displayed ‘prominently’ to its users. These duties are listed down by the 7th rule and it includes details like mentioning the legal name of the e-commerce entity, details of website and contact details, address of headquarters and branches, and so on. Further, marketplace entities (those that connect buyers and sellers) must provide details on refund,  return, exchange, warranty, guarantee, delivery, shipment, modes of payment, the security of the methods, fees or charges payable by users, details on how to cancel payments under the said methods, charge-back options and contact information. Similarly, obligations are imposed on inventory entities (those that own inventory of goods and sell directly to consumers) as well. 

Other salient features of the rules

 Another important inclusion in the rules is the one concerning grievance redressal mechanisms in e-commerce entities. Every entity is required to have such a mechanism and a grievance officer must be appointed. Further, on the platform, the contact details of the said officer must be displayed. The officer has the duty of acknowledging every consumer complaint within 48 hours before redressing it in a maximum of one month.

    The rules also protect users from being subject to false representation and price manipulation. The e-commerce entity posing as a user and posting reviews and the likes of such things are prohibited. Further, the entity must not subject its consumers to ‘unjustified’ prices considering the existing market conditions.

How do the rules impact e-commerce entities and consumers?

   The e-commerce rules are directed at ensuring that e-commerce entities don’t manipulate their consumers online by misleading them. By providing for the prohibition of false representation and price manipulation, the rules safeguard the consumers while the obligations of disclosing a plethora of information help them stay aware.

Further, in a notification released in May 2021, the government has asked every e-commerce entity to appoint a nodal officer to ensure compliance with the rules. Therefore, the rules as a whole have made things more burdensome for entities concerning how they treat consumers and rightly so. In today’s digital world, there is plenty of scope for consumers to be misled or even cheated, leading to the need for stricter laws. The Consumer Protection (E-Commerce) Rules, 2020 seek to achieve this objective and while they might seem to be causing a great deal of hassle for the entities, consumers’ rights must be protected.

    Thus for the service providers who provide e-commerce services and the entities themselves, it is of huge importance to acknowledge the rules and comply with them. Requirements of disclosure of all necessary information, grievance redressal mechanisms, the appointment of nodal officers, and avoiding false representation and manipulation of prices must be kept in mind. The consumers too must stay aware and know their rights.

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What is the significance of ‘force majeure’ during Covid crisis ?

 By Simran KaurFlywork.io TeamFlywork.io. 

 Force Majeure is a term used in contracts that essentially frees both parties from certain obligations and duties when an event that is not under the control of both parties occurs unexpectedly. We never know what may happen tomorrow and to provide parties to a contract with remedy/relief for events that were not in their control, the Force Majeure clause is used.
An example could be the present COVID-19 crisis, which has resulted in lockdowns or restricted movements in countries. Parties who suffered losses or any other grievances due to the pandemic can use the Force Majeure for remedy or relief.

Even though the term ‘Force Majeure’ has neither been defined nor specifically dealt with in Indian statutes, its references are to be found in Section 32 of the Indian Contract Act which contemplates if a contract is contingent on the happening of an event and if the event becomes impossible, the contract becomes void. In simple terms, this clause provides reprieve to a party from performing its obligations under a contract upon the occurrence of a Force Majeure event.

The essential ingredients of Force Majeure clauses are as follows:

  • Occurrence of an unexpected event
  • Parties to the agreement assumed that such an event will not occur
  • Such an event has made the performance of the obligations under the contract impossible.
  • The parties have taken all such measures to perform the obligations under the agreement.
  • The affected party by force majeure asking for relief will have the burden of proof that the force majeure event has affected such party's performance in the contract.

This Force Majeure clause is also widely found in certain business agreements such as purchase, supply, and manufacturing contracts as it relieves the parties from performing their respective obligations which are to be undertaken under the contract and consequential liabilities, during the period that force majeure events continue.

Force Majeure has been brought to light way more than before, due to the present pandemic of COVID-19 that has been incurred upon us. Companies who are unable to provide services or products promised to other parties due to the pandemic are using this clause to get relief from these obligations. They can use the clause to protect their business interests and the contract. With legal help, they can also retain the contract and obtain temporary relief from performing their obligations. If one has entered into long-term contracts, one can consider the terms of the contract for the impacted period of maybe, 6 months. This can help protect one’s contract and business. And, in contracts/agreements where supply or distribution is involved, one can increase the supply of goods (or services) later on, as demand picks up and makes up for any non-performance.

Thus, in cases such as the COVID-19 crisis, war, etc, FORCE MAJEURE has been a lifesaver for the people, and for the common good – providing protection from obligations that couldn’t be fulfilled due to unforeseen and unexpected consequences.

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