INTRODUCTION
Among other business entities, including partnerships, publicly-held firms, and start-ups, corporations use corporate lawyers to help them understand their many legal rights, responsibilities, and obligations. A general corporate strategy involves handling a variety of legal and business challenges.
A corporate law practice might differ significantly in the level of attention and type of work it offers. In some large law firms, for instance, attorneys are expected to focus on transactional work, but in others, litigation is incorporated into the transactional work.
A corporate lawyer deals with all of the following subjects:
- incorporation of businesses,
- director and shareholder rights,
- board meetings,
- secretarial provisions of a corporation,
- articles of association, and
- public listing or delisting of a firm.
However, there has been a significant impact of the COVID-19 epidemic on the corporate and commercial worlds. In response, the government eased financial restrictions for private and publicly traded companies under the Enterprises Act 2013, such as monetary packages. Due to lockdowns and travel restrictions, parties have been unable to complete time-sensitive deals and fulfil contractual obligations.
Even though the indicators were for sluggish global growth, India was one of the exceptions in terms of growth rate. While presenting the Union Budget for the financial year 2020-21, the Finance Minister, in her speech presented before Parliament on 1st February 2020, stated that the Government is targeting making India a USD 5 trillion economy by 2024, with an annual growth rate of around 6%-6.5% (though lower than the growth rate for the last few years)
Thereafter, the national lockdown due to the pandemic in March, came as a strong jolt and all businesses and sectors took a beating in the light of the outbreak. Tourism, hospitality, aviation, retail, and manufacturing have been the hardest hit sectors due to reduction in cash flows, revenue, business destruction.
This article discusses the legal challenges in the field of corporate law.
1. EMPLOYMENT LAW ISSUES:
India’s industrial relations are governed by the Industrial Disputes Act of 1947, which is a framework for resolving disputes between employers and employees and is established to maintain peace and harmony in the workplace.
In accordance with employment law, employees are treated fairly and kept safe while employed by a company. Additionally, there is also a way to use the legislation for the employer’s benefit.
Some of the most common employment challenges/issues are:
Discrimination: Discrimination is a problem in every workplace, national or international. The discrimination towards an employee or a group of an employee can be related to age, disability, race or colour, religion or sex. Anti-discrimination acts in India can be Article 14, 15, 16 of the Indian Constitution, and the Equal Remuneration Act, 1976.
Minimum Wage: The Minimum Wages Act, 1948 requires employers to pay their employees a minimum wage set by the government. Minimum wages are determined by employees’ clocked-in hourly labour. Due to economic changes every year and the ongoing pandemic, the minimum wage has been a subject of discussion as to whether it should be altered to reflect those changes.
Sexual Harassment: An inappropriate sexual advance or request for sexual favour, a hostile work environment, or a victim’s termination or punishment for refusing to give in to sexual advances constitute sexual harassment. Supervisors, coworkers, or customers may be the perpetrator and the victim, and they may be of the same gender or different genders. The statute which prohibits sexual harassment is the Sexual Harassment of Women at Workplace (Prevention and Prohibition and Redressal) Act, 2013.
2. CONTRACTUAL DISPUTES:
Contractual conflicts occur when a party or parties to the agreement disagree with the contract’s terms and definitions. The resolution of contractual disagreements can be costly and time-consuming, can lead to litigation, and can do serious harm to the business relationships and reputation, if not handled properly.
Several contract disputes have been triggered by the COVID-19 outbreak. Because of the lockdowns, which were used to limit the pandemic, many companies have found it difficult to meet their contractual obligations. A number of them have been unable to meet their contractual obligations. There have been defaults on loan payments, delays in contract completions, and refusals by employers to provide promised job perks, among other things.
Several components are required for a contract to be valid. All parties must understand the contract’s provisions and agree on them. If there is no mutual agreement or plan to contract on the specified terms, the contract is not legally binding and can be challenged in court. A contract should be enforceable by both parties.
3. PRODUCT LIABILITY:
The use of defective or harmful products causes injury to thousands of people every year. As the name implies, “product liability law” governs who is responsible for faulty or hazardous products, but it differs from ordinary injury law. Someone who has been injured can recover damages more easily with these set of rules.
Under product liability, when a defective product is placed in the hands of a consumer, a manufacturer or seller can be held liable. All sellers of a product involved in the distribution chain are liable for a defective product that causes injury. Accordingly, a legal requirement is that a product must meet an ordinary consumer’s expectation. It is not possible to say that a product meets ordinary consumer expectations when it has an unexpected defect.
As of Indian law, the term “product liability” had not been defined. However, the term ‘product liability has been defined as the:
“responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold, or by a deficiency in services relating thereto”, under the recently enacted Consumer Protection Act, 2019.
4. INTELLECTUAL PROPERTY MANAGEMENT:
Intangible intellectual property, such as copyrights, patents, and trademarks, is managed in intellectual property management (IP). There are also rights against unfair competition and publicity rights.
It can be challenging to use IP to support a business’s current and future market position. Following are some of the IP challenges that corporations face:
Dealing with IP lawsuits: A competitor or non-practising entity (NPE) can sue a company for infringement, which can result in severe financial damages and jeopardize the goodwill of its customers.
Profitability: IP departments often find it difficult to justify their valuable contributions. Though many corporates do not understand how intangible assets contribute to a company’s growth, they target these assets as a result of budget cuts.
Prevention: Multinational companies are unable to evergreen their patents, which is one of the main issues related to intellectual property rights. To make their patents evergreen, companies cannot just make minor adjustments to them. This makes section 3(d) of the Indian Patent Act, 1970 (as amended), one of the most challenging IPR issues. In general, new substances are not eligible for patent protection under the said act.
5. LICENSING:
It is possible for start-ups to need a variety of licences, approvals, or permits to achieve their goals, as a lack of legal awareness can result in penalties and even criminal behaviour. Business licenses, permits, and permissions may vary from one business to another, so it is important to be familiar with local regulations and laws before starting a business.
There are also other problems with licenses, such as the time and cost involved in obtaining them from government officials. There are many licenses required by businesses, including Goods and Services Tax (GST) registration, FSSAI licences, import/export codes, and Udyog Aadhar registration.
6. PERFORMANCE OF DIRECTORS:
It has only recently come to the attention of the regulator that performance reviews of directors are already part of the Indian legal framework. Therefore, in January 2017, the Securities and Exchange Board of India published a ‘Guidance Note on Board Evaluation’. This note included tips on setting objectives, distinguishing criteria, and evaluating performance.
To achieve the desired results in governance procedures, there is often a demand for public disclosure of the results of performance evaluations. The evaluation process is always delicate, so public revelations may be counterproductive. The sharing of negative criticism in a peer review context may be avoided to avoid public scrutiny. An independent director’s role in performance appraisal is essential to combating this type of behaviour.
7. DATA PROTECTION & PRIVACY:
Managing risk is a crucial aspect of corporate governance, which means confidentiality and data protection are crucial. This era of digitalisation demands that directors have a solid understanding of the foundations of cyber security. Good corporate governance requires executives to interact with and understand their firm’s specialists.
CONCLUSION
It is fascinating to be a corporate lawyer. Corporate lawyers work with clients across a wide range of industries. Each industry is different. Businesses are unique. Every day is different in the life of a corporate lawyer. Therefore, the above are some of the legal issues almost every company will face, sooner or later.
Experienced corporate attorneys can help business owners navigate their companies through their life cycle of formation, growth, and development, and ownership transfer or termination.
YLCC would like to thank Nikunj Arora for his valuable inputs in this article.
