Electronic business or e-business has become one of the most prominent entrepreneurial activities in India these days. While this is a good sign for India and its economy yet e-business activities need to be not only properly managed but they must be in conformity with the laws of India. The legal issues of e-business in India must be adhered to by various e-business stakeholders of India.
The legal risks for websites companies developing e-business and online gaming websites like poker have also increased drastically. Similarly, entrepreneurs dealing with the fields like encryption, cloud computing, m-health, telemedicine, online pharmacies, Bitcoins exchanges, adult merchandise, online travel, online gaming including online poker, etc are not complying with techno legal requirements of Indian laws. Investing in such legally risky ventures is not a viable strategy.
E-business laws and regulations in India are still evolving. This has created a sort of confusion and uncertainty among e-business entrepreneurs in India. While some have opened e-business outlets through websites others are exploring a more appropriate and legal way of running an e-business ventures in India.
Besides there are many legal formalities that are required in order to start a company and e-business activity in India. A business can be operated as:
(1) Sole Proprietorship.
(3) Company – Public/Private.
(4) Limited Liability Partnerships (LLP).
Mostly people decide to open a private company to substantiate an e-business activity and this article would cover that aspect alone. To incorporate a private limited company you must approve its name, registered office address, have at least 2 directors with director identification numbers (DINs), must have a minimum authorised capital of Rs. 1 Lakh, memorandum of association (MOA) and articles of association (AOA), digital signature certificates (DSCs) wherever applicable, etc. Once these conditions and requirements are fulfilled, a certificate of incorporation is sent by post to the registered office of the newly registered company.
The private limited company is also required to comply with income tax related compliances. These include obtaining permanent account number (PAN), tax deduction account number (TAN), value added tax (VAT) registration and obtaining of tax identification number (TIN), professional tax if applicable, service tax, etc.
In certain cases, compliance with labour laws is also required. For instance, the Shops and Establishment Act is a legislation implemented by various States in India. The Act lays down mutual statutory obligation and rights of employers and employees. Registration of shop/establishment is mandatory within 30 days of commencement of work. Other workmen and labour related legislations cover areas like employees provident fund, employees state insurance, etc.
However, e-business in India is also required to be conducted in a legally permissible manner. This is more so when the information technology act 2000 (IT Act 2000) prescribes stringent penal and pecuniary penalties for violation of its provisions during e-commerce transactions.
The e-business players must ensure cyber law due diligence in India (PDF). This is more so when the cyber law due diligence for companies in India has become very stringent and foreign companies and websites are frequently prosecuted in India for non exercise of cyber due diligence.
The legal requirements for undertaking e-business in India also involve compliance with other laws like contract law, Indian penal code, etc. Further, online shopping in India also involves compliance with the banking and financial norms applicable in India. For instance, take the example of PayPal in this regard. If PayPal has to allow online payments receipt and disbursements for its existing or proposed e-commerce activities, it has to take a license from Reserve Bank of India (RBI) in this regard. Further, cyber due diligence for Paypal and other online payment transferors in India is also required to be observed.