The Employees Provident Fund Organisation (EPFO) has issued a
circular dated 21 January 2016 (Circular)
exempting start-ups from inspection under the Employees'
Provident Funds and Miscellaneous & Provisions Act, 1952 and
also permitting start-ups to submit self-certified returns.
This Circular, further to the Ministry of Labour and Employment
(Ministry) direction dated 12 January 2016 (Direction),
is aimed at incentivising start-ups by easing their compliance
Who can benefit from the Circular?
The Circular is applicable only in respect of
"start-ups" which have been defined as:
"entities incorporated or registered in India not prior to
five years, with annual turnover not exceeding INR 25 Crores in any
preceding financial year working towards innovation, development,
deployment or commercialisation of new products, processes or
services driven by technology or intellectual
What are the incentives as per the Direction?
The Direction provides that start-ups may be allowed to
self-certify compliance with multiple Labour Laws, thereby:
Exempting them from inspection of
establishments: The Ministry has stated that
start-ups may not be inspected under these labour laws in the first
year of setting up and instead, the start-ups may be asked to
submit an online self-declaration instead.
Self-certified returns: The Ministry
has also stated that start-ups will be allowed to file
self-certified returns and further, from second year of setting up
onwards, up to 3 (three) years from setting up of the unit, such
start-ups will be inspected only when a very credible and
verifiable complaint of violation is filed in writing with approval
from the Central Analysis and Intelligence Unit.
"Labour laws" covered by the Direction?
The Direction applies to a total of 9 (nine) labour laws
(collectively, Labour Laws), namely: The
Industrial Disputes Act, 1947; The Trade Unions Act, 1926; Building
and Other Construction Workers' (Regulation of Employment and
Conditions of Service) Act, 1996; Industrial Employment (Standing
Orders) Act, 1946; Inter-State Migrant Workmen (Regulation of
Employment and Conditions of Service) Act, 1979; Payment of
Gratuity Act, 1972; Contract labour (Regulation and Abolition) Act,
1970; Employees' Provident Funds and Miscellaneous &
Provisions Act, 1952; and Employees' State Insurance Act,
The Direction is pursuant to the ambitious 'Make in
India' and the 'Start-up India Action Plan'
conceptualised by the Government of India. This Direction is one of
the many regulatory changes sought to be introduced encouraging
start-ups and entrepreneurs.
This Direction is a step in the right direction and would help
ease compliance for start-ups which face inevitable delay in normal
circumstances due to long and cumbersome process of inspection and
filing of returns. In addition to the various other incentives
already announced or on the anvil, the Government is facilitating
the emergence of India as a major 'Start-up' centre.
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The Ministry of Corporate Affairs notified on June 5, 2015 that certain provisions of the Companies Act, 2013 shall not apply to private limited companies or shall apply with such exceptions or modifications as directed in the notification.
Whilst trade and barter have existed since early times, the modern practice of forming business relationships through the means of contract has come into existence only since the industrial revolution in the West.
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