Winding Down & do Startups have to adhere to Labor Laws?


Winding Down & do Startups have to adhere to Labor Laws?

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Is there any legal standpoint about winding down the business?

Closing a company is a difficult call for any entrepreneur. When a startup decides to shut down, all the stakeholders need to be informed in advance and the whole process must be properly and legally planned and executed to make the exit easy for everyone.

From a legal standpoint, there are basically three ways to shut down a startup:

Fast Track Exit Mode ·
Court or Tribunal Route ·
Voluntary Closure

Do Startups also have to adhere to labor laws?

Every organization, big or small is obligated to adhere to labor laws. In simple words, when you start an organization, you hire individuals to take care of various functions and tasks, and hence you are subject to several labor laws regardless of the size of the organization. With regards to labor laws, Startups registered under the Startup India Initiative can give an express declaration under the following 9 labor laws, and get an exemption from labor inspection.

1. Building and Other Constructions Workers’ (Regulation of Employment and Conditions of Service) Act, 1996
2. The Contract Labour (Regulation and Abolition) Act, 1970
3. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 
4. The Employees’ State Insurance Act, 1948.
5. The Industrial Disputes Act, 1947
6. The Industrial Employment (Standing Orders) Act, 1946
7. The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
8. The Payment of Gratuity Act, 1972
9. The Trade Union Act, 1926

This exemption can be extended for “two years” by merely filing a self-certified declaration for the two consecutive years.

Having a well-designed employee policy can be the key to attract and retain good talent.

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