Sunday, July 14, 2024
HomeInterviewPrecautions to be considered before entering into business partnerships

Precautions to be considered before entering into business partnerships

- Advertisement -

Adv. Pratibha Bangera (Advocate and legal Expert in litigation and commercial law) suggests legal precautions before partnering with business entities with our Editor in Chief Dr Vaidehi Taman.

How can one know the legality of business? 

Any person desirous of conduction business must find out whether the activity of such business is well within the purview of “laws of the country” and take necessary precaution to check if formation of the business body is registered correctly, whether it is conflicting with intellectual property rights of others, whether there is compliance and measures towards government and taxation authorities carried out from time to time. And take professional advice before entering into business.

What are the crimes arising out of business? 

Anything that is done with an intention to cheat and results in financial loss to another person or business entity or affects economy of the country are business crimes. Hence in addition to recovery of money from civil court, it will also attract criminal liability.

What is the difference between sole proprietorship firm, partnership and company ?

A business conducted by a single person who runs the business of a firm is a sole proprietor who may even employ people.

Business done in similar manner by minimum two or upto 50 partners by entering into a registered partnership deed is partnership business. A company is a separate “legal entity” created by its associating directors.

What are Shell companies? 

Shell companies are opened for short periods to siphon off undeclared gains or fund illegal activities or misuse of trading platforms. The government has discovered and is coming heavily on lot of shell companies that do not have any real business.

What are the precautions that a novice person must take before joining an existing partnership or company or business entity? 

You must know the legality of the business and whether there is any real business being conducted by company you intend to join.

Do not feel tempted or fall prey to persons who may offer heavy profits without any real legitimate work. Define your liability on paper and have a predefined clause to exit in case of disagreements or disputes. Check to rule out acts of money laundering activities or market abuse or criminal acts.

If there is a financial fraud, you may not only be liable for return of money limited to percentage of your share along with interest, but may also go through criminal charges if you associate with such ill intended persons.

What is the liability of a person who is innocently framed?  

Ignorance of law is no excuse. Even if a person joins with limited liability the police has to investigate involvement of all partners. The Investigation authorities have to look into criminality of the case.

What can an innocent director or partner do to report such illegal acts? 

If you suspect there are any entries or money that do not match the objectives of the company, you may report about the same to local police or NCLT for oppression or mismanagement. If the amounts involved is of higher value of more than 3 crores the police may forward it to the Economic Offences Wing (EOW) experts.

What is Oppression and Mismanagement? 

It is a business condition created by majority shareholders in a manner where in the minority members (minimum 1/10th of total members of company ) or shareholders are put to hardships or deliberate conditions are created by majority shareholders for gaining control of company to deny rightful profits, or which is contrary to interest of public or the company itself.

How safe is it to do business with friends? 

The danger involved with friends is much more than conducting business with any other stranger. In these days and times fraudsters promise large returns and entice friends unsuspecting people to bring in their savings or force them to take loans to meet their greed.

The other way of mis-using friendship which is now rampant is to open fake companies to transfer their legal liability and abscond from police investigation and let the innocent friend answer all ensuing queries.

- Advertisement -
- Advertisement -
Vaidehi Taman
Vaidehi Taman
Vaidehi Taman an Accredited Journalist from Maharashtra is bestowed with three Honourary Doctorate in Journalism. Vaidehi has been an active journalist for the past 21 years, and is also the founding editor of an English daily tabloid – Afternoon Voice, a Marathi web portal – Mumbai Manoos, and The Democracy digital video news portal is her brain child. Vaidehi has three books in her name, "Sikhism vs Sickism", "Life Beyond Complications" and "Vedanti". She is an EC Council Certified Ethical Hacker, OSCP offensive securities, Certified Security Analyst and Licensed Penetration Tester that caters to her freelance jobs.
- Advertisement -


Must Read

- Advertisement -

Related News