Every board's report under the Companies Act, 2013 carries a statement, required by Section 134(5)(f), that the directors have devised proper systems to ensure compliance with all applicable laws and that those systems are adequate and operating effectively. That sentence is the starting point for corporate compliance. The board signs it every year, and it should be true.
Board governance and compliance frameworks
Section 166 requires directors to act in good faith, with due care and independent judgment, in the interests of the company, its employees, shareholders, the community and the environment, and to avoid conflicts. The Act builds structure around those duties: independent and women directors for specified companies, audit and nomination and remuneration committees, vigil mechanisms, secretarial audit and CSR obligations above set thresholds. Listed companies add the governance provisions of the LODR Regulations.
A compliance framework turns these duties into routine: a register of applicable laws and licences, an owner for each obligation, a calendar, and regular reporting to the board. A periodic legal or compliance audit then tests whether the framework works in practice.
Compliance audits and regulatory inspections
A compliance audit reviews a business against the laws that apply to it and ranks the gaps by risk. For a manufacturing or mining company in Chhattisgarh, it typically covers:
- statutory registers, filings and board and shareholder approvals under the Companies Act
- licences, registrations and renewals under central, State and local law
- compliance under the four labour codes in force since 21 November 2025
- environmental consents and returns
- related-party transactions and conflicts of interest
- open notices, inspections and litigation
Inspections and information demands can come from the Registrar of Companies under Sections 206 and 207, SEBI, the RBI, tax authorities, the pollution control board and Inspector-cum-Facilitators under the labour codes. Many Companies Act defaults are now dealt with through adjudication of penalties under Section 454, and offences punishable with fine only can be compounded under Section 441.
Anti-bribery compliance and adequate procedures
Since the 2018 amendment, giving an undue advantage to a public servant is itself an offence under Section 8 of the Prevention of Corruption Act, 1988. Section 9 makes a commercial organisation liable if a person associated with it, such as an employee, agent or subsidiary, does so to obtain or retain business, and its defence is to prove that it had ‘adequate procedures’ in place, in line with guidelines the Central Government may prescribe.
In practice, adequate procedures rest on a clear lead from the board, a risk assessment, rules on gifts, hospitality and facilitation payments, due diligence on agents, distributors and joint venture partners, contract clauses, training, and a channel for raising concerns. Our note on the Prevention of Corruption Act explains the offences in more detail.
POSH compliance, whistle-blowing and investigations
The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 requires an Internal Committee wherever there are ten or more employees, presided over by a senior woman employee, with at least half its members women and one external member. POSH compliance also means a written policy, awareness programmes, an annual report to the District Officer and a statement in the board's report. Complaints are made within three months, extendable by three more, and inquiries completed within ninety days, with any disciplinary follow-up coordinated with our employment and labour practice.
Listed companies and companies above set thresholds must run a vigil mechanism under Section 177 of the Companies Act. When a complaint points to misconduct, an internal investigation conducted through counsel preserves evidence, allows legal professional privilege under Section 132 of the Bharatiya Sakshya Adhiniyam, 2023 (formerly Section 126 of the Evidence Act) to attach to legal advice, and gives the board a basis for deciding what to report, discipline or settle.
Boards and compliance officers can write to the firm, call, or visit either office; details are on the contact page.
What the practice handles
- Board processes, committee charters and advice on directors' duties
- Compliance frameworks, registers of applicable laws and compliance calendars
- Legal and compliance audits, with findings ranked by risk
- Anti-bribery policies and ‘adequate procedures’ programmes
- Due diligence on agents, distributors and joint venture partners
- POSH policies, Internal Committee constitution, training and inquiry support
- Vigil mechanisms and whistle-blower policies
- Internal investigations and reports to the board
- Responses to inspections, and compounding and adjudication under the Companies Act
Where these matters are heard
- Registrar of Companies and Regional Director, for adjudication and compounding under the Companies Act
- SEBI and the stock exchanges, for listed companies
- Internal Committees, and the Local Committee constituted by the District Officer under the POSH Act
- Special Judges under the Prevention of Corruption Act, with investigation by the CBI or, in Chhattisgarh, the Anti Corruption Bureau and Economic Offences Wing
- National Company Law Tribunal, for oppression, mismanagement and compounding
Questions about Governance, Risk & Compliance
What are ‘adequate procedures’ under the Prevention of Corruption Act?
Section 9 gives a commercial organisation a defence if it proves that it had adequate procedures, in line with guidelines the Central Government may prescribe, to prevent persons associated with it from giving undue advantages to public servants. A defensible programme shows that the organisation assessed its risks, set clear rules, vetted intermediaries, trained staff, monitored payments and acted on red flags.
Does the POSH Act apply to a business with fewer than ten employees?
The duty to constitute an Internal Committee applies where there are ten or more employees. Where there are fewer, or where the complaint is against the employer, complaints go to the Local Committee constituted by the District Officer. The employer's other duties, such as providing a safe workplace and acting on the committee's recommendations, still apply.
What is a legal or compliance audit?
It is a structured review of a business against the laws that apply to it, usually covering corporate records, licences, labour, environmental, tax and contractual compliance. The result is a report that lists gaps, rates their risk and recommends corrective steps. Boards use it to support the directors' responsibility statement, and buyers and lenders run similar reviews as due diligence.
Is a whistle-blower mechanism mandatory?
Section 177 of the Companies Act, 2013 and its rules require a vigil mechanism for listed companies, companies that accept deposits from the public, and companies that have borrowed more than ₹50 crore from banks and public financial institutions. Listed companies must also maintain a whistle-blower policy under the LODR and insider trading regulations. Other companies often adopt one voluntarily.
Can directors be prosecuted if an employee pays a bribe?
The company itself can be prosecuted under Section 9 of the Prevention of Corruption Act if a person associated with it gives an undue advantage to a public servant to obtain or retain business. A director, manager, secretary or other officer is personally liable under Section 10 only if the offence was committed with their consent or connivance, and faces three to seven years' imprisonment and fine.
A question that is not answered here? Send it to the firm.
This page describes the law in general terms as of 24 September 2026. It is not legal advice. The outcome of any matter depends on its facts, and the firm does not guarantee results.
