Here’s a list of the primary laws that need to be covered if you are an e-commerce startup:
- Companies Act or Limited Liability Partnership Act or the Indian Partnership Act
- Contract Act
- Consumer Protection Act
- Information Technology Act & rules
- RBI Payment and Settlement Systems Act
An e-commerce startup can choose to be set up as a private limited company or a limited liability partnership or as a conventional partnership. Most often, a conventional partnership or an LLP form is preferred over a private limited company while starting up as it is cost effective. There are no compulsions regarding investment size unlike the necessity of a paid up share capital in a private limited company.
Since every e-commerce company essentially engages into a contract with its customer, it is bound by the corresponding Act governing contracts. Alongside, a strict web policy and a good cancellation policy is also recommended. Specify particularly the use of the site, a warranty disclaimer and protect as much as possible the use of third party intellectual property.
Why is the web policy important? An entrepreneur, who I met recently, while admitting to being lax in drafting the web privacy policy for his site, said that he was facing a customer issue wherein there was a duplication of ticket issuance owing to technical glitches. Obviously, the customer was not happy learning about this at the venue of the event. Such issues are governed by the Consumer Protection Act.
Depending on the type of transaction that a customer opts for, the Reserve Bank of India’s payment and settlement act comes into force. Cash on delivery transactions are excluded from this. Recently, card not present (CNP) transactions have been given a lot of coverage especially since RBI issued its third notification emphasizing its stance on the additional two step authentication process. Nowadays entrepreneurs have a pocketful of options to choose their choice of payment gateways. All one needs to ensure is that the gateway is registered with the RBI.
If shopping has been made easier by the advent of e-commerce, then it’s only natural to even commoditize the idea of setting up an e-commerce company. Shopify, Godaddy, Bigrock and Zepo provide quick help to new entrepreneurs looking to join the e-commerce bandwagon. Owning a website is not expensive, but that may not be the case if one ignores the legal aspects.
CAclubindia
