Running a successful business involves several critical considerations, and maintaining legal compliance should be at the top of your priority list. Legal compliance in India entails a significant amount of paperwork and procedures, making it essential to have a dedicated compliance team within your business to handle this function effectively.
Adhering to laws, regulations, and standards helps streamline your business operations and, most importantly, prevents severe penalties and fines. Avoiding these penalties is crucial for the well-being of your business.
What is legal compliance?
Legal compliance refers to a company’s adherence to laws and policies relevant to its sector. This includes ensuring that all actions, practices, and operations comply with applicable local, national, and international laws, as well as industry-specific regulations and internal policies.
Understanding legal compliance
The term “legal” means “being in accordance with the law,” while “compliance” means “adherence to.” Legal compliance is a framework established by the government within which companies must operate. Staying legally compliant is not just a mandate for companies; it also plays a crucial role in streamlining their business processes.
Regular audits of departments help maintain compliance and keep businesses updated on any changes in the law that might impact them. Legal compliance is vital in various aspects of society, business, and governance, as it helps maintain order
Distinguishing between legal and compliance
Legal and compliance are two distinct but often interconnected functions within an organization. Here’s a breakdown of their differences:
Legal
The legal function primarily deals with understanding, interpreting, and applying the law. This includes advising the company on legal matters, representing the company in legal proceedings, and ensuring that the company’s actions are legally defensible.
Responsibilities:
- Drafting, reviewing, and negotiating contracts
- Advising on legal rights and obligations
- Handling litigation and disputes
- Managing intellectual property
- Ensuring regulatory filings and corporate governance
Expertise:
Legal professionals, such as lawyers or attorneys, typically have a law degree and are trained in legal reasoning and analysis.
Objective:
The main objective is to protect the organization from legal risks and ensure legal compliance.
Compliance
The compliance function is centred around ensuring that the organization adheres to internal policies, standards, and external regulations. It is about making sure that the organization operates within the legal and ethical boundaries set by laws and internal policies.
Responsibilities:
- Developing and implementing compliance programs and policies
- Conducting training and education on compliance issues
- Monitoring and auditing internal processes to ensure compliance
- Investigating compliance breaches and implementing corrective actions
- Reporting on compliance status to management and regulatory bodies
Expertise:
Compliance professionals may come from various backgrounds, including legal, finance, auditing, and management. They often have certifications specific to compliance (e.g., Certified Compliance and Ethics Professional – CCEP).
Objective:
The main objective is to prevent and detect violations of laws, regulations, and internal policies, and to promote ethical behavior within the organization.
Key differences
- Scope: Legal focuses on the broader spectrum of laws and legal matters affecting the company, while compliance is more focused on adhering to specific regulatory requirements and internal policies.
- Approach: Legal tends to be reactive, dealing with issues as they arise, such as litigation or contract negotiations. Compliance is more proactive, aiming to prevent issues through policies, training, and monitoring.
- Interaction: Legal often interacts with external legal systems (courts, legal firms), whereas compliance interacts with regulatory bodies and internal stakeholders to ensure adherence to standards and policies.
- Outcome: The outcome of the legal function is to provide legal protection and advice, while the outcome of the compliance function is to ensure adherence to laws and regulations, minimizing the risk of regulatory penalties and reputational damage.
Both functions are crucial for the overall governance and risk management of an organization, and they often work closely together to ensure that the company operates within the legal and regulatory framework.
By maintaining compliance, companies can boost productivity, avoid non-compliance issues, and benefit both the business and employees. For assistance with legal and compliance services, contact TalentPro to help steer your business ahead of the competition.
