Legally compliant

Venkatachari Jagannathan
19 June 2007

With a plethora of active laws, several of which are over a century old and can still be applied against unsuspecting organisations, India is widely-considered by foreign companies as a dangerous place for doing business. Venkatachari Jagannathan explores the rising trend in legal compliance audits

After ISO quality certification the buzzword amongst domestic corporates is legal compliance certification / legal audit.

Quality standard certification, statutory / internal / cost and even secretarial audits are well known terms as are due diligence audits — normally done at the time of mergers and acquisitions. But, legal compliance certification / audit ?

Says V V Sivakumar, partner, Kochhar & Co a law firm, "It is putting a stethoscope to a company's legal health. Normally companies are compliant with substantive law and legal audit tells whether they comply with the procedural law as well."

Simply put, legal audit is combing through the entire business practices (production, accounting, human resources, etc,) of a company to see whether they conform to laws applicable to that transaction / industry / company. The whistle is blown when deviations are found, drawing the managements' attention. A team of professionals from the legal, accounting and management professions is entrusted with the combing process.

Legal compliance certification is like a quality certification issued by the legal auditor stating that the company is complying with all the applicable laws. The certification process has a wider ambit though it might be similar to legal audit in parts.