 Factories Act 1948

 Factory Act 1948

1. Government regulation o the working condition in factories begins in India in 1881 when the first
Indian factories Act was passed.

2. This act was substantially amended in 1934 on the basis ob the recommendations of the Royal
commission on labour.

3. The act of 1934 dividend factories into two categories-seasonal and perennial.

4. This act was amended several times.

5. On the eve of independence the national government announced far reaching legislative program for
the welfare of workers.

6. As a part of this program, the factories act 1948 was passed.

7. The factories act 1948 is comprehensive in nature and through it the government has tried to
implement as many provisions of the ILO code of industrial hygiene as were practicable under Indian
conditions.

8. The factories act was substantially amended in 1976.

9. Since then there has been substantial modernization and innovation in the industrial field.

10. Provisions have also been made for the workers participation in safety management.

 Factories Act, 1948

The Factories Act, 1948 (the Factories Act) lays down provisions for the health, safety, welfare and
service conditions of workmen working in factories. It contains provisions for working hours of adults,
employment of young persons, leaves, overtime, etc. It applies to all factories employing more than 10
people and working with the aid of power, or employing 20 people and working without the aid of power.
It covers all workers employed in the factory premises or precincts directly or through an agency
including a contractor, involved in any manufacture. Some provisions of the Act may vary according to
the nature of work of the establishment.

 Some Major provisions of the Factories Act are explained below:

a)Section 11 of the Act provides that every factory shall be kept clean and free from effluvia arising from
any drain, privy or other nuisance. Section 13 of the Act focuses on ventilation and temperature
maintenance at workplace. Every factory should work on proper arrangements for adequate ventilation
and circulation of fresh air.

b)Section 18 of the Act specifies regarding arrangements for sufficient and pure drinking water for the
workers.

c)Section 19 further mentions that in every factory there should be sufficient accommodation for urinals
which should be provided at conveniently situated place. It should be kept clean and maintained.
 d)Section 21 of the Act provides from proper fencing of machinery. And that any moving part of the
machinery or machinery that is dangerous in kind should be properly fenced

e)Further s 45 of the said Act specifies that every factory should have a properly maintained and well
equipped first aid box or cupboard with the prescribed contents. For every 150 workers employed at one
time, there shall not be less than 1 first aid box in the factory. Also in case where there are more than 500
workers there should be well maintained ambulance room of prescribed size and containing proper
facility.

 Objectives:

The main objective of the factories act is to regulate conditions of work in manufacturing establishing and
to ensure adequate safety sanitation, health, working hours, leave with wages and weekly holidays for
workers employed in such establishment.

 The act is a protective legislation. It also regulates employment of women and young persons in
factories.
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 The factories ac 1948 came into force on April 1 , 1948. It applies to factories all over India.
 Unless otherwise stated this act shall apply to factories belonging to central and state governments.

 Definition of Factory

According to Sec 2 (m) factory means:

In simple words, a factory is a premise whereon 10 or more persons are engaged if power is used, or 20 or
more persons are engaged if power is not used, in a manufacturing process.

Whereon 10 or more workers are working or were working on any day of the preceding 12 months, and in
any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so
carried on.

The first Factories Act in India was passed in 1881. It was designed primarily to protect children and to
provide for some health and safety measures. It was followed by new Acts in 1891, 1911 & 1934. The act
of 1934 was passed to implement the recommendations of the Royal Commission on Labour in India &
the conventions of the International Labour Organization.

Hence the Factories Act of 1948. The Act makes detailed provisions regarding health, safety and welfare
of workers, working hours of adults, employment of young persons (which includes children &
adolescents), annual leave with wages, and so on.

The Act of 1948 not only consolidated but also amended the law regulating labour in factories. It came
into force on 1stApril, 1949. In farming the new Act, the labour Minister stated in the Legislature on
30th January, 1948 that the Government had tried to implement as many of the provisions of the I.L.O
 code of industrial hygiene as were practicable under Indian conditions and the provisions relating to
periodical medical examination of young persons and the submission of plans of factory buildings
recommended under the International Labour Conventions.

Its objective is to regulate the conditions of work in manufacturing establishment which come within the
definition of the term ‘factory’ as used in the Act. Unless otherwise provided, it also applies to factories
belonging to the central or state Government (sec. 116).

The Act was substantially amended in 1987. Some provisions of the Amending Act came into force with
effect from 1st Dec, 1987 & others from 1st June, 1988.

Objects of the Acts:

The Act is a piece of social welfare legislation. It governs working conditions of workmen in factories. It
deals mainly with:

1. Health, welfare and safety of workmen: The Act aims to protect workers employed in factories against
industrial and occupational hazards and to ensure safe and healthy conditions of life and work. It makes
detail provisions regarding health, safety and welfare of workers in order to provide good working
conditions and other facilities to enhance their welfare.
2. Working hour’s of adults and annual leave with wages: the Act imposes certain restriction as to hour’s of
work and also makes provision for leave and rest.
3. Employment of women and young persons: the Act makes stringent provisions, particularly with regard
to length of working hours, in regard to women and young persons.

 What is a Prospectus?

A prospectus is a document issued by the company inviting the public and investors for the
subscription of its securities. A prospectus also helps in informing the investors about the risk of
investing in the company. A Prospectus is required to be issued only after the incorporation of
the company. These documents describe stocks, bonds and other types of securities offered by
the company. Mutual fund companies also provide a prospectus to prospective clients, which
include a report of the money’s strategies, the manager’s background, the fund’s fee structure
and a fund’s financial statements. A prospectus is always accompanied by performance history
and financial information of the company. The reason for accompanying such information along
with the prospectus is to make sure that, the investors are well aware of the company’s
background and overall performance and the investors do not fall into the prey of investing in a
bad company.

Definition of Prospectus under the Companies Act, 2013

Section 2(70) of the Act defines prospectus as, “A prospectus means any document described
or issued as a prospectus and includes a red herring prospectus referred to in section 32 or
shelf prospectus referred to in section 31 or any notice, circular, advertisement or other
document inviting offers from the public for the subscription or purchase of any securities of a
body corporate.”

Thus, it is clear from the above definition of the prospectus that, a

prospectus is a just an invitation to offer securities to the public and not an
offer in the contractual sense.

 Companies that are required to issue a prospectus

A public listed company who intends to offer shares or debentures can issue prospectus.

A private company is prohibited from inviting the public to subscribe to their shares and thus
cannot issue a prospectus. However, a private company which has converted itself into a
public company may issue a prospectus to offer shares to the public.

 Contents of a prospectus:

1. Address of the registered office of the company.

2. Name and address of company secretary, auditors, bankers, underwriters etc.

3. Dates of the opening and closing of the issue.

4. Declaration about the issue of allotment letters and refunds within the prescribed time.

5. A statement by the board of directors about the separate bank account where all monies
received out of shares issued are to be transferred.

6. Details about underwriting of the issue.

7. Consent of directors, auditors, bankers to the issue, expert’s opinion if any.

8. The authority for the issue and the details of the resolution passed therefore.

9. Procedure and time schedule for allotment and issue of securities.

10. Capital structure of the company.

11. Main objects and present business of the company and its location.

12. Main object of public offer and terms of the present issue.

13. Minimum subscription, amount payable by way of premium, issue of shares otherwise than
on cash.

14. Details of directors including their appointment and remuneration.

15. Disclosure about sources of promoter’s contribution.

16. Particulars relation to management perception of risk factors specific to the project, gestation
period of the project, extent of progress made in the project and deadlines for completion of the
project.

 Types of Prospectus under the Companies Act, 2013

There are four types of a prospectus, which are as under:

 Abridged Prospectus

According to Section 2(1) of the Act, abridged prospectus means a memorandum containing
such salient features of a prospectus as may be specified by the SEBI by making regulations in
this behalf. It means that a company cannot issue application form for purchase of securities
unless such form is accompanied by an abridged prospectus.

 Deemed Prospectus

According to Section 25(1) of the Act, where a company allots or agrees to allot any securities
of the company with a view to all or any of those securities being offered for sale to the public.
Any document by which such offer for sale to the public is made is deemed to be a prospectus by
implication of law.

 Shelf Prospectus

According to Section 31 of the Act, Shelf prospectus is a prospectus in respect of which the
securities or class of securities included therein are issued for subscription in one or more issues
over a certain period without the issue of a further prospectus. Only the companies which have
been prescribed by the SEBI can issue a Shelf prospectus with the Registrar.
  Introduction to SEBI:

1992

The Government issued an ordinance on January 30, 1992 for giving statutory powers to SEBI. This Act
was passed by the Parliament as Act No. 15 of 1992 which received the assent of the Parliament on 4th
April, 1992.

Further, on May 29, 1992 the Government issued an ordinance abolishing the Capital Issues Control Act,
1947. The ordinance also supersedes the various guidelines issued by the CCI from time to time.
Accordingly, SEBI has been set up under the SEBI Act, 1992.

 Purpose of the SEBI:

The purpose of the SEBI Act is to provide for the establishment of a Board called Securities and
Exchange Board of India.

The purpose of the Board as laid down in its preamble is as below:

(i) To protect the interests of investors in securities;

(ii) To promote the development of the securities market;

(iii) To regulate the securities market; and

(iv) For matters connected therewith or incidental thereto.

 Function of SEBI:

Section 11 of the SEBI Act specifies that basic duty of SEBI is to:

(a) Protect the interests of investors in securities, and

(b) To promote the development of, and to regulate the securities market.

The following measures may be taken by SEBI to fulfill its duties:

(a) Regulating the business in stock exchanges and any other securities markets;

(b) Registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to
an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers,
investment advisers and such other intermediaries who may be associated with securities markets in any
manner;
(ba) registering and regulating the working of the depositories, participants, custodians of securities,
foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by
notification, specify in this behalf;

(c) Registering and regulating the working of venture capital funds and collective investment schemes,
including mutual funds;

(d) Promoting and regulating self-regulatory organisations;

(e) Prohibiting fraudulent and unfair trade practices relating to securities markets;

(f) Promoting investors’ education and training of intermediaries of securities markets;

(g) Prohibiting insider trading in securities;

(h) Regulating substantial acquisition of shares and take-over of companies;

(i) Calling for information from, undertaking inspection, conducting inquiries and audits of the stock
exchanges, mutual funds, other persons associated with the securities market, intermediaries and self-
regulatory organisations in the securities market;

(i) calling for information and record from any bank or any other authority or board or corporation
established or constituted by or under any Central, State or Provincial Act in respect of any transaction in
securities which is under investigation or inquiry by the Board. [Inserted by the Securities and Exchange
Board of India (Amendment) Act, 2002].

(j) Performing such functions and exercising such powers under the provisions of the Securities Contracts
(Regulation) Act, 1956, as may be delegated to it by the Central Government.

(k) Levying fees or other charges for carrying out the purposes of this section;

(l) Conducting research for the above purposes;

(l) calling from or furnishing to any such agencies, as may be specified by the Board, such information as
may be considered necessary by it for the efficient discharge of its functions;

(m) Performing such other functions as may be prescribed.

 SEBI Guidelines for Issue of Securities:

SEBI has issued detailed guidelines in respect of issue of securities to public. The guidelines were first
issued on 11th June, 1992 and were amended subsequently from time to time. SEBI issued consolidated
guidelines as SEBI (Disclosure and Investor Protection) Guidelines, 2000 vide its circular No. 1 dated 19-
1-2000.
These guidelines were applicable to all public issues by listed and unlisted companies, all offers for sale
and rights issues by listed companies whose equity share capital is listed, except in case of rights issues
where the aggregate value of securities offered does not exceed Rs. 50 lacs.

Broadly, there are three methods for issuing securities to the public:

 Conventional mode of receiving applications through bankers,

 Book building, and
 On line system of stock exchange (e-IPO).

Other Measures Taken By SEBI:

The Securities and Exchange Board of India, in addition to the above mentioned guidelines ‘for disclosure
and investor protection’, has taken a number of other measures for healthy development and regulation of
the capital market.

 Guidelines for Merchant Bankers.

 Guidelines for EURO Issues.
 Guidelines for Mutual Funds and Asset Management Companies.
 Guidelines for Foreign Institutional Investors.
 Guidelines to Development Financial Institutions for Disclosure and Investor Protection.
 Guidelines for Book Building, Employees Stock Option Scheme (ESOS) and Employee Stock
Purchase Scheme (ESPS).
 Guidelines for Preferential Issues.
 Guidelines for OTCEI Issues.
 Guidelines on External Commercial Borrowings.
 Regulatory measures for Stock Brokers and Sub-brokers, Underwriters, Portfolio Managers,
Registrars to an Issue and Share Transfer Agents, Insider Trading, Bankers to an Issue,
Depositories and Participants, Venture Capital Funds, etc.

 Powers of SEBI

The important powers of SEBI (Securities and Exchange Board of India) are:-

1. Powers relating to stock exchanges & intermediaries

SEBI has wide powers regarding the stock exchanges and intermediaries dealing in securities. It
can ask information from the stock exchanges and intermediaries regarding
their business transactions for inspection or scrutiny and other purpose.

2. Power to impose monetary penalties

SEBI has been empowered to impose monetary penalties on capital market intermediaries and
other participants for a range of violations. It can even impose suspension of their registration
for a short period.

3. Power to initiate actions in functions assigned

SEBI has a power to initiate actions in regard to functions assigned. For example, it can issue
guidelines to different intermediaries or can introduce specific rules for the protection of
interests of investors.

4. Power to regulate insider trading

SEBI has power to regulate insider trading or can regulate the functions of merchant bankers.

5. Powers under Securities Contracts Act

For effective regulation of stock exchange, the Ministry of Finance issued a Notification on 13
September, 1994 delegating several of its powers under the Securities Contracts (Regulations)
Act to SEBI.

SEBI is also empowered by the Finance Ministry to nominate three members on the Governing
Body of every stock exchange.

6. Power to regulate business of stock exchanges

SEBI is also empowered to regulate the business of stock exchanges, intermediaries associated
with the securities market as well as mutual funds, fraudulent and unfair trade practices relating
to securities and regulation of acquisition of shares and takeovers of companies.

 Powers of SEBI
1. For the discharge of its functions efficiently, SEBI has been vested with the following
powers:
2. To approve by−laws of stock exchanges.
3. To require the stock exchange to amend their by−laws.
4. To inspect the books of accounts and call for periodical returns from recognized stock
exchanges.
5. To inspect the books of accounts of financial intermediaries.
6. To compel certain companies to list their shares in one or more stock exchanges.
7. Registration of brokers.