Business eligibility under the Shops & Establishment Act

Business eligibility under the Shops & Establishment Act

Legal & Compliance

Vakilsearch Staff

Vakilsearch Staff

120 week ago — 7 min read

Commercial establishments of various types come under the purview of the Shops and Establishments Act. Hence, business owners need to ensure they obtain a Shops and Establishments License to stay on the right side of the law before commencing operations.


The Shops and Establishments Act is applicable nationwide and all commercial establishments, including hotels, eateries, amusement parks, theatres, entertainment houses, and public amusement places come under the purview of this Act. As a result, business owners need to obtain the documentation and licenses required if they fall under this Act. Hence, business owners need to first understand what a commercial establishment is as per the guidelines of this Act. Here’s a quick look at the eligibility criteria for registering under the Shops and Establishments Act.


The Shops and Establishments Act is applicable nationwide and all commercial establishments, including hotels, eateries, amusement parks, theatres, entertainment houses, and public amusement places come under the purview of this Act. 


What is a Commercial Establishment?

As per the Act, a commercial establishment is defined as one of the following;

  • Any commercial sector undertaking, such as banking, trading, or insurance establishments.
  • Any establishment wherein individuals are employed or engaged to do office work or provide various services.
  • Hotels, eateries, boarding houses, small cafés, or refreshment houses.
  • Amusement parks and entertainment places, such as theatres and cinema halls.

Hence, all the commercial establishments mentioned above fall under the purview of this Act and must adhere to the regulations specified by it. The exceptions to the Act differ between states, and each state in India has a list of commercial establishments that must register under the Act. Hence, business owners need to meet with legal experts to understand local laws and run their business legally in any area.


Also read: Mandatory compliances for startups in India


When to obtain registration

Any individual who plans on starting a commercial establishment that falls under the purview of the Act must file for registration within 30 days of commencing their business. This registration is mandatory for several reasons, including being necessary for opening a current account in a bank. The Shops and Establishments Act license works as an essential license or proof of business that companies need to apply for other registrations and loans. 


What to know about the Shops & Establishments Act registration

Business owners need to provide an address proof for the establishment and a copy of the sale deed or rental agreement for the shop. Additionally, they must also furnish copies of their PAN card and pay the prescribed fees to complete the registration process. Inspectors will verify the details on the application and might visit the establishment to cross-check everything. Once you receive the registration certificate, it must be displayed in a prominent place in the shop and renewed in case of any changes or upon expiry. 


The Shops and Establishments Act registration is a mandatory requirement for all businesses which operate as an establishment or shop. Hence, business owners must update their license if any changes are made to the establishment. In case of closure, or renewal, an application for the same must be made within 15 days of the said change or closure. Any business that has an office or establishment, even if run by sole proprietors or freelancers will require this license when trying to raise investment through loans or from venture capitals. The license helps prove the validity and credibility of the establishment, making it an integral part of running any business. The registration process takes around ten days for completion, following which the business receives a hard copy of the registration certificate. However, the process might take around 20 days in major cities due to a large number of applications.


Why register under the Shops & Establishments Act?

The primary objective of such a registration is to secure uniform benefits for employees serving different establishments across the country. The Act also regulates work hours, payment of wages, terms of service, and holidays that employees receive. It also lays down guidelines regarding the conditions of work, the number of people employed and helps in ensuring their wellness. The registration acts as a basic license that helps in securing further registrations and certifications. All commercial establishments, except those that fall under the purview of the Factories Act, 1948, must register under this Act. However, since the Act is a state-specific regulation, each state has its laws and guidelines regarding operating such establishments.  


Documents required for Shops & Establishments registration

  • Photograph of the shop and its name board 
  • Certificate of incorporation/ Memorandum or Articles of Association/ LLP Agreement
  • Copy of PAN card
  • List of directors and partners 
  • Identity and address proof of all directors and partners
  • Copy of partners consent or board resolution 
  • Address proof of the establishment
  • Details of all employees 


How to apply for the Shops & Establishments license?

Individuals can apply for the Shops and Establishments license through forms available online on the government’s official website. However, each state has a different set of rules regarding the process of registration and the eligibility criteria for the same. Hence, entrepreneurs must seek legal help to ensure they get the required documentation ready for registration. Additionally, business owners will have to obtain the required approval from the Department of Labour; and a registration certificate from the Chief Inspector of Shops and Establishments.


The application form for the same must contain details regarding the establishment’s name, owner’s address, and employees. These details must be in a format to the inspector in charge of your locality for the application to receive approval. Vakilsearch can help you register your business with ease, as we have decades’ worth of experience in this field. Our legal experts will collect the required details from you, file the application in the prescribed format. Further, they will send you the registration certificate at the earliest. 


Also read: India's new Labour Laws: Your queries answered by legal experts


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Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.

Comments (1)

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Vakilsearch Staff

Greetings! We would love to work with you and your company. We look forward to connecting with business houses and MSME's.