Entrepreneurs must pay suppliers on time (within 45 days for MSME suppliers), use fair contracts, avoid abusing bargaining power and build long-term relationships. To creditors, they must use funds for the stated purpose, repay on schedule, report honestly, protect collateral and follow covenants. To depositors, they must follow Companies Act deposit rules, repay on time, keep funds safe, be transparent and never run unregulated schemes.
Late payment is one of the biggest problems India’s small suppliers face, so seriously that the law now forces the issue. Under the MSMED Act, 2006, buyers must pay registered micro and small suppliers within 45 days where there is a written agreement, or pay compound interest at three times the RBI bank rate. Since FY24, Section 43B(h) of the Income Tax Act also stops buyers from deducting such dues as expenses until they are actually paid.
An entrepreneur’s responsibilities to suppliers, creditors and depositors go beyond legal minimums. The people who give a business goods on credit or lend it money are trusting it. Here is what that trust requires. For the wider picture, see social responsibilities of entrepreneurs.
Responsibilities Towards Suppliers
1. Pay on Time
Honour agreed credit terms, and within 45 days for MSME suppliers. Delayed payments push small suppliers into debt.
2. Clear, Fair Contracts
Spell out price, quantity, quality, delivery and payment terms in writing.
3. No Abuse of Bargaining Power
Large buyers should not force unfair discounts, sudden order cancellations or one-sided returns.
4. Honest Information
Share realistic order forecasts so suppliers can plan capacity.
5. Fair Selection
Choose suppliers on merit, without bribes or favouritism.
6. Long-Term Relationships
Stable partnerships help both sides invest in quality and efficiency.
7. Help Suppliers Improve
Share technical know-how and quality standards, as large manufacturers do with their component makers.
Responsibilities Towards Creditors (Banks and Lenders)
8. Use Funds for the Stated Purpose
Diverting a loan taken for machinery to other uses is a breach of trust and often of the loan agreement.
9. Repay on Schedule
Pay interest and instalments on time; tell lenders early if trouble is coming.
10. Give Accurate Financial Information
Submit true accounts, stock statements and project reports. Inflating figures to get a loan is fraud.
11. Protect the Security
Maintain and insure assets pledged as collateral.
12. Comply With Covenants
Keep agreed ratios and seek consent before major changes such as new borrowing or asset sales.
Responsibilities Towards Depositors
13. Follow Deposit Rules
Companies can accept public deposits only under the Companies Act, 2013 (Sections 73 to 76) and its rules, with credit ratings, limits and disclosures.
14. Pay Interest and Principal on Time
Depositors are often retirees relying on that income.
15. Keep Deposits Safe
Do not use deposit money for speculative ventures.
16. Be Transparent
Disclose the company’s financial position honestly in deposit documents and annual reports.
17. Never Run Unregulated Schemes
The Banning of Unregulated Deposit Schemes Act, 2019, makes collecting money through unregistered schemes a criminal offence.
Quick Reference
| Stakeholder | Core duty | Relevant rule |
|---|---|---|
| MSME suppliers | Pay within 45 days | MSMED Act 2006; Income Tax Act s.43B(h) |
| Banks and lenders | Use funds properly, repay on time, honest reporting | Loan agreement, IBC 2016 |
| Public depositors | Accept deposits legally, repay on time | Companies Act 2013 ss.73-76; BUDS Act 2019 |
Related: responsibilities towards employees, customers and government.
