The Indian economy has expanded at a rapid rate during the current decade and the corporate sector has been the biggest contributor in this growth story. A significant feature of this growth is the increasing integration of the Indian corporate economy into the global business environment. While the Ministry of Corporate Affairs is working towards reforming the enabling environment for effective functioning of the corporate sector, simultaneously, there is a strong argument for fostering sensitivity to community and social concerns as a part of the broader objective of inclusive growth. It has been our constant endeavor at the Ministry to consult all the stakeholders in true spirit of our democratic values while undertaking these reform initiatives. The Ministry is also encouraging the corporate sector to take into account the concerns of stakeholders beyond their investors and to demonstrate that responsible business governance can generate value for all the stakeholders. In the long run, this collaborative effort between the government and the corporate sector will become a key multiplier in helping the ‘Aam Aadmi’ participate in the India’s growth story.
Ministry of Corporate Affairs has been working towards repositioning itself as a significant facilitator in creating a positive and healthy environment for doing business in India by offering an enlightened regulatory regime and efficient services so that the entrepreneurial energies are utilized in creating value for the stakeholders and are not spent in un-knotting the bureaucratic red tapes. A number of initiatives have been taken by the Ministry on legislative, regulatory, service delivery and capacity building sides.
The Ministry has formulated “National Voluntary Guidelines on Social, Environmental and Economic responsibilities of Business” that will mainstream the subject of business responsibilities. The guidelines, released by Shri Murli Deora, Hon’ble Minister for Corporate Affairs today, are a refinement over the Corporate Social Responsibility Voluntary Guidelines 2009. These guidelines have been formulated keeping in view the diverse sectors within which businesses operate, as well as the wide variety of business organizations that exist in India today – from the small and medium enterprises to large corporate organizations. The Guidelines are applicable to all such entities, and are intended to be adopted by them comprehensively, as they raise the bar in a manner that makes their value-creating operations sustainable.
The Guidelines are not prescriptive in nature, but are based on practices and precepts that take into account the realities of Indian business and society as well as the global trends and good practices adapted to the Indian context. It urges businesses to embrace the “triple bottom-line” approach whereby its financial performance can be harmonized with the expectations of society, the environment and the people it interfaces with, in a sustainable manner. The adoption of these Voluntary Guidelines would also improve the ability of businesses to enhance their competitive strengths, improve their reputations, their ability to attract and retain talent and manage their relations with investors as well as the society at large.
Recent initiatives on legislative, regulatory, service delivery:
Ministry of Corporate Affairs has been pursuing the agenda of providing an effective regulatory framework to the Indian corporate sector that enables them to freely exploit their entrepreneurial energies while contributing to the overall growth of the society. In order to cut time lines in service delivery and give further ease to the stakeholders, we have undertaken various initiatives in the recent past. Some of major initiatives are as under: —
(1) Green Initiatives in the Corporate Governance : The Ministry has allowed paperless compliances by the companies and Registrar of Companies under the provisions of the Companies Act, 1956 such as : –
(a) Allowing service of Documents including Balance Sheets and Auditors report etc through e-mail addresses : In order to reduce cost of posting and speedy delivery of documents, service of documents through electronic mode has been permitted under section 53 of the Companies Act, 1956 in place of service of document under certificate of posting. Similarly, to reduce the consumption of papers and speedy secure delivery, service of copies of Balance Sheets and Auditors Report etc., to the members of the company as required under section 219 of the Companies Act, 1956 has been allowed to be served through electronic mode by capturing their e-mail addresses available with the depositories or by obtaining directly from the shareholders.
(b) Participation by Directors and shareholders in meetings through video conferencing : In order to provide larger participation and for curbing the cost borne by the Company, Directors, and shareholders to attend various meetings under the provisions of the Companies Act, 1956, participation through video conferencing has been permitted subject to certain compliances.
(c) Voting in General Meeting of Companies through electronic mode : In order to have secured electronic platform for capturing accurate electronic processes, Central Depository Services (India) Ltd (CDSL) and National Securities Depositories Limited (NSDL) are being given approval by the Ministry of Corporate Affairs to provide their electronic platform for capturing accurate electronic voting in General meetings of the company.
(d) Issue of Digital Certificates by Registrar of Companies: The Registrar of Companies has to issue a number of certificates to the companies and other stakeholders as required under the provisions of the Companies Act, 1956. In order to cut timelines and an another step towards “Green Initiative”, it has been decided that all certificates and standard letters issued by the Registrar of Companies will now be issued electronically under the Digital Signatures of the Registrar of Companies.
(2) Simplification in Procedures and Process under Companies Act, 1956: The Ministry has taken following steps to simplify the procedures for the corporate are as under : —
(a) Incorporation of new Company within 24 hours by end of July, 2011
i. Allotment of Director Identification Number (DIN) has been made online by the system once the particulars of the applicant are verified by the practicing professionals.
ii. The Ministry is issuing revised guidelines for allotment of name of the company. The name shall be made available online, if the application has been certified by the practicing professional that the proposed name is in conformity with the guidelines. The guidelines shall be implemented by end of July, 2011.
iii. A separate e-form is being developed for the Memorandum and Articles of Association and incorporation process will be totally paperless.
(b) Issue of License under section 25 (non profit companies) of the Companies Act, 1956 : – Work relating to issue of license under section 25 (non profit companies) has been delegated to ROCs and condition for publication of notice for 30 days in the newspapers before issue of license have been dispensed with.
(c) The Director’s Relatives (Office or Place of Profit) Amendment Rules, 2011:- Limit of Directors relatives salary has been enhanced from Rs. 50,000/- per month to Rs. 2,50,000/- per month. Now onwards, for remuneration for relatives of the Directors within the enhanced limit, company need not to approach Ministry for approval.
(d) Marking a company as having management dispute by Registrar of Companies under MCA-21 system : In order to have uniform practice in all Office of ROCs, clarification has been issued that unless there is a order of the court or the Company Law Board, no company is to be marked as having management dispute by the ROCs.
(e) Various E-forms are approved online : A number of e-forms which are informative in nature have been processed and approved/ recorded by the Registrar of Companies online and are made available for inspection to the public immediately.
(f) Registration of place of business by a foreign company: Registration of place of business by a foreign company has been made priority item and it is registered by ROC on same day.
(g) Appointment of LLPs of chartered accountants as auditor: After making amendment in definitions of body corporates, Limited Liability Partnerships of chartered accountants will not be treated as body corporate for the limited purpose of section 226(3A) of the Companies Act, 1956, hence they can be appointed as auditor of a company.
(h) Allotment of Designated Partner Identification Number (DPIN) :Designated Partner Identification Number issued under Limited Liability Partnership (LLP) Act, 2008 has been integrated with DIN. Now (w.e.f. 09.07.2011) only DIN will be allotted under Companies Act, 1956 and the same will be used as DPIN for LLP Act, 2008.
(i) New Guidelines for Fast Track Exit of defunct Companies : The Ministry has issued guidelines for Fast Track Exit mode to give opportunity to the defunct companies to get their names struck off from the Register under section 560 of the Companies Act, 1956 in time bound manner.
(j) Special drive to clear pendency: A large number of e-forms filed prior to implementation of revised Regulation 17 are pending for want of action by the companies/stakeholders. Without any response from the companies, ROCs cannot process the said forms. As per Regulation 17, these forms have become time barred. To reduce the pendency of such e-forms, Ministry has decided to re-open all such pending forms for reviewing by ROCs and disposing them by 7th July, 2011.
(k) To improve compliances by the company : In order to ensure corporate governance and proper compliances by the companies, it has been decided that w.e.f. 3rd July, 2011, no e-forms shall be accepted by ROC from such companies which have not filed their updated Balance Sheets and Annual Returns since 2006-07. The Directors of such defaulting company shall also be debarred for filing any document unless they make the default good.
(3) e-Payments in the Ministry: The payment of filing fee by the companies has been made completely online.
(4) International Financial Reporting Standards (IFRS) : In the field of financial reforms, convergence of Indian Accounting Standards called Indian AS’s with International Financial Reporting Standards (IFRS) has been approved by the Ministry in February, 2011. The date of coming in force of Indian Accounting Standards will be notified shortly.
(5) Investor awareness programmes : In order to channelize the significant household savings available with the Indian households into the corporate economy, the Ministry has decided to launch investor awareness programmes in 300 districts in association with ICAI, ICWAI ICSI, Stock Exchanges, RBI, SEBI, Trade Chambers, etc.
(6) The Companies Bill, 2011 : The Companies Bill, 2009 was introduced in the Parliament on 3rd August, 2009 after an extensive stakeholders’ consultation. It was subsequently referred to the Department related Parliamentary Standing Committee on Finance for examination. The report and the recommendations of the aforesaid Standing Committee have been examined in the Ministry and a revised draft Companies Bill, 2011 prepared in consultation with Ministry of Law (Legislative Department), has been circulated to the various Ministries and Departments for views and comments. Once the consultation with Ministries and Departments are completed, a revised Bill as Companies Bill, 2011 is proposed to be introduced in the next session of the Parliament after obtaining due approvals. Consequent upon introduction of the Companies Bill, 2011, the Companies Bill, 2009, pending in the Lok Sabha, will be withdrawn.
(7) Reorganisation of field offices : For better administration and faster service delivery, the Ministry created a new office in the form of Regional Director (SER), Hyderabad in May 2011. The field offices of the Ministry are now organized in six regions. Similarly, it is planned to restructure the cadres in the Ministry for better service delivery to public and better promotional prospects to existing personnel.
(8) Easy Exit Scheme, 2011 : With a view to reduce the number of defunct /inoperative companies, we launched Easy Exit Scheme, 2011 providing them an easy route for closure. Under the scheme, till now, more than 29,000 defunct /inoperative companies have been struck of.
(9) Indian Institute of Corporate Affairs (IICA) : The Indian Institute of Corporate Affairs (IICA) has started functioning from its new office and building at Manesar. A large number of new initiatives, capacity building etc. are planned at IICA.
Following improvements are planned in the functioning, service delivery and regulatory work of the Ministry:
(1) Limited Liability Partnership Act : The e-Governance project for Limited Liability Partnership Act, (LLP Act) is running. However, to improve the working of LLP Act, it is planned to take up the registration of LLPs as a full e-Governance project on the same platform as MCA21.
(2) Extensible Business Reporting Language (XBRL) : Extensible Business Reporting Language (XBRL) is being introduced in e-filing of Balance Sheet, Profit Loss Accounts, etc. to have compatibility with international accounting and for data mining and analysis. The taxonomy of XBRL has been finalised after extensive consultation with all stakeholders – ICAI, Trade Chambers, etc. This taxonomy has been placed on the website of Ministry for information of all.
(3) National Foundation for Corporate Social Responsibility (NFCSR) : It has been decided to establish National Foundation for Corporate Social Responsibility (NFCSR) at IICA.
(4) National Company Law Tribunal (NCLT) : To cut short the time delays in liquidation of companies. The Ministry is in process of establishing National Company Law Tribunal (NCLT) which will replace High Courts and BIFR for liquidation and rehabilitation of companies.
(5) Guidelines for unpaid and unclaimed dividends: The Ministry is formulating guidelines for unpaid and unclaimed dividends. It is also in the process of implementing a functionality whereby the names of such investors who have not claimed amounts due to them shall be displayed on the website of the Ministry for the benefit of all.
(6) New Bills on Multi State Societies and Multi State Partnerships
The Ministry is considering to bring legislations on Multi State Societies and Multi State Partnerships to regulate their business activities.