YEAR-END REVIEW- 2010
The basic
charter of Ministry of Corporate Affairs is to promote the growth of the Indian
corporate sector through enlightened regulation. To enable formulation of
enlightened regulations that provide a framework for the corporate sector and
its stakeholders to achieve their aspirations, the Ministry has
developed a collaborative form of working with all the stakeholders. In the true spirit of partnership between the
government and the businesses, as both are intrinsic parts of a democratic
framework and as the structure of corporate governance which is essentially
rooted in democracy, there is need to bring out the shareholders and
stakeholders as real voices in the corporate democratic space wherein relations
are defined by mutual respect. With this background, the Ministry of Corporate
Affairs has adopted the mottos of ‘Corporate Growth with
Enlightened Regulations’ and ‘Corporate Sector and Inclusive Growth’.
Since last calendar year a
number of positive developments have taken place in the framework
of corporate regulation, some of which are
highlighted below.
Companies Bill
A new Companies Bill was introduced in the Lok Sabha on 3rd August, 2009 and it was referred to the Parliamentary Standing Committee. The examination by the
Standing Committee of Parliament was successfully completed in August 2010 through
a rigorous consultative process and the Ministry is now preparing to introduce
the Bill in the budget session of the Parliament during the first half of 2011. This Bill seeks to replace the
Companies Act 1956 with a new law that is modern in construction and provides
flexibility to respond to the rapid changes in the business environment while
incorporating some of the best practices in the field of corporate regulation.
The new Companies Bill, 2009 will be beneficial for companies as well as
common people as it provides, inter alia, as below:
(i)
Requirements
at the time of incorporation would be clear and precise;
(ii)
Responsible
self regulation with disclosures and accountability;
(iii)
Electronic
mode provides for company processes;
(iv)
Protection
of right of minority shareholders;
(v)
Introduction
of concepts like Key Managerial Persons (KMP), independent directors and committees of Board;
(vi)
More
accountability on the part of auditors;
(vii)
Investor
Education & Protection Fund (IEPF) claims to be allowed even after seven
years; and
(viii)
Shareholders
Association / Group of shareholders enabled to take legal action and
introduction of ‘Class Action Suits’.
Company
Law Settlement Scheme, 2010 and Easy Exit Scheme, 2010
The total number of
registered companies in the country at the beginning of the current Financial
Year was 7,89,361. However, there are about 1.92 lakh dormant companies which have not filed their Balance
Sheet for last 3 consecutive years or more. The Ministry has initiated a
massive program to identify and weed out such dormant companies.
The Ministry of Corporate Affairs had floated
two schemes namely, Company Law Settlement Scheme (CLSS), 2010 and Easy Exit
Scheme (EES), 2010 on 30.5.2010. These schemes were designed to provide a
window to the companies to file statutory documents which they have failed to
file in the past and also for closure of defunct companies in case they do not
want to continue with their business.
Both the schemes, which were in operation for a
period of 3 months ending on August 31, 2010, have been successful.
The Ministry has decided to re-launch Easy Exit Scheme from 1st
January, 2011
for a period of one month in order to facilitate closure of defunct companies.
Corporate
Governance
The National Foundation of Corporate
Governance (NFCG) has been expanded so as to make its membership more broad
based and to enable it to function as the national apex platform on corporate
governance issues. In order to raise the bar of corporate governance practices
in the Indian corporate sector, the Ministry had released Voluntary Guidelines
on Corporate Governance in December last year which highlighted some of the
issues related to independent directors, audit, compensation to directors etc.
Keeping in view the adoption of these guidelines and the feedback from
stakeholders, the Ministry is considering incorporation of some of the features
in the Companies Bill itself.
Corporate Social
Responsibility
The
Ministry, while providing the enabling environment for the corporate sector to
grow, is also focusing on the relationship between the growth of corporate
sector and the social & economic development of the common man. Keeping in view this objective, the Ministry
had released Voluntary Guidelines for “Corporate Social Responsibility” in
December 2009. Further refinement of these guidelines is being done through an
elaborate consultative process by the IICA.
Accounting Standards
& IFRS
The Ministry of Corporate Affairs is the nodal Ministry in
the matter of convergence of International Financial Reporting Standards (IFRS) and has decided that Indian Accounting Standards currently followed by the
companies will start converging with IFRS from April, 2011, in a phased manner as part of the G20 commitment. A
Core Group on convergence with IFRS was constituted in the Ministry in July, 2009 with
representatives from MCA, C&AG, RBI, SEBI, IRDA, PFRDA, ICAI
and MOF and some other experts. The Core Group has finalized a roadmap on
convergence with IFRS.
The
Ministry, through Professional Institutes, has been organizing various
workshops for professionals including industry specific tailor-made workshops
at various cities throughout the country in order to have hassle-free smooth
convergence.
Indian Institute of Corporate
Affairs
The
Indian Institute of Corporate Affairs (IICA) was established by the Ministry of
Corporate Affairs in 2008 to take up training and capacity building, especially
of the Indian Company Law Service (ICLS) officers and also to act as a think
tank on corporate matters. To facilitate its activities, a self-sufficient
state of the art campus is being built at Manesar in
Haryana and is nearing completion.
Though
at a nascent stage, IICA has already taken up capacity building and training in
various subjects and matters relevant to corporate regulation and governance,
competition law, business sustainability through environmental sensitivity and
social responsibility etc.
IICA
has been set-up with a flexible organizational structure having:
·
Schools for teaching, training and capacity
building in academic disciplines relevant to corporate regulation and
functioning;
·
Think tanks for research, studies and policy
advice to the government;
·
ICLS Academy for providing induction
and in- service training to ICLS Officers;
·
A network of global partnerships with
government, institutions, corporate entities, academic and other institutions.
International Cooperation
The Ministry has
up-scaled its international cooperation initiatives so that the developments in
the global business environment can be suitably incorporated in the process of
enlightened regulation. An MOU was signed with Japanese authorities where
Indian experts will be providing knowledge to Japanese counterparts in the
field of convergence with IFRS. Arrangements are being
worked out with USA, Australia, Russia and Netherlands for mutually beneficial
exchange of ideas.
Investor Awareness
Initiatives
The
participation of the common man in the corporate economy in India is still very low
despite the increasing trend of household savings. In order to bring a national
focus on investor awareness issues, the Ministry organized the India ‘Investor
Week’ in July this year in collaboration with 18 partners namely, BSE, NSE,
MCS-SX, CII, FICCI, ASSOCHAM, ICAI, ICSI, ICWAI, AIAI, AIMA, SICCI, FAPCCI, IMC, PHD Chamber, RBI, SEBI, and UTI-MF.
To
make the investor education content available to the common man, the Ministry
released the ‘Beginners’ Guide to the Capital Market’ published in English,
Hindi and all the major regional languages along with launching the investor
awareness website www.iepf.gov.in in the major regional
languages during the ‘Investor Week’ . A comprehensive Guide to the Capital
Markets was also released during this week.
Under this initiative, the Ministry is organizing over 3000 investor
awareness programmes throughout the country.
e-Governance
The MCA21 system has been upgraded to address the issues
related to peak filing so that the stakeholders are offered further ease of
availing the services of this e-Governance portal. A new record of 70,040
filings in a single day was achieved on 29th
October 2010
that includes 21,801 balance sheets. E-Stamp or electronic stamp duty payment
in MCA21 has emerged as a successful joint initiative of Centre-State in
e-Governance for speedy service delivery to recipients of MCA21 services. More
and more States have joined this initiative and at present this facility has
been extended to 29 States & UTs of India.
The
Ministry is also pursuing the adoption of Extended Business Reporting Language
(XBRL) enabled filing process in MCA21 so that the system can be utilized for
more effective data analysis, regulatory enforcement and value added services
to the policy formulators, researchers, corporate sector and other
stakeholders.
The
Ministry has already made available ‘Company Master details’
in the public domain under the MCA21 e-Governance program. The Master details
containing 17 important company information such as, date of incorporation,
registered office address, class of company, authorized capital, paid up
capital etc. are available free of cost.
In
addition, an electronic registry containing documents filed by companies such
as, Incorporation documents, charge documents, balance sheet, annual returns
and other documents filed by the companies is available in the public domain by
paying a token fee. The regulators and other Government agencies are allowed
free online access to the electronic registry
Early
Warning System (EWS)
The Ministry has devised Early
Warning System (EWS) based on the information available in MCA-21 System. Based on ‘identified risk
parameters’, the system generates alerts in respect of unusual tendencies in
financial statements. Based on
these alerts, respective Registrars of Companies examine the concerned cases to
find out irregularities, if any, and
take action according to law.
Companies
Bill, 2009 also provides for stringent provisions for non-compliance of the
provisions of the
Bill.
India Corporate Week 2010
While
the Ministry is focusing on the entire business sector and a number of
initiatives in this direction are underway, it is felt that there is need to
provide positive reinforcement to the efforts made by the corporate sector in
the development of India.
To this effect, the Ministry decided to observe the third week of December as ‘India
Corporate Week’ (ICW) every year. The first ICW was organized in December 2009
with the theme ‘Corporate Sector and Inclusive Growth’.
The theme of the second ICW, organized recently
from December 14-21, 2010 was ‘Sustainable Business’.
During this week, a large number of events were organized throughout the
country focusing on this theme. The week started with the inauguration of the national
event by the Prime
Minister, Dr. Manmohan Singh at Vigyan
Bhawan, New Delhi on 14th
December. Various organizing partners of MCA hosted a number of programmes on the above theme in Tier-II and Tier-III
cities also throughout the country. The number of such programmes during the week were over 250. The major
organizing partners were: CII, FICCI, ASSOCHAM, PHD Chamber, Madras Chamber of
Commerce & Industry, All India Association of Industries, Institute of
Chartered Accountants of India, Institute of Cost & Works Accountants of
India and Institute of Company Secretaries of India. During the ICW- 2010,
Ministry launched nation-wide Investors’ Education Website in Hindi and eleven
regional languages. The Ministry also released a book titled ‘India Unlimited -
A Corporate Journey’, in partnership with NFCG and Penguin Books Indian Pvt.
Ltd.
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