Ministry of Corporate Affairs: preparing ground for Indian Corporates to Play Global
In recent times, Ministry of Corporate Affairs has taken a number of initiatives by introducing e-stamping with MCA-21 to further facilitate the e-registration of companies. It has also made the Competition Commission of India (CCI) and Competition Appellate Tribunal (CAT) functional. Limited Liability Partnership Act has been enacted and relevant rules issued. The new Companies Bill is now being scrutinized by the Standing Committee of the Parliament. It has been the Ministry’s constant endeavour to consult the stakeholders, invite and welcome suggestions, recommendations and views from all quarters before revisiting any rules and regulations in order to make them in tune with the changing world.
Some of the major achievements of the Ministry of Corporate Affairs during the year 2009 are enumerated below:-
A. Legislative Business
(i) Law on Limited Liability Partnership: Keeping in view the potential for growth of the services sector and the dominant role played by the professionals in the country’s economy, a new legal framework to provide for Limited Liability Partnership has been evolved for which the Limited Liability Partnership Bill, 2008 as passed by both the Houses of the Parliament, received the assent of the President of India on 7th January 2009 and notified in the Official Gazette dated 9th April 2009. All the provisions of the Limited Liability Partnership Act, 2008 (Act No. 6 of 2009), except provisions relating to winding up and dissolution, were notified for implementation with effect from 31st March 2009. The Limited Liability Partnership Rules, 2009 (on all matters except winding up and dissolution of Limited Liability Partnership) have been notified on 01st April 2009.
(ii) Notifications under Limited Liability Partnership Act, 2008: The notification for revision of 7 forms [Form 1 - Application for reservation or change of name, Form 2 - Incorporation Document and Statement, Form 3 - Information with regard to Limited Liability Partnership Agreement and changes, if any, made therein, Form 4 - Notice of appointment of partners/ designated partner and changes among them, intimation of DPIN by the Limited Liability Partnership to Registrar and consent of partner to become a partner /designated partner, Form 5 - Notice of change of name, Form 6 - Intimation of particulars of name or address of a partner/ change in such particulars by a Partner to the Limited Liability Partnership, Form 7 - Application for allotment of Designated Partner Identification Number] has been sent to M/o Law for final vetting.
(iii) Convergence of Accounting Standards with International Financial Reporting Standards (IFRS): Accounting Standards are policy documents relating to various aspects of measurement, treatment, presentation and disclosure of accounting transactions and events. The purpose of Accounting Standards is to standardize diverse accounting policies with a view to eliminate incomparability of financial statements. The objective is to provide a set of standard accounting policies and disclosure requirements to discourage accounting policies which are not in conformity with generally accepted principles and policies in accounting field.
The initiative for harmonization of Indian Accounting Standards with International Financial Reporting Standards (IFRSs) taken up by National Advisory Committee on Accounting Standards in 2001 and implemented through notification of accounting standards by the Central Government in 2006 would be continued by the Government with the intention of achieving convergence with International Financial Reporting Standards by 2011.
(iv) Comprehensive revision of the Companies Act:
The Companies Bill, 2008, which sought comprehensive revision of the Companies Act, 1956 was introduced in the Lok Sabha on 23.10.2008 and subsequently referred to the Department related Parliamentary Standing Committee on Finance for examination and report. However, before the said Committee could present its report, 14th Lok Sabha was dissolved and the Companies Bill, 2008 lapsed as per clause (5) of Article 107 of the Constitution of India. Ministry has now re-introduced the Companies Bill, 2008 as Companies Bill, 2009 in the Lok Sabha on 3.8.2009. The Bill is now under examination of the Department related Parliamentary Standing Committee on Finance.
B. Satyam Computer Services Ltd.
(i). On 16th December, 2008, Satyam Board passed resolution pertaining to acquisition of Maytas Infra Limited and Maytas Properties Limited which had valuation and related party interest issue. Due to severe opposition from the stakeholders of Satyam, the above deal was withdrawn leaving liquidity crunch and steep erosion of market valuation. On 7.1.09, Ex-Chairman of Satyam, Shri B. Ramalinga Raju, made a statement about the falsification of accounts/ financial statements of Satyam.
(ii). On 9th January, 2009, the Central Government moved Company Law Board seeking suspension of Satyam Board by Government nominated directors. As authorized by Company Law Board, the Central Government appointed six directors on the Board of Satyam under the Chairmanship of Shri Kiran Karnik.
(iii). On the recommendation of the nominated Board the Central Government supported the induction of strategic investor before the Company Law Board. On 13th April, 2009, M/s Tech Mahindra through its subsidiary was declared as highest bidder/ strategic investor in a fair, transparent and open bidding process. Company Law Board too confirmed the aforesaid induction vide its order dated 16th April 2009. With the completion of process of public announcement under Securities and Exchange Board of India, Substantial Takeover Regulations on 01.07.09, the Central Government moved an application before CLB for withdrawal of its nominee Directors and the same was permitted on 17.07.09. By Order dated 17.07.09, the Central Government has withdrawn Sh. Kiran Karnik, Sh. Deepak Parekh, Sh.Tarun Das & Sh. Suryakant Balkrishna Mainak from the Board of Satyam and Sh. T.N. Manoharan and Sh. C. Achutan are allowed to continue on the Board till further orders to ensure the compliance of requirements contained in the above mentioned Company Law Board order dated 17.07.09.
(iv). The Central Govt. ordered investigation on 13.1.09 under section 235 of the Companies Act into the affairs of Satyam through inspectors drawn from Serious Fraud Investigation Office apart from inspection of books of accounts on 08.01.09 under section 209A of the Companies Act in eight connected/associated Companies of Satyam.
The Serious Fraud Investigation Office has carried out investigation in to the Satyam in coordinated manner by associating Securities and Exchange Board of India/Central Board of Investigation/Enforcement Directorate etc. On 13th April 2009, Serious Fraud Investigation Office has furnished the investigation report of the Satyam to the Ministry. Serious Fraud Investigation Office has been asked to carry out further investigation on the issue of diversion of funds by promoters within India and outside India.
(v). CBI, ED and SEBI are taking action regarding violation of the laws relating to them. CBI has filed charge sheets for IPC offences. On the issue of pure Company Law violations reported in the investigation report, the Serious Fraud Investigation Office has been authorized to file eight number of complaints vide instruction dated 13.11.09. Serious Fraud Investigation Office has informed that seven complaints have been filed in Hyderabad.
C. Competition Act, 2002
During the year 2009, the Competition Commission of India and the Competition Appellate Tribunal established under Section 7 and Section 53 (A) respectively of the Competition Act, 2002 became fully operational. One Chairman and six Members have been appointed in the Competition Commission of India and one Chairman and two Members have been appointed in Competition Appellate Tribunal.
With the notification of section 3 & 4 and related section of the Competition Act, Competition Commission of India has become fully opertainal.
D. Strengthening of Serious Fraud Investigation Office (SFIO)
Various measures have been taken to strengthen Serious Fraud Investigation Office. 58 new posts have been created in various grades including Joint/Additional Directors, Deputy Directors-Grade II etc. Specialized posts have been/are being encadred in the specialized cadre of Indian Corporate Law Service, Indian Law Service and National Informatic Centre. Full powers have been delegated to Director, Serious Fraud Investigation Office to engage outside technical experts in accordance with General Financial Rules (GFRs).
E. MCA21 Project and e-Stamping Process in MCA21 Project
v Ministry of Corporate Affairs has launched MCA21, an ambitious e-Governance project. This is aimed at transforming the Ministry’s mode of working from traditional paper to paperless format.
v This initiative delivers over 100 services to citizens electronically covering almost completely the Companies Act of 1956.
v This project is the first successful Mission Mode Project under the National e-Governance Plan and has received the Prime Minister’s Award for Excellence in Public Administration.
v These services are provided in easy and secured manner via Ministry of Corporate Affairs portal.
v This is the first portal to use Digital Identity for users.
v It offers flexible Payment Options as mentioned – Challan, Credit Card, Debit Card, Internet Banking
v It provides uninterrupted service delivery we have contingency plan implemented through Data Centre and Disaster Recovery Centre.
v Service Level Agreements are maintained and regularly monitored with the operators to ensure high performance
v Before introduction of e-Stamping, stamp instrument has to be submitted physically in paper format at Registrar of Companies office. This causes delay in service delivery. In the entire process of electronic filing this is the only process which uses paper extensively. In order to eliminate this bottleneck and to increase the efficiency of service delivery, e-stamping was envisaged.
v 21 States and 3 Union Territories have authorized Ministry of Corporate Affairs to collect stamp duty and generate stamp electronically.
v We have introduced e-Stamping in selected Forms (Form 1, Form 5, Form 44, Memorandum of Association and Articles of Association) where the Stamp Amount is large.
v Stamp Duty will be collected along with Ministry of Corporate Affairs fees and e-Stamp will be generated and affixed on the forms or will be attached with Memorandum of Association and Articles of Association as a separate sheet.
v In case of any differences in the Stamp Duty, Registrar of Companies will be able to ask the applicant to pay additional stamp duty through a different form – Form 67.
v E-stamp will be generated and affixed only when the Registrar of Companies is satisfied that prescribed stamp duty has been paid.
v This process was introduced with effect from 13th September 2009. State of Kerala and Union Territory of Lakshadweep gave its consent on a later date and the e-Stamping process was introduced from 19th November 2009. We are extending the acceptance of physical stamp papers till 31st December 2009 thereafter which e-stamps will be made mandatory. This is applicable only for those States and Union Territories which have given their consent to Ministry.
F. Indian Institute of Corporate Affairs
Indian Institute of Corporate Affairs (IICA) has been set up to be a holistic think-tank, capacity building and service delivery institute to help corporate growth, reforms through synergized knowledge management, partnerships and problem solving in a one-stop-shop mode. The Institute would provide support to the Ministry in review/ revision of existing corporate laws, rule and regulations, as well as in framing of new ones, as per requirements of a dynamic economic environment. In addition, it would provide the much-needed training to Indian Corporate Law Service (ICLS) and other officials working for the Ministry, and support organizational reforms initiatives. Indian Institute of Corporate Affairs would also help in continuous improvement of service delivery in diverse areas like MCA-21, corporate governance, corporate social responsibility, investor education and protection, etc.
This is the first-ever Plan Scheme of the Ministry and involves an outlay of Rs. 211.00 crore over the Eleventh Plan period. The Indian Institute of Corporate Affairs Society has been registered under the Societies Registration Act, 1860 on 12.09.2008.
The Campus of the Institute is being constructed at IMT, Manesar on a 14 acre plot and the construction of the same has commenced with effect from last week of August 2009 and the same is expected to be completed by February, 2011. However, the functioning of the Institute has started pending completion of the physical infrastructure from September 2008 onwards itself. Since then following activities have been undertaken under the aegis of Indian Institute of Corporate Affairs in the year 2009-10:
- A 4-week training of Indian Corporate Law Service (ICLS) officers was conducted in March, 2009
- Indian Institute of Corporate Affairs conducted an Induction Training Programme for the Competition Commission of India (CCI) officers in July, 2009. Indian Institute of Corporate Affairs is also conducting an
Advanced Professional Programme for Competition Commission of India.
- The Ministry of Corporate Affairs in association with Indian Institute of Corporate Affairs and INSOL International organized a Roundtable on
Policy & Regulatory Issues in Insolvency on 27-28 April 2009 at New Delhi.
- Indian Institute of Corporate Affairs is funding the Quality Review Boards (QRBs) of the three professional Institutes under the Ministry of Corporate Affairs viz. Indian Chartered Accountants Institute, Indian Company Secretaries Institute and Indian Cost & Work Accounts Institute. The move is aimed at providing greater operational autonomy to the Quality Review Board. A meeting of the Quality Review Board of Indian Chartered Accountants Institute was held at Paryavaran Bhawan on 24th April 2009.
- Two programmes on Company Law Administration have been conducted by Institute of Corporate Affairs in 2009-10.
- Indian Institute of Corporate Affairs has taken up a project to develop an Indian concept along with national guidelines and disclosure
framework on Corporate Social Responsibility in partnership with GTZ, Germany. An expert group set up under this project is proposed to be expanded in the form of a Forum on socially responsible corporate governance.
· International Workshop on Cross-Border Insolvency and Developments in the Indian Regulatory Framework was held at New Delhi on April 27-28, 2009
· One day Workshop on Investigation of Corporate Fraud was held at New Delhi on 20th, August, 2009.
- Two days Workshop on Derivatives Demystified was held at New Delhi on 26-27 October, 2009.
- Workshop on Derivatives and their Implications for Financial Systems was conducted on 2nd December, 2009 for officers of the Department of Financial Services, Government of India.
- In the year 2009-10 Indian Institute of Corporate Affairs proposes to hold a Professional programme on Inspections and Investigations, an
Advanced professional programme on investigations under the Companies Act, 1956, a Programme on Liquidation and Winding up of Companies and Capacity addition programme for Official Liquidators staff.
G. India Corporate Week 2009:
The Ministry organized the first ever ‘India Corporate Week’ between December 14-21, 2009. This event, conceived as an annual event in the third week of December every year, was organized to showcase the contribution of Corporate Sector in the social and economic development of the country as well as to highlight the initiatives of the Ministry towards enlightened regulations. For this, the Ministry had collaborated with the leading trade and industry chambers as well as the professional Institutes and a total of 125 events on various themes organized during this week throughout the country. In the concluding events, held on Dec., 21, 2009 at Vigyan Bhawan, New Delhi, the President of India, Smt. Pratibha Devisingh Patil, gave the recognition of excellence to some of the leading chambers and the professional Institutes. The Corporate Affairs Minister, Shri Salman Khurshid, released the Voluntary Guidelines on Corporate Governance, Voluntary Guidelines on Corporate Social Responsibly and a Compendium titled “Corporate India 2009”.
Vision of the Ministry:
To be a leader and partner in initiatives for corporate reforms, good governance and enlightened regulations with a view to promote and facilitate effective corporate functioning and investor protection.