Union Corporate Affairs Minister Dr. M. Veerappa Moily has emphasized upon creating an environment that would enable the corporate community meet the multifarious global challenges while enhancing their competitiveness. Dr. Moily was addressing a Press Conference to highlight the achievements of his Ministry here in New Delhi today. The minister said a systematic plan has been chalked out to increase engagement with the industry associations and chambers in crucial issues of corporate administration and governace. On this occasion He also released a the compendium entitled, Innovative March to New Horizons of Corporate Growth.
Dr. Moily said his ministry is not in the business of policing the companies; our mandate is to let the corporates do business efficiently and responsibly. He said the major agenda of ministry reform is in the form of the Companies Act as the Bill as introduced in the Lok Sabha in a revised form in late 2011 is still with the Parliamentary Committee on Finance. He said I would not like to speculate as to how long it will take us to present our proposal in the light of the second report of the Committee as this will depend on the kind of recommendations made; If these are not of a wide ranging nature it should not take long, otherwise we need to have an elaborate consultative process with stakeholders like the Ministry of Finance, SEBI, RBI and such other Ministries as may appear to be affected by the reports.
The minister referred to the Eurozone crisis which has had a deleterious effect on our exports and the escalating import bill largely on account of the ever increasing demand for petrol and petroleum products. He however, expressed the hope that our corporate sector has the resilience and expertise to come on top of the situation. He said as friends of the corporates his ministry is alive to their concerns and anxieties and we have taken care to ensure that the regulatory requirements for them do not become any more onerous. We have introduced the practice of ˜abridged statement of accounts™ we have also taken steps like excluding the Employees Share Option Plan or ESOPS from the purview of ˜interest in capital™ for the purpose of deciding managerial remuneration. I am making a mention of these two randomly selected measures only to emphasise that my Ministry believes that even seemingly small steps have the effect of going towards engendering a sense of well being among the corporates.
The minister informed that the Committee appointed under the chairmanship of Shri Adi Godrej to formulate the National Policy Guidelines on Corporate Governance is making good progress and it should be possible to have the draft policy framework ready for public discussion and debate by the end of next month or early August. We have already put the business responsibility reporting framework proposed by Bharat Wakhlu Committee in the public domain. In particular, the CII is taking interest in further improving the efficacy of the proposed framework. We have also finalised the proposed amendments in the Competition Act and the proposed national policy on competition these initiatives are being fine tuned by a Group of Ministers so as to ensure harmony between the competition regulators and other regulators.
Dr. Moily also spoke about the inauguration of the new campus of Indian Institute of Corporate Affairs (IICA) at Manesar, Gurgaon by Prime Minister Dr. Manmohan Singh on April 13 this year. He said the Institute is in the process of finalizing the recruitment of faculty so as to serve as a think tank on all issues of corporate governance and to act as a bridge between the Government and the corporate sector in initiating policy formulation. The Institute will soon as an important capacity building platform in all aspects of corporate law and governance.
The Minister referred to the electronic platform called the MCA 21. This is the most comprehensive e-governance solution within the governmental system. All aspects of corporate regulation and reporting involving over 8 lakh companies are now on line. It is possible to get a company incorporated within 48 hours where there is no confusion about availability of name and to view on line all the filings of the companies what better examples can one think of when talking of increasing transparency and efficiency in corporate regulation sector. XbRL filing for select companies is a further milestone in corporate governance as it is enabling the regulators to look more deeply in the financial affairs of the corporates and to watch against early signs of emerging problems.
Referring to the Reebok case Dr. Moily said the Serious Fraud Investigation Office (SFIO) has already started its investigations and in touch with other agencies involved in the investigation. It is committed to take a dispassionate view and carry out an objective investigation to get to the bottom of the truth. Also, SFIO has reported full cooperation from the management of Reebok Indiaand others in possession of relevant information.
The Minister gave brief detail of his ministries achievement which is as under:
Corporate Growth: There are 8 lakh active companies and 9520 LLPs at present. There has been a tremendous growth in incorporation of new companies viz. 68,088 during 2009-10, 92,080 in 2010-11 and 1,00,242 in 2011-12. Ministry is taking all possible steps to improve the existing MCA21 platform to enable hassle free incorporation.
Companies Bill:- The Companies Bill, 2011 stands referred to the Parliamentary Standing Committee on Finance for examination and report. The evidence of the Ministry on the Bill was taken on 20.4.2012. In the last oral hearing, an indication was given to the officials of the Ministry that the report will be tabled within the Budget Session. This did not transpire and now it is expected that this will be done in the early part of the Monsoon Session.
(a) e-Stamping: e-Stamping for MCA services has been extended to cover all States andUnionTerritories. With these, companies registered in all States and UTs can avail of the facility. The Ministry had already added a new payment gateway through Union Bank ofIndia in addition to existing ICICI payment gateway for credit card and net banking payments.
(b) E-Banking: Corporates availing of entire range of regulatory services through the electronic platform of the Ministry (MCA21) can now make electronic payments through any bank, making life much simpler for the companies.
(c) Integration of LLP with MCA21: A decision has been to integrate LLP e-Governance programme with MCA21 to enable registration of LLP by ROCs. The work of software development has been done by TCS. To ensure seamless transition, a number of changes were necessary and have been carried out. The system is being made live today viz. 11th June.
(d) OL e-Governance: In an attempt to improve the functioning of Official Liquidators (OL), the Ministry intends to extend the application of e-Governance to liquidation and winding up of companies. We are planning to do this on existing MCA21 platform for e-auction, HR and accounting functions of OLs.
XBRL: Implementation of XBRL by select class of companies last year was one of the most significant achievements of the Ministry. The first year implementation have been widely appreciated. Till the end of May, 2012, 26,815 companies have filed their financial statements in XBRL format. The Ministry has already conducted technical analysis of these filings. The XBRL taxonomy for this year has already been exposed for comments on MCA and ICAI Portal.
MCA21 v2: The MCA 21 v2 is essentially a continuation of the existing MCA21 Project. The project is to be implemented through an open bid process for the selection of a service provider . The RFP v2 has already been issued on 1st May, 2012.
IEPF: As part of the investor protection initiative, the Ministry has introduced a functionality in its website for the company to file details of unpaid and unclaimed amounts of dividends and deposits for the last 7 years. To inform investors about such amounts lying with companies, this functionality will be very useful.
(a) Competition Policy: The draft of the National Competition Policy is likely to be submitted to the Cabinet for its approval very shortly. The proposed Competition Policy envisages the Cabinet Committee on Competition to provide necessary directions and guidelines to various Ministries and Departments of Government of India on steps to be taken to engender the ˜Competition Culture™.
(b) Mr. Justice (Retd.) V. S. Sirpurkar, former Judge of Supreme Court of India has joined as Chairperson, Competition Appellate Tribunal on 22.05.2012, following the retirement of Justice Dr. Arijit Pasayat.
(c)Competition (Amendment) Bill : In its meeting held on 20.4.2012, seeking approval of the Cabinet to introduce Competition (Amendment) Bill, 2012 , the Cabinet has decided to refer the pertinent issues for consideration by Group of Ministers.
Corporate Governance: To prepare a formal policy document on corporate governance based on wide consultations with all stakeholders, a High Powered Committee has been constituted on 7th March, 2012 with Shri Adi Godrej as Chairman, Dr. Kiran Majumdar Shah , CMD, Biocon, Ms Zia Mody, Lawyer, etc. as Members. The Committee has been asked to give its report within 6 months.
CSR: The concept of Corporate Social Responsibility (CSR) is proposed to be introduced within the legislative framework and for the first time anywhere in the world a responsibility will be cast for corporates falling in specified category to spend 2% of their net profit on socially productive activities. Provisions for mandatory reporting along with reasons in case of failure to meet the prescribed target has also been included.
IICA: A state of the art institute, namely Indian Institute of Corporate Affairs (IICA) has been set up at Manesar, Gurgaon, Haryana. This was inaugurated by the Hon™ble Prime Minister on 13th April, 2012. The Institute is expected to act as a think tank for academics, training, research and to foster inclusive growth and entrepreneurial excellence with ethical business practices. To advocate and promote CSR, National Foundation for Corporate Social Responsibility has been established within IICA. This is expected to create a National Platform for Corporate Sector to work in partnership with Government, Non-governmental and Civil Society Organisations leading to inclusive growth and sustainable development.
Follow up of India Corporate and Investor Meet:
The Ministry had organized India Corporate and Investor Meet events in the month of February, 2012 with the support of industry chambers. Based on the deliberations in these events, a Committee has been constituted under the chairmanship of Shri Jaydeep N. Shah, President, ICAI to prepare a roadmap for investor related issues comprising of financial literacy, investor grievance redressal, channelizing household savings into the corporate sector, and recognition to corporates for investor friendliness. The Committee has been asked to give its report by 2nd week of August, 2012.
As you can see in the publication released today, we have briefly outlined our vision and plans for the way forward to make the corporate administration effective, transparent, accountable and responsive so that we are able to provide an ambient environment for corporate growth in the country. The details are provided in the publication, however, I would briefly touch upon some of the important issues:
MCA 21 Version-2
As stated earlier, the Ministry of Corporate Affairs has done pioneering work in the e-Governance arena. The MCA-21 V-2 is under process of implementation and the same will come in force before 16.01.2013.
MCA21 v2 is essentially a continuation of the existing MCA21 project with much enhanced and transparent framework:
- Enhanced experience to the end-users through modifications/upgrade of software and improvement of some of the current interfaces like enabling mobile devices, tablets etc.
- Replacement of outdated client side infrastructure;
- Enhanced network connectivity for the offices of MCA;
- Enhancing the applications to meet the requirements of the New Companies Bill, 2011 as and when it is passed;
- Integration into the national infrastructure being planned and implemented by DIT, Govt. of India.
Apart from strengthening the IICA to make it a world class institute and think tank for corporate governance in the country, special emphasis will be given to training ICLS officers and other Group A officers on the issue of corporate management and finance. It has been envisaged to conduct specialised training module for the CFOs and other senior finance executives working with Banks and financial institutions. Capacity building programmes are also being worked out for the senior and middle level corporate managers and the senior executives of the public sector units.
Furthering the interests of investors
(i)Preparation of the road Map
The Ministry is actively engaged to prepare roadmaps on the basis of the suggestions / recommendations received during the five investor™s meet held in February. The Ministry plans to take up this in a big way and in time bound manner.
In the context of the crucial issue of financial literacy and creating awareness among the investors in order to build up vibrant capital market, efforts are being made for preparation of a blue-print in consultation with Ministries of Finance and HRD, NCERT, different State education boards and CBSE. I have already written to the Minister, HRD and the Chief Ministers of all the States to suggest steps to be taken for inclusion of suitable module on capital market in school curriculum.
(ii)Sub-site on unpaid and unclaimed amounts lying with the companies
The Ministry is launching a sub-site on the Ministry™s website htp:/www.mca.gov.in , where companies are required to file their investor-wise details of unpaid and unclaimed amounts of investors lying with them. This website will enable the investors, specially the small investors and investors from remote areas, to search and locate the information on such amount. At present these amounts are being transferred to Investor Education and Protection Fund (IEPF) after the expiry of seven years and there is no provision of returning the money to them. This website will help investors to find out such amount due to them and file their claim with the respective companies.
Business Responsibility Reporting Framework
Based on the recommendations of a Committee of various stakeholders formed by the Ministry, a framework for Annual Business Responsibility Report is being finalised shortly. This will be implemented in consultation with SEBI and other stakeholders.
Institutional Arrangement for Dispute Resolution
Company Law Board
The Company Law Board functions with 4 Regional Benches at Mumbai, Kolkata,New Delhiand Chennai (Principal Bench atNew Delhi). The Board has a sanctioned strength of nine Members including the Chairman & Vice-Chairman. With the recent appointment of three Members, the Board shall function with full sanctioned strength for the first time. With this, it is expected that the pendency of cases will reduce further.
With the enactment of the Companies Bill, the CLB shall cease to exist and its function shall be discharged by the proposed National Company Law Tribunal.
Business Confidence Index (BCI)
The concept of Business Confidence Index is a useful tool to indicate the sense of well being among the role players in the corporate sector vis-a-vis their own organisation and its linkages with the large world. The Ministry is seeking to actively explore the possibility of introducing their performance indicator in the overall corporate governance paradigm. Certain professional institutions have already started work in this direction.
(i) National Competition Policy
The Ministry has constituted a Committee to draft the National Competition Policy. After detailed deliberations, the draft is ready and necessary steps are afoot for submission of the note to Cabinet.
The National Competition Policy aims to achieve highest sustainable levels of economic growth, entrepreneurship, employment, higher standards of living for citizens, protect economic rights for just, equitable, inclusive and sustainable economic and social development, promote economic democracy, and support good governance by restricting rent seeking practices.
Model Law on Societies
The Societies Registration Act, 1860 provides for the registration of literature, scientific and charitable societies. ˜Society™ being the State subject, the law has been adopted with some amendments by twelve States whereas many other states have enacted their own law on this subject. While the original Act was remarkably clear in not introducing any form of State interference into the affair of such institutions except routine matters of filling annual statements, many of State legislations went for widespread governmental control to deal with abuses, malfeasance and nonfeasance of societies. In nutshell, diversity of laws across the states has given rise to emergence of non-uniform practices in the management of the societies. Therefore, the Ministry feels that there is a need for enactment of a model law, to be adopted by state legislatures.
In this backdrop, the Ministry has constituted an Expert Group to identify the regulatory gaps and oversight mechanism in governance of Societies across the States with a view to formulate a Model law on the Subject. While doing so such laws in other countries like U.K, USA, China, Brazil, South Africa and Nordic countries are also being examined.
Convergence with International Financial Reporting Standard
The Ministry of Corporate Affairs prepared a roadmap for IFRS implementation inIndiaand application of Converged Indian Standards by Companies. It was decided that the converged accounting Standards (Ind-AS) will be applicable for both stand alone and consolidated financial statements.
Adoption or convergence with IFRS helps the economy at large, investors as well as the industry. It benefits the economy by increasing growth of its international business. As far as investors are concerned, they want the information that is more relevant, reliable, timely and comparable across jurisdictions.
Implementation of theInd-As shall be notifies immediately with the passage of the Company Bill.
CSR a tool for Nation building
The Ministry has planned number of steps to try and develop Corporate Social Responsibility (CSR) as an important tool for nation building. We believe that in the new economic environment, private sector must collaborate with the government in dealing with welfare of the weaker section of society.
Through the National Foundation for CSR established within the IICA, the mission is to help in creating a national platform for the Corporate Sector to work in partnership with Government, Non-Governmental and Civil Society Organisations to advocate and capture issues that lead to inclusive growth and sustainable development.
As mentioned earlier theInstituteofCorporate Affairshas been established by the Ministry for capacity building and knowledge transfer in matters related to corporate governance and regulation.
The IICA shall operate through a network of six schools – the Centers of Excellence and Forums which will pertain to the areas of Corporate Law, Competition Law, Corporate Finance, Business Environment, Corporate Governance and theICLSAcademy.
It has been visualised that the Institute shall introduce international standard Degree / Post Degree programmes on these subjects very soon comparable to such programmes in some of the leading universities of the world.
Partnering with the Corporate World
Government and industry/corporate need to work together to consider the cumulative and inter-related impacts of regulatory regimes and reforms to ensure that regulatory structures and processes that are relevant and robust, transparent, accountable and forward-looking. This will help achieve the goal of regulatory reform to improve the national economy and enhance the ability to adapt to change.
Keeping this objective in mind the MCA work with the Industry in creating an environment that would enable the corporate community meet the multifarious global challenges while enhancing their competitiveness. A systematic plan has been chalked out to increase engagement with the industry associations and chambers in crucial issues of corporate administration and governace.