Union Minister of Corporate Affairs Dr. M.Veerappa Moily today detailed the recent initiatives taken by his ministry for attaining an all – inclusive role of addressing a vide sweep of functions – Corporate Governance Reforms and the Emerging Legal Framework with a vision to facilitate corporate growth with enlightened regulation. Addressing media persons gathered at the annual Economic Editors Conference 2012 her in New Delhi he said the over all aim of these initiatives is to be responsive and sensitive to changes in the business environment and suitably formulate and modify corporate laws and regulations from time to time.
The Minister said we are meeting in a scenario which is growth driven with realistic optimism indicating an ever improving economic situation. The measures recently announced to accelerate the pace of reforms has not only sent a positive signal to the corporate sector but have auger well in the economic as a whole and I am glad that these measures have been whole-heartedly welcomed by different shades of objective opinions. That these announced measures are not a passing phenomenon is buttressed by the fact that on a single day i.e. 4th of October the inflow of FII was 0.8 billion US Dollars. What is more the movement of NIFTY in the recent past has been of the order of 25 % which is the highest in the corresponding period among all the major exchanges like NASDAQ (21%) and the German exchange (20%).
He said the Ministry of Corporate Affairs is tasked with the responsibility of not only regulating and overseeing governance of companies but indirectly our responsibility also extends to providing a suitable legal framework which allows businesses to play a role in the development by a country with of course involvement and policy inputs from a number of Ministries / agencies.
The corporate sector continues to grow at a steady rate. At present the number of companies incorporated is nearing a million mark. There is more to this figure – 2.00 lakh companies have been added in the last two years alone. This shows a high degree of corporatisation of businesses in the country and promises ever increasing role of corporates in the overall Indian growth story.
Dr. Moily referred to the Cabinet approval of a number of amendments to the Companies Bill introduced last year largely on the basis of the report of the Parliamentary Standing Committee on Finance. The amendments seek to fine tune the provisions of the Bill to make them more effective and serve the needs of the growth of the corporate sector. He however, dispelled the impression that one of the amendments makes the requirement to spend 2% of the average net profits of the last three years by the prescribed class of companies from non-mandatory to mandatory. He clarified that in the Companies Bill, 2011 as introduced, the stipulation is that the select class of companies “shall endeavour to ensure” expenditure as above on the CSR – if they fail to do so, the Director’s Report will explain the reasons for not being able to achieve the requisite target. All that the amendments propose to do is to remove the words ‘endeavour to’ from the earlier formulation. In other words, if a company fails to ensure achievement of the target, it is required to explain the reasons in its report as before and hence there is no material change in the situation as far as its mandatory nature or enforceability is concerned. He hoped that if legislative business proceeds smoothly in the Winter Session, the Bill will receive approval of both the Houses in that Session itself as it reflects the conscientious in the Standing Committee.
The minister also referred of a number of amendments in the Competition Act which not only seek to make functioning of Competition Commission of India more effective in the light of experience gained in its working but it also proposes a very healthy relation between the Competition Commission and other sectoral regulators. Sectoral regulators will be required to compulsorily refer issues concerning competition which arises within their jurisdictions to the Commission with a corresponding responsibility on the Competition Commission to refer any issue relevant to the jurisdiction of a sectoral regulator to that regulator. The amendment also seeks to enable laying down different thresholds for different classes of enterprise to attract the jurisdiction of the Competition Commission in matters of acquisitions and mergers etc.
Dr. Moily also mentioned of the recommendations made by a Committee of eminent business personalities under the Chairmanship of Shri Adi Godrej on adoption of 17 “Guiding Principles” to underpin the system of corporate governance in the country. He said SEBI is actively contemplating making these principles as part of its listing agreements and the MCA on its part is examining as to how these principles can form part of policy guidelines of corporate governance.
He also hoped of obtaining the endorsement of the Cabinet to the National Policy on Competition applicable to the Centre and States to serve as a forward linkage and extension of the Competition Act.
Dr. Moily said his ministry has taken serious note of the reported procedural bottlenecks, jurisdictional overlaps and systematic inertia coming in the way of Ease of Doing Business. Accordingly, a Committee under the chairmanship of Shri M. Damodaran, former Chairman, SEBI with a very eminent members has been appointed to address the issue in a larger perspective and to suggest measures to be taken by different Ministries and agencies to a provide friendly enabling environment for initiating and smooth conduct of business by entities both from this country and abroad.
The Minister also informed that a Committee constituted by the Ministry has prepared an Annual Business Responsibility framework, which has been shared with various stakeholders. He intimated that SEBI has already adopted this framework got top 100 listed Companies. The Ministry is examining opinion of stakeholders on this framework and will soon take a decision regarding implementing the same for specified class of Companies.
He recalled the Ministry’s primary responsibility of administration of the Companies Act, enforcement of its provisions and corporate regulation generally. In this sphere keeping a record of filing required under the law by the companies and making such stored information easily accessible to public and to regulators alike is the sine-qua-non on our existence. He also referred to the comprehensive interactive portal MCA21 which has made filing and retrieval of information and collation of data a very easy task. He said in fact this arrangement compares most favourably with the best in the world. It is the pioneering and functional portal amongst all organisations of Government of India. MCA21 will undergo further upgradation from January, 2013 in its next 8½ years’ cycle for which Infosys has been chosen as the service provider following a very comprehensive technical and financial competition process. The portal will have still more advanced features and will encompass the Company Law Board, SFIO and the Official Liquidators organisations.