It took almost six decades for India to get a new set of rules for the way companies are set up and regulated, but it took just a few months to again change them with an aim to make it easier to do business in the country.
In an eventful 2014, the new Companies Act finally saw the light of the day in April 2014, earning both bouquets and brickbats for the Corporate Affairs Ministry — the nodal point for this law — which itself had to fight for its survival amid talks of it being merged with the all-powerful Finance Ministry.
While the Ministry of Corporate Affairs has managed to survive, with Finance Minister Arun Jaitley overseeing it as an additional charge, the new Companies Act could not, at least in its entirety.
The new government decided towards the end of the year to bring some important amendments to the provisions that were seen as hurting the ease of doing business, where India ranks poorly at 142nd position.
Outside the companies law, the Ministry was seen taking necessary action against various frauds, including politically sensitive Saradha scam in West Bengal, as also the National Spot Exchange Ltd (NSEL) payment default.
The Ministry’s white-collar probe agency SFIO not only found violations by multiple entities related to Saradha group, but also concluded that investors’ money worth Rs 2,400 crore was still to be recovered.
Apart from pushing forward stringent regulations to curb fraudulent money pooling activities, work is on track to usher in new accounting standards, that are converged with global norms.
With six-decades of legacy continuing to spew dissent noises, the Ministry, after giving itself a long rope, finally decided to amend as many as 14 provisions in the Companies Act, 2013 which came into effect from April 1, 2014.
The decision came after a slew of clarifications could not pacify the frayed nerves of stakeholders, spanning from companies to chartered accountants.
This is also being seen as part of Narendra Modi-led government’s efforts to make it easier for entities to do business in India.
The new set of regulations are aimed at ensuring high corporate governance standards and safeguard the interest of shareholders, including by way of strict norms for related party transactions.
The new law, that replaced the Companies Act, 1956, has around 470 sections and 283 of them along with 22 sets of corresponding rules, are in force.
On the brighter side, the compulsory Corporate Social Responsibility (CSR) spending has become a reality for certain class of profitable entities, who are now required to shell out at least two per cent of their three-year annual average net profit towards such activities.
This fiscal alone, CSR spend is pegged at a whopping Rs 14,000 crore.
Though seen as a major push to ensure active participation of corporates in societal development, the contours of implementation, especially those related to compliance, would take longer time to be visible.
While making efforts to sensitise people about fraudulent schemes, the Ministry also kept a tight leash on those found flouting norms as indicated by its directions to SFIO to investigate as many as 29 cases in the current fiscal till November 15.
Seen as a major development, the Serious Fraud Investigation Office (SFIO) completed its probe into the Saradha scam and its report has set the tone for the ongoing multi-agency probe into the case, which continues to raise political temperatures in West Bengal.
Against the backdrop of rising instances of people getting duped by fraudulent investment schemes, the Ministry is also actively co-ordinating with other agencies and departments to tackle such activities.
Among others, professionals are now required to verify details of a company by personally visiting the site in case a new entity is being set up or the existing address is getting changed.
Boosting efforts to curb ponzi schemes, one of the proposed changes to the Act is for punishment to entities that violate norms governing deposit-taking activities.
Separately, the Ministry has set the ball rolling for new accounting norms that are converged with International Financial Reporting Standards (IFRS), which is being followed in more than 100 countries.
Efforts are on to ensure that domestic companies’ voluntarily adopt the new Indian Accounting Standards (Ind AS) from 2015-16 fiscal and compulsorily from 2016-17 onwards.
Even as works progressed to implement various provisions of the new Act, the relatively low profile Ministry saw change of guard, thanks to new government coming into power.
Arun Jaitley, who holds Finance and I&B portfolios, is now at the helm, and for a brief while, he had a deputy in Nirmala Sitharaman at the Corporate Affairs Ministry.