Press release of MCA

One Year of UPA Government : Major Decisions and Initiatives - Company Affairs 

MAJOR DECISIONS AND INITIATIVES
COMPANY AFFAIRS

The UPA Government completes one year on May 21, 2005. During this period, the Government has taken several important initiatives. Some of these are being brought out in the series ‘Major Decisions and Initiatives’. 

The UPA Government upgraded the erstwhile Department of Company Affairs into a Ministry. The Ministry has been taking steps to meet the challenges arising out of the current economic growth in the country, emergence of new areas of activity and corresponding business models, and the need for mobilizing investment in the private sector.

Development of the New Companies (Amendment) Bill

The Ministry took up a comprehensive revision of the Companies Act, 1956 through a consultative and participative process to enable the evolution of a simplified compact law to take into account the changes in the national and international scenario, and to enable adoption of internationally accepted best practices and provide adequate flexibility to respond to future changes. In line with this objective, a Concept Paper on Company Law was prepared and put on the Ministry’s website on August 4, 2004. Responses were invited from various stakeholders within a period of three months. A large number of responses were received. An Expert Committee, headed by Dr. J.J.Irani, and comprising representatives of industry associations, regulatory and professional bodies and legal experts was constituted to advise the Ministry on issues relating to the Company Law to enable the development of a new Companies Bill. The Irani Committee has already held a number of meetings and is expected to submit its recommendations by May 2005. The new Companies Bill will be drafted once the recommendations of the Committee are received.

Bills on Revision of Various Acts

In order to revise the framework for the functioning of these professional bodies in tune with the situation resulting from economic changes and increasing economic exchanges globally, the following Bills were introduced in Parliament:

(i) The Chartered Accountants (Amendment) Bill, 2003
(ii) The Cost and Works Accountants (Amendment) Bill, 2003
(iii) The Company Secretaries (Amendment) Bill, 2003
The process of amendments in the three Acts is already in hand as these have been considered by Parliament’s Standing Committee. The Amendment Bills in respect of these three Acts are under process.


Competition Act (Amendment) Bill
The Competition Act 2002, in its present shape, faced some legal challenges before the Supreme Court. The Supreme Court disposed of the matter in January 2005 to enable the Government to bring in some amendments in the Act. The Ministry is now considering these.


National Company Law Tribunal and National Company Law Appellate Tribunal
A revised framework for constituting the National Company Law Tribunal (NCLT) and the National Law Appellate Tribunal (NCLAT) has been provided for in the Companies Act through the Companies (Second Amendment) Act, 2002. This institutional arrangement is proposed to replace the existing Company Law Board. However, there are legal challenges on the setting up of NCLT. A civil appeal in the matter is under the consideration of the Supreme Court. NCLT can be constituted only after the verdict of the Apex Court. In the meantime, the current framework comprising the Company Law Board/BIFR would continue to function as before.


Investor Education and Protection Fund 
The Ministry has set up an Investor Education and Protection Fund (IEPF) to protect the interests of the small investors and spread awareness regarding related issues. The Minister of Company Affairs launched the website, www.watchoutinvestsors.com on November 9, 2004 as a national registry of economic defaulters. It contains information on convictions by various regulatory bodies. It has been created to help the investors protect themselves from unscrupulous promoters, companies and entities.


Initiatives for Effective Grievances Redressal
To strengthen the mechanism for dealing with the grievances of investors and depositors against companies, the Ministry has notified nodal teams in all the offices of the Regional Directors and the Registrar of Companies. A nodal team for dealing with these issues at the Ministry has also been notified. The details of the nodal teams were placed on the Ministry’s website on November 4, 2004 for enabling the investors and depositors to approach them for redressal of their grievances. The details of the nodal teams were also published in newspapers on December 11 and 13, 2004 for wider dissemination of the information among the investing public.

The Ministry and the National Informatics Centre (NIC) have jointly developed a new system of online lodging of complaints by investors and depositors against companies with a view to improving the present system of lodging of complaints against companies and their processing by the Ministry. The new system facilitates investors and depositors to lodge their complaints electronically with the Investor Protection Cell. The system issues complaint number as online acknowledgement for future reference. The new system for lodging online complaints of investors and depositors was placed on the Ministry’s website on January 11, 2005.


Measures Against Vanishing Companies
A Special Cell was set up in the Ministry to monitor and track vanishing companies and take all possible remedial measures. A Central Coordination and Monitoring Committee (CMC) co-chaired by the Secretary, Ministry of Company Affairs, and Chairman, SEBI has been monitoring the action taken by four Task Forces against vanishing companies and their promoters/directors. At present, the number of vanishing companies stands at 15. The offices of the Registrar of Companies have initiated action against vanishing companies for violation of the provisions of the Companies act, 1956, by launching prosecutions under the relevant provisions of the Company Law. Simultaneously, action has also been initiated under the Criminal Law by filing FIRs with the State police authorities. CMC regularly monitors action against vanishing companies and their promoters/directors with a view to punishing the guilty and protecting the interests of the investors.


Implementation of MCA21 e-governance Project
The Ministry has drawn up an ambitious e-governance initiative known as “MCA21”. This project aims at continuously repositioning MCA as an organisation capable of fulfilling the aspirations of its stakeholders. It is the largest ever e-governance initiative in the Government of India. This programme envisages electronic filing of companies’ documents through an interactive and paperless registration process on Internet. It also ensures uniform transmission of information amongst MCA offices across the country. The programme endeavours to transform the Ministry into a modern, professional, service-oriented and customer-centric organization. The implementation of the project began on March 1, 2005 after the signing of a contract with the selected operator M/s Tata Consultancy Services Limited. The project has an implementations cycle of 60 weeks from the date of signing of the contract and thereafter an operation period of six years.


National Foundation for Corporate Governance
A National Foundation for Corporate Governance (NFCG) has been set up as a not-for-profit trust to provide a platform for deliberations on issues relating to good corporate governance and to sensitise corporate leaders on the importance of good corporate governance, self-regulation and directorial responsibilities. The Ministry has also launched a website of the Foundation, which is expected to serve as a medium for exchange of views between various stakeholders and help in formulation of policies for better corporate governance. NFCG has framed an Action Plan for 2005-06 which includes development of identified themes into good corporate governance standards. 


Serious Fraud Investigation Office
The Serious Fraud Investigation Office (SFIO) was set up in July, 2003 and is fully functional now. Till date, 26 cases have been referred to it by the Central Government for investigation under Sections 235/237 of the Companies Act, 1956. Investigations in respect of four cases have been completed and the reports submitted to the Government. The Government has since issued instructions for taking legal action in two cases relating to M/s. Daewoo Motors India Limited and Vatsa Corporation Limited.


Inspection and Investigation
The Ministry of Company Affairs conducts inspection of books of accounts and the records of the companies under the provisions of the Companies Act, 1956. Further, on the basis of the examination of the records and information pertaining to non-compliance of statutory requirements under the Act, prosecution is taken up under the provisions of the Companies Act. Effective steps are being taken to strengthen its inspection wing.


Simplified Exit Scheme, 2005
The Ministry introduced a Simplified Exit Scheme, 2005 (SES 2005) in order to give an opportunity to defunct companies desirous of getting their names struck off from the Registrar of Companies under the Companies Act, 1956 through a simplified procedure. Effective since February 1, 2005, the scheme will continue till July 31, 2005.


RK:LV:VN

PIB SF-20 (12.05.2005)