Law making, fraud fighting make 2013 a watershed year for MCA
New Delhi: After fighting numerous frauds in 2013 and changing the way lakhs of corporates function and are regulated, the Corporate Affairs Ministry is looking at the new year to ensure right execution of new companies law and initiatives aimed at safeguarding interest of investors.
"The real challenge is in the execution of the law... The devil lies in the detail," Corporate Affairs Minister Sachin Pilot said, while setting the agenda for 2014 after an eventful year of policy initiatives and other actions.
As the Companies Act 2013 promises a paradigm shift from the way Indian companies have operated and have been regulated over the past six decades, the Ministry is now looking forward to rejuvenate Indian Inc and persuade them to spend on social welfare activities amid uncertain economic prospects.
Relatively younger to many of its counterparts, the Ministry remained in focus during 2013 amid a host of high- profile cases of corporate misdoings, regulatory co-ordination to crackdown on fraudulent investment schemes and not the least, the much talked about inquiry into alleged lobbying activities of Walmart in India.
At a time when the economy is grappling with multiple headwinds, a Ministry-appointed high level panel came up with wide-ranging suggestions to improve the country's business climate.
Strengthening its efforts, the Ministry is now working on early fraud warning mechanism as well as on having a robust data dissemination system.
Amid plethora of illicit money pooling schemes and shady corporate governance practices, protection of investor interests set the agenda for the Ministry which made strenuous efforts to separate wheat from the chaff.
"We can certainly feel satisfied that we have been able to do substantial work," Pilot told the agency in an interview.
Besides, the new Companies Act is set to have a long-term impact and it is not a question of this year or next year.
A first of its kind, the Ministry pulled out a trump card of sorts, by making Corporate Social Responsibility (CSR) spending mandatory for a certain class of profitable companies.
The idea -- set to be a reality from next financial year beginning April 1, 2014 -- is estimated to result in spending to the tune of Rs 15,000 to Rs 20,000 crore a year.
As per the new law, certain category of entities have to shell out at least two per cent of three-year annual average net profit towards CSR activities.
Apart from the arduous work involved in formulating the new legislation, many a corporate misdoings including the ongoing National Spot Exchange Ltd (NSEL) crisis came under its scanner.
Whether it is ordering Serious Fraud Investigation Office (SFIO) probe into the infamous Saradha scam or re-assuring investors about the strong fundamentals of the national economy, the Ministry made real efforts.
Besides, the long-pending investigation into alleged Rs 870 crore fraud at sportswear maker Reebok India made headway with prosecution proceedings underway following the SFIO report on the issue.
The one-man panel that probed allegations of bribery and lobbying against US retail giant Walmart to enter the Indian retail market could not gather enough evidence to arrive at a conclusion on whether it violated laws, especially since lobbying continues to remain undefined here.
Ending years of wait and surviving political debates, the new Companies Act became a reality in August after receiving the green signal from the country's law makers the same month. Within weeks of Parliament nod, the companies bill received the President's assent.
As complex as the rule making itself, the journey of the companies bill too witnessed challenges. Besides going to the Parliamentary standing committee more than once, it took about eight months for the bill to get Rajya Sabha nod after getting clearance from the Lok Sabha in December 2012.
Emphasising the importance of the new legislation, Sachin Pilot said, "Any law to make and to talk about is very easy but the execution (is not) because we are shifting the entire paradigm".
After extensive and transparent consultations with stakeholders as well as public at large, the Ministry is now in the process of finalising the rules.
"The rule making is as important as text of the bill," Pilot said.
Besides, the Ministry has set in motion efforts to provide more resources for SFIO, which has the mandate to probe white collar crimes referred to it by the government. The initiatives include relaxation in recruitment norms and works on having early fraud detection models.
Staying with the revamped companies law, the country would also soon see at least two new bodies -- National Company Law Tribunal that would replace the Company Law Board and National Financial Reporting Authority (NFRA).
As the country gets ready for the robust companies law, the Ministry's platter is likely to more than full in 2014 too.