Dear Stakeholders of Corporate India,
As a most vibrant corporate community of the world, you are aware or recent unwelcome development related to corporate India like Satyam, Sahara and Saradha. These developments raised strong concern among us and Parliament of India as well. This reflects in core principles of the Companies Act, 2013. India has some of the best corporate governance and social responsibility norms in the world.
Companies enjoy certain legal protections and benefits from law, law keep the under watch through certain Financial and non – financial reporting. Law further provides certain verification in the form of Statutory Audit for financial reporting, Secretarial Audit for non – financial reporting which is post – facto verification. Further there are certain other real-time checks in the form of legal responsible professionals like full-time Company Secretary in the company, to advise the company about legal procedures and keep real – time watch on the company. In last few years, we also have pre – certification of various form, where in independent professional certify forms and returns to be filed by companies.
The Companies Act, 2013 mandates better corporate governance norms but leave drafting of fine prints to subordinate legislation; which may cause disaster. Unfortunately, we are experiencing this at very early stage of rolling out of new Companies Act, 2013.
Firstly, law mandates for appointment of key managerial personnel. A whole –time company secretary was de – jure part of this élite club governing companies since long with a paid – up capital of five crore rupees. Under newly framed rules, the Ministry of Corporate Affairs has not only raised this threshold to ten crore rupees but also excluded private companies howsoever big in size.
Recent experience shows companies with paid – up capital of rupees two crore or more has substantial public stake at risk irrespective of their legal status as public or private companies. Risk of excluding private companies are: (1) They already enjoy many benefits of privacy, which the Parliament through the Companies Act 2013 tried to cut but rules drafted by the Ministry tried to reverse; (2) Most of these private limited companies are multi – national companies. I also underline the fact multi – national companies need more real – time assistance of company secretaries to understand and comply the law of land as well as to keep legal check on these companies.
Secondly, The Parliament through the Companies Act, 2013 Provide for Secretarial Audit. The Rules Drafted by the Ministry tried to dilute effect of this legislative mandate also. These rules suggests Secretarial audit of the Public companies with paid – up capital of at least fifty crore rupees or turnover of at least two hundred crore rupees. Not only companies under these thresholds but also private companies howsoever big in size are excluded.
I do not understand, when non- financial reporting become more important, why secretarial audit is not required for all companies. On the other hand, statutory audit for financial reporting is compulsory for every company irrespective of its paid – up capital, turnover or profit. Even many companies are subject to internal audit of financial aspects in addition of statutory audit.
Thirdly, Ministry of Company Affairs introduced pre –certification of forms to be filed by independent professional as a part of e – governance initiatives. This was also a practice that various forms was taken on record immediately without any bureaucratic interference and made available to general public within seconds of filings. This initiative improved its services to stakeholders of Corporate India and significant reduced bureaucratic interference.
With removal of requirement of pre- certification by independent professionals, all these forms have to be scrutinized by officials of the Ministry. This will increase discretionary powers of bureaucracy but reduce promptness of services. No information filed by the companies shall be made available immediately. In some cases, information filed by companies may be available to public after a time gap of more than one month. This may reduce corporate governance practice and transparency drastically.
Through this communication, I not only share my personal views with all of you but also invite your immediate attention to the requirement of corrective measures.
With warm regards,
Aishwarya Mohan Gahrana
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