Year 2018: India moved up in 'Ease of doing Business' rank, though shaken by multitude of scams

NEW DELHI: Although shaken by a series of sensational scams, during the year going by, India improved its ranking by 23 points and reached 77th position on the World Bank's 'Doing Business' 2019 report.

As per the report -- released on October 31 -- India moved up 23 spots to 77th position as compared to 100th in 2017 and improved its rank in six out of ten parameters relating to starting and doing business in the country.

The Corporate Affairs Ministry has contributed towards starting a business, insolvency resolution and protection of minority interests.

To provide greater 'Ease of Doing Business' to all stakeholders, bring about greater transparency in corporate structure and better corporate compliance so as to enhance the efficiency of the processes under Companies Act, 2013, the Corporate Affairs Ministry took several landmark initiatives during the year.

Among the significant ones were Companies (Amendment) Act, 2017, Companies (Amendment) Ordinance 2018, establishment of National Financial Reporting Authority (NFRA), amendments in Insolvency and Bankruptcy Code, eKYC drive for directors of all companies and speedier processing of incorporation related applications, uniformity in application of rules and eradicating discretion.

Companies (Amendment) Bill, 2017 was assented by President Ram Nath Kovind on January 3, 2018 and was enacted as the Companies (Amendment) Act, 2017 (CAA-17).

The Act contains total 93 sections of which 92 have been brought into force along with relevant rules.

Framework reviewed A committee to review the existing framework dealing with offences under the Companies Act, 2013, in its report recommended that the existing rigour of the law should continue for serious offences, covering six categories, while for lapses that are essentially technical or procedural in nature, mainly falling under two categories may be shifted to in-house adjudication process.

This would serve the twin purposes to promote Ease of Doing Business and better corporate compliance.

It would also reduce the number of prosecutions filed in the Special Courts, which would, in turn, facilitate speedier disposal of serious offences and bring serious offenders to book.

Based on its recommendations, the Government decided to promulgate an Ordinance.

Accordingly the Companies (Amendment) Ordinance, 2018 was promulgated on November 2, this year.

The Ministry also proposes to introduce a Replacement Bill (Companies (Amendment) Bill, 2018) to replace the Companies (Amendment) Ordinance 2018 in the ongoing Winter Session of Parliament.

During the year going by, the President also gave assent to promulgate Insolvency and Bankruptcy Code (Amendment) Ordinance.

Insolvency and Bankruptcy process has taken good shape since 2017 and is a fast evolving legislation.

A major factor behind the effectiveness of the new code has been the adjudication by the judiciary.

The Code provides strict time limits for various procedures under it.

In this process a rich-case law has evolved reducing the scope of legal uncertainty.

The Insolvency and Bankruptcy Code (Amendment) Act, 2018 notified on January 19 replaced IBC (Amendment) Ordinance which further amended provisions relating to prohibition on certain persons from submitting a resolution plan, so as to provide more clarity.

Insolvency Further, second amendment was also done by the way of ordinance in August, 2018 on the recommendations of Insolvency Law Committee.

The Ordinance was promulgated to balance the interests of various stakeholders in the Code, especially interests of home buyers and micro, small and medium enterprises, promoting resolution over liquidation of corporate debtor by lowering the voting threshold of committee of creditors and streamlining provisions relating to eligibility of resolution applicants.

The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 has replaced IBC (Amendment) Ordinance.

In the wake of accounting scams and frauds in the corporate sector, National Financial Reporting Authority (NFRA) was notified as an independent regulator for auditing profession which is one of the key changes brought in by the Companies Act five years ago.

The NFRA will review the quality of corporate financial reporting in certain classes and sub classes of companies and take disciplinary action against auditors/audit firms for not discharging their statutory duties with due diligence.

The Government has constituted this Authority and has prescribed NFRA (Manner of Appointment and other Terms and Conditions of Service of Chairperson and Members) Rules, 2018 and NFRA Rules.

R Sridharan and Dr Prasenjit Mukherjee were appointed as Chairperson and full-time member respectively of NFRA on October 1, this year.

The Ministry to provide for faster and transparent processes, introduced a web base service named as 'Reserve Unique Name' to make the Name Reservation process speedy, smooth, simple and reduce the number of procedures with effective from January 26, 2018 for companies and from October 2, 2018 for LLPs (Limited Liability Partnership).

Re-engineering It also introduced steps such as re-engineering the process of allotment of DIN, exemption of MCA fee for company incorporation, deployment of e-forms due to IFSC & exemption notifications, amendment to Companies Act, CRL-1, implementation of Condonation of Delay Scheme, eKYC drive for directors of all companies, Integrated form for LLP (FiLLiP) incorporation, and setting up Central Registration Centre (CRC) for 'name reservation' and 'incorporation' for LLPs.

During the year, the Ministry in order to speed up matter related to resolution of bankruptcy and insolvency, proposed setting up of eight special courts under the National Company Law Tribunal to deal with the insolvency cases.

These courts are proposed to be set up in Mumbai, Delhi, Chennai, Kolkata and Hyderabad.

To facilitate timely resolution of disputes, it is envisaged to set up exclusive IBC Courts under the NCLT benches of Delhi, Mumbai to start with and step up infrastructure of NCLT.

The aim is also to strengthen the insolvency process for faster resolution of NPAs.

To bring more transparent accounting, the Ministry has notified Indian Accounting Standard (Ind AS) 115 which would be effective from April 1, 2018.

Ind AS 115 is a new revenue recognition standard for customer contracts in line with the International Financial Reporting Standards which will help in more transparent accounting of revenues with an impact on companies operating in diverse sectors, including technology, real estate and telecom.

As part of bringing about greater transparency in corporate structure and in view of advantages of dematerialisation of securities, especially in terms of KYC and investor protection, the Government's focus on 'Digital India' and the enabling provisions, the Ministry has amended the relevant rules to apply the dematerialisation requirements to unlisted public companies, in addition to listed companies.

Consultations were held with all stakeholders and rules were amended on September 10, 2018 to mandate with effect from October 2, issue and transfer of securities by unlisted public companies in demat form only.

The Investor Education & Protection Fund (IEPF) Authority unveiled its new logo in 2018 to provide for strong brand presence and recognition.

The IEPF authority also signed an MoU with the CSC e-governance services India, which would identify village level entrepreneurs for investor awareness projects, among other activities.

The Ministry is actively looking at further reforms in IEPF.

More transparency As part of bringing about greater transparency in corporate structure and in view of advantages of dematerialisation of securities, especially in terms of KYC and investor protection, the Government's focus on 'Digital India' and the enabling provisions, the Ministry has amended the relevant rules to apply the dematerialisation requirements to unlisted public companies, in addition to listed companies.

Consultations were held with all stakeholders and rules were amended on September 10, 2018 to mandate with effect from October 2, 2018, issue and transfer of securities by unlisted public companies in demat form only.

The Investor Education & Protection Fund (IEPF) Authority unveiled its new logo in 2018 to provide for strong brand presence and recognition.

The IEPF authority also signed an MoU with the CSC e-governance services India, to identify village level entrepreneurs for investor awareness projects, among other activities.

The Ministry is actively looking at further reforms in IEPF.

To review the existing claim settlement processes a committee of practicing company secretaries was constituted through the Institute of Company Secretaries of India (ICSI).

The committee had reviewed the existing processes and have recommended that the entire process should be made online with e-verification of the claims by the companies, online PAN based verification of the claimant.

A new portal namely www.iepfportal.in has been developed for increasing the outreach of IAPs and monitoring the programmes conducted by the professional institutes, CSC e-governance and other partner institutions.

The portal provides access to the partner institutions like ICAI, ICSI, ICoAI& IICA and CSC e-Governance for uploading the details of past & future programmes.

To enlarge the scope of debate of competition in India and to bring the best practices from around the world on competition issues, Competition Commission of India (CCI) successfully hosted the 17th International Competition Network (ICN) annual conference in March 2018 in New Delhi The MCA constituted an Inter-Ministerial Committee to carry out 'Competition Assessment of existing policies' under the chairmanship of Department of Industrial Policy and Promotion Secretary Ramesh Abhishek with representation from seven other ministries or organisations on dated June 1, this year.

The prime focus of the Committee was to conduct a review of select Acts/Rules/Policies/Regulations formulated in the recent past and some upcoming acts to look into issues of anti-competition aspects and to focus on any restrictions/provisions in laws that pose great threat to competition.

Further, in pursuance of its objective to ensure that legislation is in sync with the needs of strong economic fundamentals, the Government constituted a Competition Law Review Committee under Corporate Affairs Secretary Injeti Srinivas on October 1, 2018.

The Committee is mandated to review the Competition Act/Rules/Regulation, to look into international best practices and sectoral interfaces.

Competition Commission of India (CCI) has amended the Combination Regulations.

The post amendment regulations among others includes permitting withdrawal of notice and refilling the same by parties, allowing submission of voluntary modifications in response to notice, appointing agencies to supervise implementation of modification etc.