Cabinet approves Amendments to the Companies Bill, 2011

The Union Cabinet today approved the proposal to make official amendments to the Companies Bill, 2011. The Companies Bill, 2011, on its enactment, would allow the country to have a modern legislation for growth and regulation of corporate sector in India. The existing statute for regulation of companies in the country, viz. the Companies Act, 1956 had been under consideration for quite long for comprehensive revision in view of the changing economic and commercial environment nationally as well as internationally. In view of various reformatory and contemporary provisions proposed in the Companies Bill, 2011 together with omission of existing unwanted and obsolete compliance requirements, the companies in the country would be able to comply with the requirements of the proposed Companies Act in a better and more effective manner. The Salient features of amendments approved by the Cabinet are as follows: 1. The words 'make every endeavour to' omitted from Clause 135(5). Such clause is also amended to provide that the company shall give preference to local areas where it operates, for spending amount earmarked for Corporate Social Responsibility (CSR) activities, The approach to 'implement or cite reasons for non implementation1 retained. (Amendment of Clause 135). 2. To help in curbing a major source of corporate delinquency, Clause 36 (c) amended, to also include punishment for falsely inducing a person to enter into any agreement with bank or financial institution, with a view to obtaining credit facilities. (Amendment in Clause 36). 3. Provisions relating to audit of Government Companies by Comptroller and Auditor General of India (C&AG) modified to enable C&AG to perform such audit more effectively. {Amendment in Clauses 143(5) and (6)}. 4. Clause 186 amended to provide that the rate of interest on inter corporate loans will be the prevailing rate of interest on dated Government Securities. (Amendment in Clause 186). 5. Provisions relating to restrictions on non audit services modified to provide that such restrictions shall not apply to associate companies and further to provide for transitional period for complying with such provisions. (Amendment in Clause 144). 6. Provisions relating to separation of office of Chairman and Managing Director (MD) modified to allow, in certain cases, a class of companies having multiple business and separate divisional MDs to appoint same person as 'chairman as well as MD. (Amendment in Clause 203). 7. Provisions relating to extent of criminal liability of auditors particularly in case of partners of an audit firm reviewed to bring clarity. Further, to ensure that the liability in respect of damages paid by auditor, as per the order of the Court, (in case of conviction under Clause 147) is promptly used for payment to affected parties including tax authorities, Central Government has been empowered to specify any statutory body/authority for such purpose. (Amendments in Clause 147 and 245). 8. The limit in respect of maximum number of companies in which a person may be appointed as auditor has been proposed as twenty companies. {Amendment in Clause 141(3) (g)}. 9. Appointment of auditors for five years shall be subject to ratification by members at every Annual General Meeting (Amendment of Clause 139(1). 10. Provisions relating to voluntary rotation of auditing partner (in case of an audit firm) modified to provide that members may rotate the partner 'at such interval as may be resolved by members' in stead of 'every year' proposed in the clause earlier. {Amendment in Clause 139(3)}. 11. 'Whole-time director' has been included in the definition of the term 'key managerial personnel' {Amendment of Clause 2(51)}. 12. The term 'private placement' has been defined to bring clarity. (Amendment in Clause 42). 13. Approval of the Tribunal shall be required for consolidation and division of share capital only if the voting percentage of shareholders changes consequent on such consolidation {Amendment of Clause 61(1) (b)}. 14. Clarification included in the Bill to provide that 'Independent Directors' shall be excluded for the purpose of computing 'one third of retiring Directors'. This would bring harmonisation between provisions of Clause 149(12) and rotational norms provided in clause 152. (Amendment in Clause 152). 15. Provisions in respect of removal of difficulty modified to provide that the power to remove difficulties may be exercised by the Central Government upto 'five years' (after enactment of the legislation) in stead of earlier upto 'three years'. This is considered necessary to avoid serious hardship and dislocation since many provisions of the Bill involve transition from pre-existing arrangements to new systems. (Amendment in Clause 470). Background: (i) The Companies Bill, 2011 was introduced in the Lok Sabha on 14th December, 2011 and was considered by the Parliamentary Standing Committee on Finance which submitted its report to the Honourable Speaker, Lok Sabha on 26th June, 2012. The report was laid in Parliament on 13th August 2012. Keeping in view the recommendations made by such Committee it was decided to make certain modifications in the Companies Bill, 2011 through official amendments. (ii) In view of the developments taking place nationally as well as internationally, and with the intent to modernize the structure for corporate regulation in India and also to promote the development of the Indian corporate sector through enlightened regulation and good corporate governance practices, a decision has been taken to revise the existing Companies Act, 1956 comprehensively. Various stakeholders viz Industry Chambers, Professional Institutes, Government Departments, Legal Experts and Professionals etc. were consulted in the process and accordingly, the Companies Bill 2009 was introduced in the Lok Sabha on 3rd August, 2009 which was referred to Parliamentary Standing Committee on Finance for examination and report, which submitted its report to the Parliament on 31st August, 2010. (iii) Keeping in view the recommendations made by the Standing Committee and consultation with various Ministries/Departments etc. a revised Companies Bill, 2011 was prepared which was approved by the Cabinet on 24th November, 2011. The revised Bill was introduced in the Lok Sabha on 14th December, 2011. On introduction of the Companies Bill, 2011, the Companies Bill, 2009 was withdrawn. (iv) The Companies Bill, 2011 was referred to the Parliamentary Standing Committee on Finance for examination and report. The Committee examined the Bill and presented its report/ recommendations to the Speaker, Lok Sabha on 26th June, 2012. The report was laid in the Parliament on 13th August, 2012. Keeping in view the recommendations made by the Committee and the inter-ministerial consultation held with concerned Ministries/Departments, it has been decided to make official amendments to the Companies Bill, 2011. Source:  http://pib.nic.in/newsite/ Accessed on 19th December, 1.30 PM

The government has decided to crack the whip on fraudulent multi-level marketing companies (Ponzi)

Ponzi, that have duped hundreds of investors in the country by blocking their websites and tracking their online transactions.

Corporate Affairs Ministry, the nodal department in this regard, has decided that its investigative arm - Serious Fraud Investigation Office (SFIO) - will coordinate with Department of Information Technology and Central Economic Intelligence Bureau (CEIB) to identify suspect websites and transactions and take strict legal action.

Sources said such companies, operating from various locations within the country, have defrauded the public for amounts which could easily run into hundreds of crores.

"There are various entities (multi-level marketing) doing business in India through websites and many such entities do not have a registered office within India. Therefore, in order to prevent funds being transferred outside India, the website of major establishments doing multi-level marketing business need to be stopped through gateways by Department of Information and Technology (DIT).

"This issue will be taken up with DIT very soon and details of such companies will be provided to it for blocking the payments," an official privy to the development said.

For multi-level marketing websites operating clandestinely and conducting hidden transactions, the Ministry will ask the Financial Intelligence Unit under Finance Ministry to track and supply snoop data on them so that SFIO can take action.

The FIU is mandated to generate suspicious transaction reports based on inputs provided by banks and other financial and economic bodies.

The Ministry is mulling adding an enabling provision in the Companies Act to initiate legal action of attachment of properties of individual directors of such companies by moving the Company Law Board (CLB) in this regard.

The Ministry, during a recent meeting of the SFIO and its regional directors, mooted a plan to activate its marketing intelligence unit to keep a tab on fraudulent innovative systems developed by such companies to cheat the public and investors.

Source: http://www.indianexpress.com/news 7th Nov. 2012

Selected Companies are Required to File Statements in XBRL format

Final version of the MCA XBRL Validation Tool (for Financial Statements based upon new Schedule VI of the Companies Act, 1956) has been released. XBRL filings of financial statements for accounting year commencing on or after 01.04.2011 have been enabled on MCA website with effect from 14.10.2012. Stakeholders are also advised to refer to the ‘Filing Manual’ available on the XBRL portal for filing the financial statements in XBRL format.

Many organizations have been looking to the internet to bring the long-heralded promises of “better, faster, cheaper” data to organizational decision-making, and specifically to business and financial reporting. An emerging technology standard, eXtensible Business Reporting Language (XBRL), promises to web-enable the financial reporting process for both preparers and consumers.

Instead of treating financial information as a block of text, XBRL provides a computer-readable tag to identify each individual item of data. By attaching identifying tags to individual pieces of data, a business reporting document becomes “intelligent” data, allowing the exchange of business reporting data by encoding the information in a meaningful way.

Computer applications can use the XBRL data to recognize the information in an XBRL document - selecting, analyzing, storing, and exchanging it with other computers and present it in a variety of ways for users. As companies review their business reporting disclosure controls and procedures and begin to comply with new filing requirements, XBRL is becoming the chosen tool to help facilitate and restore confidence in business reporting and in turn, to communicate accurately the value of the company.

XBRL is:

·         An open technology standard for reporting and analyzing business and financial information

·         Software agnostic, or independent

·         Accounting framework neutral

XBRL is not:

·         A standardized chart of accounts

·         A way to require the reporting of specific information

·         A transaction level activity (although it can summarize general ledger transactions)

For more information, see our publication Addressing XBRL.

In recent years, XBRL has seen rapid expansion as an enabling technology around the world. XBRL is a “network innovation” which requires concerted action from a number of different stakeholders to be widely adopted. For this reason, its development has been, and continues to be, facilitated through the voluntary and collaborative efforts of key stakeholders — currently driven principally by local government and regulatory agencies, the most notable of which is US Securities and Exchange Commission (SEC) which is requiring filings in this standardized electronic format.

We hope this site will add to the public dialogue now taking place about the merits of XBRL and about the promise of XBRL specifically. To that end, we have outlined the ways we think you can benefit from adopting XBRL now for your key business-reporting processes and provided a road map that can move you toward these ends.

On 30 January 2009, the US Securities and Exchange Commission (SEC) published a final rule for the mandatory use of eXtensible Business Reporting Language (XBRL) in reporting financial information to the SEC. 

Source: http://www.ey.com/GL/en/Services

http://www.mca.gov.in/Ministry/pdf/General_Circular_34_2012.pdf

CORPORATE SOCIAL RESPONSIBILITY

The 21st century is characterized by unprecedented challenges and opportunities, arising from globalization, the desire for inclusive development and the imperatives of climate change. Indian business, which  is  today  viewed  globally  as  a  responsible  component  of  the ascendancy of India, is poised now to take on a leadership role in the challenges of our times. It is recognized the world over that integrating social, environmental and ethical responsibilities into the governance of businesses ensures their long term success, competitiveness and sustainability. This approach also reaffirms the view that businesses are an integral part of society, and have a critical and active role to play in the sustenance and improvement of healthy ecosystems, in fostering social  inclusiveness  and  equity,  and  in  upholding  the  essentials  of ethical  practices  and  good  governance.  This  also  makes  business sense  as  companies  with  effective  CSR,  have  image  of  socially responsible companies, achieve sustainable growth in their operations in the long run and their products and services are preferred by the customers.

Indian entrepreneurs and business enterprises have a long tradition of working within the values that have defined our nation's character for millennia. India's ancient wisdom, which is still relevant today, inspires people  to  work  for  the  larger  objective  of  the  well-being  of  all stakeholders.  These  sound  and  all-encompassing  values  are  even more  relevant  in  current  times,  as  organizations  grapple  with  the challenges of modern-day enterprise, the aspirations of stakeholders and of citizens eager to be active participants in economic growth and development.

CSR is not philanthropy and CSR activities are purely voluntary- what companies will like to do beyond any statutory requirement or obligation. To provide companies with guidance in dealing with the abovementioned  expectations,  while  working  closely  within  the framework  of  national  aspirations  and  policies,  following  Voluntary Guidelines for Corporate Social Responsibility have been developed.

While  the  guidelines  have  been  prepared  for  the  Indian  context, enterprises  that  have  a  trans-national  presence  would  benefit  from using these guidelines for their overseas operations as well. Since the guidelines are voluntary and not prepared in the nature of a prescriptive road-map, they are not intended for regulatory or contractual use. While it is expected that more and more companies would make sincere efforts to consider compliance with these Guidelines, there may be genuine reasons for some companies in not being able to adopt them completely. In such a case, it is expected that such companies may inform their stakeholders about the guidelines which the companies have not been able to follow either fully or partially. It is hoped that “India Inc.” would respond to these Guidelines with keen interest.

After  considering the experience of adoption of these guidelines by Indian Corporate Sector and consideration of relevant feedback and other  related  issues,  the  Government  may  initiate  the  exercise  for review of these Guidelines for further improvement after one year.

Source: CORPORATE SOCIAL RESPONSIBILITY VOLUNTARY GUIDELINES 2009, MCA, Govt. of India

India ranks 7th in corporate governance in Asia-Pacific

India has been ranked in the seventh place in terms of corporate governance score in Asia Pacific region, says a report by global brokerage firm CLSA.

According to the CLSA Corporate Governance Watch 2012 list, produced in collaboration with the Asian Corporate Governance Association, India's corporate governance score has improved by 3 percentage points but ranking has remained the same.

"This is not due to a lack of awareness by the regulators, but rather a piecemeal approach to reform and a lame duck government unable to do anything meaningful given infighting among its allies," ACGA Research Director Sharmila Gopinath said in the report.

Among the market rankings, Singapore was at the top in 2012 followed by Hong Kong and Thailand in the second and third position respectively. In the fourth position there is a tie between Japan and Malaysia, the report said.

Others in the top include Taiwan at the 6th place, followed by India (7th), Korea (8th), China (9th), Philippines (10th) and Indonesia (11th).

The report which analysed as many as 864 listed companies across Asia-Pacific markets, including Japanese and Australian firms, said that Infosys was the only Indian company that was featured in the top 20 corporate governance large caps.

Moreover, there were just five Indian companies which got featured in the top 50 league table. Besides, Infosys the other four include HUL, Wipro, Titan Industries and Yes Bank.

"Despite efforts made by the corporate sector and individual regulators to raise corporate governance standards, these mostly fail to address core governance issues such as accounting standards, the regulation of auditors and obstacles to voting for investors who are unable to attend company meetings," Gopinath added.

The report, entitled "Tremors and cracks", noted that cracks in Asian corporate governance have become more apparent with corporate scores slipping since the previous CG Watch report was issued in 2010.

Investors have faced issues ranging from relatively minor corporate transgressions to growing concerns about the reliability of financial statements and, at the extreme, outright fraud.

"Corporate governance is largely about checks and balance," CLSA Head of Asia Research Amar Gill said in a statement, adding that "Investors will need to swerve and get a tighter grip when dealing with the cracks in governance and the tremors in Asian investing." 

Source: http://profit.ndtv.com/news

Silicon Valley lawyers are highest paid

When it comes to lawyer pay, no one beats Silicon Valley.

A survey by legal recruiting firm Major Lindsey & Africa shows that average partner compensation for attorneys in Silicon Valley is $1.2 million annually, beating all other major legal centers in the country, including New York, Washington D.C., Boston, San Francisco and Los Angeles.

The survey did not explain why Silicon Valley attorneys are tops in partner pay. But it likely has a great deal to do with the fact that corporate law and intellectual property law — both high compensation practices — are quite prevalent in the region.

Silicon Valley partners are earning — on average — much more than their counterparts in New York, where partners ranked second in the survey. New York partners earned on average slightly more than $1 million.

San Francisco partners came in seventh in the survey, collecting an average of $723,000.

The lowest ranking city for law firm partners in the survey was Philadelphia, where they were collecting $478,000 on average.

Eric Young covers law, government and the business of sports for the San Francisco Business Times.

Source: http://www.bizjournals.com/sanfrancisco

RSS leader says law will take its own course against Gadkari

The Joint General Secretary of the Rashtriya Swayamsevak Sangh (RSS), Dattatreya Hosabale, has said that the law will take its course on allegations of corruption levelled against Bharatiya Janata Party president Nitin Gadkari, and added that those who are found guilty, should be punished.

He was speaking on trhe sidelines of a three-day RSS Executive Council meeting here on Friday.

The RSS leadership is meeting to deliberate on various issues of national importance, including illegal migration from Bangladesh and security situation in the country.

Hosabale said they are not discussing issues related to BJP in this meeting.

"The General Secretary of RSS has already issued a statement that if there is any allegation against anybody, the due process of law should take place and those who are found guilty should be punished according to the law. The same stand continues and we are not going to discuss the BJP issues here," said Hosabale.

According to media reports, Gadkari was alleged of having business links with Ajay Sancheti, a lawmaker. Also, that Sancheti was given a special deal for a coalmine in the BJP-ruled central Madhya Pradesh state because of his association with Gadkari.

Recently, a coal scam had hit the country and the affair had washed out the just concluded monsoon session of parliament over the report of the Comptroller and Auditor General (CAG) tabled in the upper house of Indian parliament.

The CAG had alleged under-priced sales of coalfields that may have cost the exchequer as much as $33 billion in revenues.

On this issue, the Bharatiya Janata Party had demanded the resignation of Prime Minister Manmohan Singh, who handled the portfolio of Coal Ministry between 2006-2009, when a majority of the allocations were sanctioned.

Hosabale said that there was need to take stringent action against the corrupt irrespective of their political parties.

"Nitin Gadkari is a Sangha swayamsevak (volunteer) and like in the family, Nitin Gadkari also meets RSS office bearers and talk to people of RSS and such discussions take place. It is not a child's play anyhow, if something is happening in the society, we also discuss. But as far as the issues of corruption by anybody, whether it is Congress or any other person or BJP, we have been always been telling that the due process should take place, allegations should be answered properly and that we have already said," Hosabale said.

Hosabale added that the RSS has no soft corner for anybody and their yardstick for corruption is same for everyone.

"Why single out Gadkari about the land acquisition. There may be hundred others also. We are not going to discuss case wise or person wise. We are going to discuss the policy of the land acquisition. Who ever come within that will have to stand before the law. We are not giving any soft corner to anybody. We go by the policy and we have been stressing on that. Land acquisition or corruption or any other issue, we don't have different yardsticks. RSS views are that the country's interest and the nation's interest is supreme, public morality is supreme for us and accordingly we deal with things," said Hosabale.

Kejriwal had recently accused Gadkari of having a huge business empire in Maharashtra, and alleged that the former and NCP leader Ajit Pawar were hand-in-glove with each other in the irrigation scam.

Earlier Anjali Damania, close aide of anti-graft crusader cum politician Arvind Kejriwal had alleged that Gadkari had acquired 100 acre of farmers' land through dubious means for his private trust although he refuted these charges.

Gadkari was recently charged for illegally acquiring government land and for running a fake investment company.

A probe is being undertaken by the ministry of corporate affairs and income tax officials on whether the BJP party chief's vast financial empire is funded by ghost investors.

According to the report in the media, 18 companies which own 80 percent of the shares in Purti Group, owned by Gadkari, are not located on the addresses mentioned on the website of the company.

Managing director of Purti group, Sudhir Dive had out rightly dismissed corruption allegations against Gadkari, adding that he resigned from the company 14 months ago.

Hosabale said the country needs a change for the better.

"The people of this country want a change, change for the better and earlier it was the best that is what the RSS feels," said Hosabale.

Over the past few months, a string of recent multi-billion dollar corruption scandals have sparked Indian middle class anger over the federal government's abysmal track record in curbing graft.

Corruption is part of daily life in India - from bribes paid for something as simple as getting a gas connection, passport or avoiding a traffic violation, to multi-billion-dollar scandals.

Political parties are perceived to be the most corrupt institutions by Indians, according to Transparency International's Global Corruption Barometer in 2011.

A recent survey of upper house lawmakers by National Election Watch found their average net worth stood at around USD 2.3 million. Lawmakers earn around USD 900 a month. (ANI)

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