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MCA's Greater Shift Towards Ease Of Doing Business Boosts Economic Growth
The MCA has been continuously announcing various circulars and amendment in the act and rules to facilitate corporates during the pandemic stress, promoting transparency, adopting better governance and disclosure mechanisms, relooking at compliance structures
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In the recent past, the Government has announced various policy level measures and initiatives to propel the growth of the Indian economy. To boost investments in various industries, ease of doing business in the country and various relaxations during the COVID period to relieve the compliance stress in conforming with various statutes and regulations as well as calling out measures to alleviate financial stress in the industry.
The Ministry of Corporate Affairs (MCA) in line with the vision of the Government has come out with various circulars and notifications amending the Companies Act 2013 and the relevant regulations to promote ease of doing business in India, announced relaxation in compliance during the COVID times, better governance measures, re-looked at decriminalization, facilitate the operations of start-ups, to name a few.
To enable and improve ease of doing business, SPICe+ and AGILE PRO form has been launched which is an next-gen integrated Web form offering 11 services by 3 Central Govt Ministries & Departments allowing to save many procedures, time and cost for Starting a Business in India, rules amended so that Private Companies which list only their NCDs but not Equity Shares would not be treated as Listed Companies, the process made easy for converting a public company into a private company and has issued Notification under section 393A of the act to rationalize the compliance framework, provide Ease of Doing Business, and attract investment in IFSCs.
In order to better corporate compliance and ease of doing business, modifications have been announced in the act by De-criminalizing non-compliance, relooking at Penalization and powers to NCLT. The same has been achieved by announcing Phase-II of Decriminalization of Penal provisions under Companies Act, 2013 through the Companies (Amendment) Act, 2020 and amendments to LLP Act, 2008. Lesser Penalties for Small Companies, One person Companies, Start-ups & Producer Companies for defaults under the Companies Act, 2013 have also been announced.
To encourage start-ups, many welcome measures have been announced for Small Companies and One Person Companies (OPCs) that notably include modifying the definition of Small Companies by enhancing their thresholds for Paid up capital from “not exceeding Rs 50 Lakh” to “not exceeding Rs 2 Cr” & Turnover from “not exceeding Rs 2 Crore” to “not exceeding Rs 20 Cr”. This is expected to benefit more than two lakh companies in terms of lesser compliances, lesser filing fees and lesser penalties (in the event of any defaults). Apart from the aforesaid, there has been extension of the fast-track process for mergers under the Act to also include mergers of Startups with other Startups and with small companies and introduction of new abridged & concise version of Annual Return introduced for small companies and OPCs. OPCs have also been incentivized by allowing them to grow without any restrictions on paid up capital and turnover, allowing their conversion into any other type of company at any time, etc.
During the Covid Period, MCA announced various relaxations such as allowing companies to conduct their AGMs and EGMs through VC upto 30th June, 2022, amending Companies (Indian Accounting Standards) Rules, 2015 to align Ind ASs with amendments made in IFRS so that the Covid 19 related relaxations are extended, announcing Companies Fresh Start Scheme, 2020 to provide opportunities to Companies to make good any filing related defaults, regardless of duration of defaults, and make a fresh start as a fully compliant entity & LLPs Settlement Scheme, 2020 for granting similar opportunity to LLPs. Other measures consisted of providing relaxation of time for filing forms related to creation or modification of charges as well as allowing additional time upto 15th & 31st March, 2022 to companies to file their Financial Statements & Annual returns, respectively, without payment of any additional fees.
To address better Corporate Governance practices, quality of disclosures has been strengthened through amendments made in the formats of financial statements, Companies (Accounts) Rules, Companies (Audit and Auditor’s) Rules and the Companies (Auditor’s Report) Order, 2020. In order to encourage Corporate Citizen’s role in addressing social needs of the country, the Schedule VII of the Companies, 2013 which enlist the eligible CSR activities has been amended thrice to enable companies to undertake CSR activities in the emerging development sectors and various circulars were issued to clarify that spending of CSR funds for COVID-19 related activities are eligible CSR activities. The Companies (CSR Policy) rules, 2014 was amended on 22nd January 2021 to enhance transparency and strengthen disclosures on CSR compliance.
The MCA has been continuously announcing various circulars and amendment in the act and rules to facilitate corporates during the period of covid stress, promoting transparency, adopting better governance and disclosure mechanisms, relooking at compliance structures and to further promote India as destination for investment and ease of doing business by both domestic and foreign investors by enabling rationalized and efficient processes.