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Answer Key CSE (Prelims) 2021

Corporate Affairs

14- CORPORATE AFFAIRS
  • THE Ministry of Corporate Affairs (MCA) is primarily concerned with the administration of the Companies Act 2013, the Companies Act 1956, the Limited Liability Partnership Act, 2008, and other allied Acts and rules and regulations framed there-under mainly for regulating the functioning of the corporate sector.
  • The Ministry is also responsible for administering the Competition Act, 2002 to prevent practices having an adverse effect on competition, to promote and sustain competition in markets, to protect the
  • interests of consumers through the commission set up under the Act.
  • The Ministry also has the responsibility of carrying out the functions of the Central Government relating to the administration of the Partnership Act, 1931, the Companies (Donations to National Funds) Act, 1951 and Societies Registration Act, 1860.

Administrative Structure:

  • The Ministry has a three-tier organizational structure with the headquarters at New Delhi, seven offices of Regional Directors (RDs), fifteen Registrars of Companies (RoCs), fourteen Official Liquidators (OLs), and nine RoC-cum-OLs in states and union territories.
  • The jurisdictional Registrars of companies, continue to have jurisdiction over the companies incorporated by the Registrar, CRC under the Companies Act, 2013 for all other provisions of the Act and the Rules made thereunder, which may be relevant after incorporation.
  • The Official Liquidators function under the overall administrative control of the Ministry and are attached to corresponding High Courts.
  • They are mainly responsible for implementing court orders regarding the liquidation and the final dissolution of the companies.

Central Registration Centre:

  • The project to transform the processing of company incorporation, e-forms was undertaken with one clear objective, i.e., applications for name reservation and incorporation of a company could be processed and completed within D+1 days (D=Date of Payment Confirmation) in line with global best practices.

Ease of Doing Business:

  • The Ministry has prescribed a Simplified Proforma for Incorporating Companies (SPICe) along with e-MOA (Electronic-Memorandum of Association) and e-AoA (Electronic-Articles of Association) which eliminates the requirement of physically signing the Memorandum of Association (MoA) and Articles of Association (AoA) by the applicant and helps entrepreneurs to start a business in India, without many hassles
  • According to the Doing Business Report (DBR) of the World Bank, India has jumped 14 positions against its rank of 77 in 2020 to 63 among 190 countries.
  • The Companies Act, 2013 seeks to bring corporate governance and regulatory practices in India at par with global best practices.
  • The corporate sector has been given more flexibility in regulating its own affairs, subject to full disclosure and accountability of its actions while minimizing Government interference.
  • The Act provides more opportunities for new entrepreneurs and enables wide application of information technology in the conduct of affairs by corporates.

Ease of Doing Business

Key Features of the Companies Act, 2013
  • Business Friendly Corporate Regulations/Pro-Business Initiatives
  • Good Corporate Governance and Corporate Social Responsibility (CSR)
  • Enhancing Accountability of Management
  • Strengthened Enforcement
  • Audit Accountability
  • Investor Protection

Companies (Amendment) Act, 2015
  • The Companies Act, 2013 was amended through the Companies (Amendment) Act, 2015 to facilitate business and address certain immediate concerns raised by stakeholders.
  • These amendments along with the relevant rules have been notified and they provide exemptions under various provisions of the Act to:
    • Private companies
    • Government companies
    • Section 8 companies
    • Nidhis

Insolvency and Bankruptcy Code, 2016 (IBC, 2016)
  • The Insolvency and Bankruptcy Code, 2016 (Code) became functional from May, 2016.
  • Government of India (Allocation of Business) Rules, 1961 were amended wherein the Ministry of Corporate Affairs was entrusted with the responsibility to administer the Code.
  • Objective: To consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner.

Insolvency and Bankruptcy Board
  • The Insolvency and Bankruptcy Board of India (IBBI) was established in 2016.
  • The IBBI has the mandate for the regulation of insolvency professionals, insolvency professional agencies, and information utilities besides exercising other powers and functions as envisaged under the Code.

Special Courts
  • Under Section 435 of the Companies Act, the Ministry of Corporate Affairs has constituted Special Courts by designating 20 existing Session courts/Additional Sessions Courts as Special Courts.

National Company Law and Appellate Tribunal:

  • The constitution of National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) was done in 2016.
  • These bodies have been constituted for faster resolution of corporate disputes and reducing the multiplicity of agencies thereby promoting ‘ease of doing business’ in the country.
  • With the constitution of the National Company Law Tribunal (NCLT), the Company Law Board (CLB) stands dissolved and cases pending with CLB were transferred to NCLT.
  • Central Government has also notified provision for transfer of proceedings relating to arbitration, compromise, arrangements, and reconstruction to the benches of NCLT.
  • The applications pending before High Courts on winding up shall continue to be dealt by the respective High Courts and fresh applications are required to be filed before NCLT.
  • NCLAT has its headquarters at New Delhi.
  • The Competition Appellate Tribunal under the provisions of the Competition Act was dissolved in 2017 and merged with NCLAT.
  • The appeal against the orders of the Competition Commission of India is now with NCLAT.

Companies in the Registry
  • There were more than 11.89 lakh active companies in June, 2018.

Corporate Social Responsibility
  • In India, Corporate Social Responsibility (CSR) for companies has been mandated through legislation through Section 135 of the Companies Act, 2013.
  • Section 135, Schedule VII of the Companies Act, 2013, and the Companies (Corporate Social Responsibility Policy) Rules, 2014 came into force from April, 2014.
  • From time to time the Ministry has made amendments to Companies (CSR Policy) Rules, 2014.

Limited Liability Partnerships
  • In India, about 95 per cent of industrial units are Micro, Small and Medium Enterprises (MSMEs).
  • As per the survey conducted by MSME, over 90 percent of these are registered as proprietorships, about 2 to 3 percent as partnerships, and less than 2 percent as companies.
  • The corporate form does not appear to be widely prevalent amongst MSMEs.
  • Analysis of the data collected by the Ministry of MSME suggests that high compliance cost under the Companies Act, 1956 deterred the MSMEs from adopting the corporate form.
  • In this context, the Limited Liability Partnership (LLP) Act was enacted in 2008 and came into force from 2009.
  • LLP is a form of business entity, which allows individual partners to be protected from the joint and several liabilities of partners in a partnership firm.
  • The liability of partners incurred in the normal course of business does not extend to the personal assets of the partners. It is capable of entering into contracts and holding property in its own name.

MCA21— e-Governance Project
  • The Ministry operated an end-to-end e-governance project called MCA21 for end to end service delivery comprising Company and Limited Liability Partnership (LLP) registration, incorporation, registry and other compliance-related services.
  • The project was started in March 2006 on Build, Own, Operate and Transfer (BOOT) Model with the vision was “to introduce a service-oriented approach in the design and delivery of Government services”.
  • The project was undertaken on a Mission Mode to bring about a service-centric approach in the delivery of public services and administration of the Companies and LLP Act, and it specifically focuses on:
    • Speedy incorporation of companies and LLPs
    • Providing Ease of Doing Business.
  • The project has been implemented in the Ministry’s headquarters, all Regional Directorates and Registrar of Companies offices.
  • All services are provided online and the filed documents are available in public domain.

Cost Audit
  • The companies engaged in the production of goods or providing services as specified in orders issued by the central government under Section 148 of the Companies Act, 2013 are required to include the particulars relating to the utilization of material or labour or to other prescribed items of cost in their books of account.
  • The Companies (Cost Records and Audit) Rules were notified in 2014 specifying the class of companies and the threshold limit, which require to maintain cost records and conduct audit thereof.

Investor Education and Protection Fund
  • The Companies Act provides for the establishment of Investor Education and Protection Fund (IEPF) for promoting Investor Awareness and protecting their interests.
  • Investor Awareness Programmes (IAPs) are organized in association with three professional institutes:
    • Institute of Chartered Accounts of India,
    • Institute of Company Secretaries of India
    • Institute of Cost Accounts of India.

Indian Corporate Law Service
  • Ministry of Corporate Affairs is the cadre controlling authority of the Indian Corporate Law Service (ICLS).
  • The erstwhile Indian Company Law Service was rechristened in 2008 as the Indian Corporate Law Service.

Serious Fraud Investigation Office
  • The SFIO was set up in 2003.
  • The Companies Act, 2013, interalia, has accorded statutory status to SFIO and its functions and powers have been enhanced substantially with the number of enabling provisions in the Act and it was established under Section 211 of the Companies Act, 2013.
  • The main function of SFIO is to investigate corporate frauds of serious and complex nature.
  • Investigations are carried out by a multi disciplinary team which includes experts from the field of accountancy, forensic auditing, taxation, customs, and central excise, information technology, capital market, financial transaction (including banking) and enforcement agencies like Central Bureau of Investigation (CBI), Intelligence Bureau (IB) and Enforcement Directorate.

Indian Institute of Corporate Affairs:

  • The Ministry set up the Indian Institute of Corporate Affairs (IICA), a society registered under the Societies Registration Act, 1860 to serve as a ‘Holistic ThinkTank’,  and a ‘Capacity Building, Service Delivery Institution’ to help corporate growth.
  • The Institute fulfills the training needs of the officers of the Indian Corporate Law Service (ICLS), and other officials working for the Ministry, corporates, PSUs, and banks through its network of various schools and centers.
  • National Foundation for Corporate Social Responsibility is also anchored with IICA.

Competition Commission of India:

  • The CCI was established in 2003 under the Competition Act, 2002, with the objective of eliminating practices having an adverse effect on competition, promoting and sustaining competition, protecting the interest of consumers and ensuring freedom of trade in India.
  • The Competition Act, 2002 was amended twice (Amendment) Act, 2007, and the Government (Amendment) Act, 2009.
  • The provisions of the Competition (Amendment), 2002 relating to anti-competitive agreements and abuse of dominant position were brought into force in 2009 and those relating to combinations from 2011.

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