Parliament Question: Protection of Interests of Investors

GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS LOK SABHA UNSTARRED QUESTION NO. 4935 ANSWERED ON MONDAY, 23RD MARCH 2026 CHAITRA 02, 1948 (SAKA) PROTECTION OF INTERESTS OF INVESTORS QUESTION

4935. Dr. M P ABDUSSAMAD SAMADANI:

WILL THE MINISTER OF CORPORATE AFFAIRS BE PLEASED TO

STATE:

(a) the steps taken by the Government to protect the interests of investors;

(b) the major investigations conducted by the Serious Fraud Investigation Office (SFIO);

(c) the assistance provided by the Government to new startups; and

(d) the amount spent as Corporate Social Responsibility (CSR) funds in areas such as education and healthcare? ANSWER MINISTER OF STATE IN THE MINISTRY OF CORPORATE AFFAIRS;

MINISTER OF STATE IN THE MINISTRY OF ROAD TRANSPORT AND HIGHWAYS (SHRI HARSH MALHOTRA)

(a) The Ministry administers the Companies Act, 2013 which includes various provisions of enforcement, compliance mechanism to ensure protection of interests of investors. The enforcement mechanism includes ordering of inquiries, inspections or investigations under sections 206, 210/ 212 of the Companies Act, 2013 in cases of misuse of funds, fraud, non-compliances of statutory provisions of the Companies Act, 2013. Similar enforcement actions are undertaken in respect of Limited Liability Partnerships (LLPs) under the LLP Act, 2008. Based on the non-compliances reported, proceedings of adjudication, fine and prosecution, as the case may be, are initiated against such companies / LLPs and / or their directors/ partners, Key Managerial Persons, auditors, etc. Further, compliance under different sections of the Act is implemented through mandatory filings by companies with a view to ensure that relevant information is available to the investors/ stakeholders.In addition to above, this Ministry has constituted Investor Education and Protection Fund Authority under section 125(5) of the Companies Act, 2013. This Authority is entrusted with the responsibility of administration and utilisation of the Investor Education and Protection Fund (IEPF) for making refunds of shares, unclaimed dividends, matured deposits/ debentures, etc. to investors, promoting awareness among investors, thereby protecting the interests of the investors.

(b) SFIO investigates the cases ordered by the Central Government under section 212 of Companies Act, 2013 and assigned to it. SFIO has completed 68 investigation cases during the last three years including the current year.

(c) The details of provisions in the Companies Act, 2013 to promote Start-ups are at Annexure-A.

(d) The amount spent as Corporate Social Responsibility (CSR) funds in areas such as education and healthcare on the basis of annual filings made by companies in the MCA21 registry from FY 2021-22 to FY 2023-24 are at Annexure-B.

*****Annexure-A In reply to Part (c) of Parliament question No. 4935 for 23.03.2026.

Sr. Section/Rules of Subject Provisions in the Company Act, 2013 to support No. Companies Act, Start-ups 2013

1. Section 2(40) Financial Requirement of cash flow statement to be part of Statement financial statement is optional for Start-ups.

2. Section 73(2) Acceptan Start-ups were exempted from procedural clause (a) to (e) ce of compliance at the time of accepting deposits from deposits its members (such as issuance of a circular to its members showing the financial position of company, credit rating, depositing 20% of the maturing deposits, and certification regarding default in repayments).

3. Section 92(1) Annual Directors of a start-up are allowed to sign annual Return returns of the private limited company if the Company does not have Company Secretary.

4. Section 173(5) Meetings Under Companies Act, 2013, Board of Directors of a of Board company are required to meet at least once in 120 days, 4 board meetings in a year. However, Start-ups are exempted from holding quarterly board meetings and are allowed to hold two board meetings in a calendar year, i.e., once every six months.

5. Rule 6 of Conversio The requirement that an OPC must convert itself Companies n of OPCs after its paid-up capital exceeds Rs 50 lakh and its

(Incorporation) into average annual turnover exceeds Rs 2 crore was Rules, 2014 Public and omitted. Since many start-ups are One Person Private Company, this allows them to retain the status as an Companie OPC.

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6. Rule 8(4) of Sweat In general, the issuance of sweat equity shares in a Companies Equity company shall not exceed 25% of the paid-up capital (Share Capital of the company at any time. However, in case of and Debenture) start-ups, this limit is upto 50% of its paid-up share Rules, 2014) capital.

7. Rule12(1)(c) of Employee In general, ESOPs are not given to employee who is Companies Stock a promoter or a person belonging to the promoter (Share Capital Options group and a director who either himself or through and Debentures) (ESOPs) his relative or a body corporate, directly or indirectly Rules, 2014 holds more than 10% equity of the company. Start- ups are allowed to issue ESOPs to promoters and directors.

8. Rule 2 (1)(c) Convertibl Start-ups can receive an amount of Rs 25 lakh or

(xvii) Companies e Note more by way of a convertible note (convertible into (Acceptance of equity shares or repayable within a period not exceeding ten years from the date of issue) in aSr. Section/Rules of Subject Provisions in the Company Act, 2013 to support No. Companies Act, Start-ups 2013 Deposits) Rules, single tranche, from a person, and such transactions 2014 are not considered deposit.

9. Rule 3(3) of Acceptan Companies may ordinarily accept or renew any Companies ce of deposits from its members not exceeding 35% of the (Acceptance of deposits paid-up share capital, free reserves and securities Deposits) Rules, premium account of the company. But start-ups have 2014 been permitted to accept deposits from members without any restriction on the amount.

*****Annexure-B In reply to Part (d) of Parliament question No. 4935 for 23.03.2026. (Amount in Rs. Crores) S. Development Sector FY FY FY No. 2021-22 2022-23 2023-24

1. Education 6,719.89 10,414.93 12,134.57

2. Health care 8,049.49 7,023.60 7,150.81 (Data upto 31.03.2025) (Source: Corporate Data Management Cell) *****