Executive Summary:
The Ministry of Corporate Affairs addresses challenges faced by the corporate sector regarding ease of doing business, regulatory compliance, corporate governance, insolvency resolution, and access to capital, particularly for startups and MSMEs. The document outlines steps taken by the Government of India to promote business-friendly policies and enhance transparency and investor protection through amendments to the Companies Act, various schemes, and initiatives. Key measures include decriminalizing offenses, streamlining compliance, and improving access to capital.
Key Points / Main Content:
Corporate Governance:
* The Companies Act, 2013, ensures financial accountability and transparency through requirements for maintaining books of accounts, preparing audited financial statements, and reporting crucial parameters in the Board's Report.
* Action is taken against defaulting companies that fail to file Annual Returns or Financial Statements.
* Listed and public companies meeting specified thresholds must appoint independent Directors and constitute Board committees like Audit, Nomination and Remuneration, and Stakeholders Relationship Committees.
Ease of Doing Business and Reducing Compliance Burden:
* Amendments in 2015 and 2017 facilitated ease of doing business by removing minimum paid-up share capital requirements and making the common seal optional.
* Amendments in 2019 and 2020 to the Companies Act and in 2021 to the LLP Act decriminalized 63 offenses.
* Exemptions from various provisions of the Companies Act have been provided to Private companies, Government Companies, Charitable companies, Nidhis and IFSC GIFT city companies.
* The requirement for minimum paid-up capital has been removed.
* The fast-track merger process has been extended to cover mergers of Startups with other Startups and with Small companies.
* New section 446B introduces lesser penalties for One Person Companies, small companies, startups, and Producer Companies.
* Private companies listing Non-convertible debt instruments on stock exchanges are not regarded as listed companies.
* Provisions relating to Producer Companies (Earlier Part IXA of Companies Act, 1956) included in the Companies Act, 2013.
* The Central Registration Centre (CRC) expedites company and LLP incorporations.
* The Centre for Processing Accelerated Corporate Exit (CPACE) was made operational on May 1, 2023, for centralized processing of voluntary company closures.
* The Central Processing Centre (CPC) was operationalized on February 16, 2024, for faster handling of electronic forms.
* Abridged Annual Returns have been introduced for small companies and One Person Companies (OPCs).
* Transition to a faceless adjudication mechanism for corporate default cases has been started.
Investor Protection:
* Shareholders Associations can take legal action against misstatements in prospectus or fraudulent inducement to invest.
* Protection of investor claims over unclaimed dividends beyond the existing limit of 7 years through the Investor Education and Protection Fund (IEPF).
* IEPF is utilized for refunds of unclaimed dividends, application monies, and promotion of investor education.
* Members and depositors have the right to initiate a class action suit before the National Company Law Tribunal (NCLT).
Expeditious Resolution Process:
* Six legislative amendments have been made to the Insolvency and Bankruptcy Code, 2016 (IBC).
* Steps are being taken for effective implementation of IBC, including filling vacancies, implementing e-court and hybrid court projects, and capacity building for members.
* An integrated technology platform is planned to integrate key IBC institutions: NCLT, NCLAT, IBBI, Information Utility, and MCA.
Access to Capital for Startups and MSMEs:
* Schemes supporting MSMEs include the Prime Minister's Employment Generation Programme, Credit Guarantee Scheme for Micro and Small Enterprises, and others.
* Under the Startup India initiative, financial support is provided through schemes like the Fund of Funds for Startups (FFS), Startup India Seed Fund Scheme (SISFS), and Credit Guarantee Scheme for Startups (CGSS). CGSS has been operationalized from April 1, 2023.
Impact Analysis:
Corporate Sector, Startups, and MSMEs:
* Impact: Benefit from ease of doing business measures, reduced compliance burdens, improved access to capital, and faster insolvency resolution.
* Action Required: Leverage available schemes and initiatives, comply with amended regulations, and utilize streamlined processes for incorporation, mergers, and exits.
Investors:
* Impact: Enhanced protection through class action suits, access to unclaimed dividends via IEPF, and greater transparency in corporate governance.
* Action Required: Stay informed about their rights, utilize IEPF for unclaimed funds, and participate in shareholder associations to protect their interests.
Government of India (Ministry of Corporate Affairs):
* Impact: Streamlined regulatory processes, reduced litigation burden, and improved business environment.
* Action Required: Continue monitoring and refining policies, ensuring effective implementation of IBC, and promoting investor awareness.
Key Entities Referenced
Companies Act, 2013: A law in India that regulates the incorporation of companies, responsibilities of directors, and dissolution of companies.
Insolvency and Bankruptcy Code, 2016: An act of the Parliament of India that consolidates the existing framework by creating a single law for insolvency and bankruptcy.
Ministry of Corporate Affairs: The government ministry in India responsible for regulation of Indian enterprises in Industrial and Services sectors.
Small Industries Development Bank of India: A development financial institution in India, for promotion, financing and development of the Micro, Small and Medium Enterprise (MSME) sector.
Securities and Exchange Board of India: The regulator of the securities and commodity market in India owned by the Government of India.
Limited Liability Partnership Act, 2008: An Act of the Parliament of India enacted in 2008 to introduce and regulate limited liability partnerships in India.
Startup India: An initiative by the Government of India to build a strong ecosystem for nurturing innovation and Startups in the country.
National Company Law Tribunal: A quasi-judicial body in India that adjudicates issues relating to Indian companies.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
LOK SABHA
UNSTARRED QUESTION NO. 3496
ANSWERED ON MONDAY, AUGUST 11, 2025
SRAVANA 20, 1947 (SAKA)
TRANSPARENCY AND INVESTOR PROTECTION MECHANISM
QUESTION
3496. Shri Zia Ur Rehman:
Will the Minister of CORPORATE AFFAIRS
be pleased to state:
(a) whether the Government is aware of the challenges being faced
by the corporate sector, particularly with regard to ease of doing
business, regulatory compliance burdens, corporate governance
issues, insolvency resolution delays, access to capital for startups
and MSMEs and the need to strengthen transparency and investor
protection mechanisms;
(b) if so, the details thereof and the steps being taken by the
Government to promote business-friendly policies; and
(c) if not, the reasons therefor?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF CORPORATE AFAIRS
AND MINISTER OF STATE IN THE MINISTRY OF ROAD, TRANSPORT
AND HIGHWAYS
[SHRI HARSH MALHOTRA]
(a) to (c) : The Government of India has been taking several steps
towards ease of doing business, optimising regulatory compliance,
addressing of corporate governance issues for overall transparency,
ensuring access to capital to start-ups and MSMEs, reducing delays
in resolution of insolvency and strengthening transparency andinvestor protection. Some of the important measures taken in this
regard are as under:
CORPORATE GOVERNANCE
(i) The provisions of the Companies Act, 2013 [CA-13 or Act] and
the rules made thereunder contain adequate provisions to
ensure financial accountability and transparency in the
management of companies. These provisions inter alia require
maintenance of books of accounts and statutory registers at the
registered offices, preparation of financial statements in
accordance with applicable financial reporting/accounting
standards and filing them with the Registrar after due
approvals. The financial statements are required to be audited
by an independent chartered accountant. Crucial parameters
such as risk management, state of company's affairs, material
changes affecting company's financial position are required to
be reported in the Board’s Report. The Registrar of Companies
take action against the defaulting companies who fail to file
their Annual Returns and/or Financial Statements by either filing
prosecution under Section 92, 96, 99, 137 of the Act or by
striking off the name of the companies under section 248 (1) of
the Act read with Companies (Removal of names of companies
from the Register of Companies) Rules, 2016.
(ii) The Act also requires listed and public companies meeting
specified thresholds with respect to paid up capital or turnover
or debt to appoint independent Directors and constitute various
committees of the Board viz. Audit Committee, Nomination and
Remuneration Committee, Stakeholders Relationship
Committee etc.
EASE OF DOING BUSINESS AND REDUCING COMPLIANCE BURDEN
(iii)Amendments made in the Act in 2015 & 2017 were aimed
towards facilitating ease of doing business. Key changes
included removing the requirement for a minimum paid-up share
capital, making the common seal optional, empowering AuditCommittee to give omnibus approvals for related party
transactions on annual basis and allowed companies to issue
shares at a discount to its creditors when its debt is converted
into shares in certain cases.
(iv)Amendments made in CA-13 in 2019 and 2020 and in the LLP
Act, 2008 in 2021 to de-criminalize 63 offences. While providing
relief to corporates, one of the objectives of decriminalization
has also been reduction of litigation burden in judicial courts
and shifting the prosecution cases towards adjudication.
(v)Exemptions from various provisions of Companies Act to Private
companies, Government Companies, Charitable companies,
Nidhis and IFSC (GIFT city) companies have been provided
through issue of notifications under section 462 of the CA-13
during 2015, 2017 and 2020.
(vi)The requirement of minimum paid up capital, i.e. Rs. 1 lakh for
a private company and Rs. 5 lakh for a public company, has been
done away with.
(vii)Extension of fast track process of mergers under the
Companies Act, 2013 to cover mergers of Startups with other
Startups and with Small companies, so that the process of
mergers & amalgamations is completed faster for such
companies. Now this process can also be availed in cases
where a holding company incorporated outside India is to be
merged with its wholly owned subsidiary incorporated in India.
(viii)New section 446B for lesser penalties for One Person
Companies, small companies, startups and Producer
Companies.
(ix)Private companies which list Non-convertible debt instruments
on stock exchanges not to be regarded as listed companies so
as to ensure development of corporate bonds market.
(x)Provisions relating to Producer Companies (Earlier Part IXA of
Companies Act, 1956) included in the Companies Act, 2013.(xi)The Central Registration Centre (CRC) is an initiative by the
Ministry of Corporate Affairs (MCA) in India to expedite and
streamline the process of company and Limited Liability
Partnership (LLP) incorporations.
(xii)The C-PACE (Centre for Processing Accelerated Corporate Exit)
(C-PACE) was made operational w.e.f. 1.05.2023 under Section
242(2) of the Companies Act, 2013 for centralized and
transparent processing of the matters related to voluntary
closure of the companies. This is an important mechanism
which enables entrepreneurs to have ease of exit which is
equally important factor in promoting entrepreneurship as much
as ease of doing business.
(xiii)The Central Processing Centre (CPC) was operationalized w.e.f
16.02.2024 for faster and centralised handling of various
electronic e-forms filed earlier with jurisdictional ROCs under
Companies Act, 2013.
(xiv)Streamlining Annual Compliance: Abridged and concise
versions of Annual Returns have been introduced for small
companies and One Person Companies (OPCs).
(xv)Faceless and Electronic Adjudication Mechanism: Transition to
a faceless adjudication mechanism to eliminate physical
hearings for corporate default cases has been started. This
process has made it easier for Directors and Key Managerial
Persons to attend the adjudication proceeding through online
VC.
INVESTOR PROTECTION
(xvi)Shareholders Associations/ Group of Shareholders empowered
to take legal action in case of actions relating to misstatements
in prospectus/fraudulently inducing persons to invest money in
the company.
(xvii) Protection of claim of an investor over unclaimed dividend
etc. beyond the existing limit of 7 years. Such amounts can beclaimed through Investor Education and Protection Fund (IEPF)
even after 7 years.
(xviii)IEPF account to be utilised for refund of unclaimed dividend
application monies due for refund and promotion of investors
education, awareness etc. IEPF accounts also to be utilised for
redistribution of disgorged amount to identifiable victims.
(xix) The Act provides the members and depositors of a company,
the right to initiate a ‘class action suit’ before the National
Company Law Tribunal ("NCLT"). This provision enables them to
collectively pursue legal remedies against the company, its
directors, auditors, experts, advisors, or consultants for
unlawful or fraudulent conduct prejudicial to the interests of the
company, its members, or depositors.
EXPEDITIOUS RESOLUTION PROCESS
(xx)The Government has undertaken six legislative amendments to
the Insolvency and Bankruptcy Code, 2016 (IBC) and introduced
over 100 changes to the regulations since its inception, to
strengthen the insolvency resolution framework and enhance
procedural efficiency. Necessary steps are taken for effective
implementation of IBC on an ongoing basis, including filling up
of vacancies, implementation of e-court and hybrid court
project, regular colloquiums for capacity building of members,
provision of infrastructure facilities etc.
(xxi)Further, an integrated technology platform has been envisaged
to integrate the key institutions forming pillars of the IBC
ecosystem viz. the NCLT, NCLAT, IBBI, Information Utility and
the MCA which would greatly enhance the ease of doing
business.
ACCESS TO CAPITAL FOR STARTUPs AND MSMEs
(xxii)Schemes undertaken to support MSMEs include, Prime
Minister's Employment Generation Programme, Credit
Guarantee Scheme for Micro and Small Enterprises, PMVishwakarma Scheme, Entrepreneurship & Skill Development
Programme Scheme, Micro and Small Enterprises - Cluster
Development Programme, Raising and Accelerating MSME
Performance, MSME Champions Scheme, Tool Room and
Technical Institutions (TR & TI), International Cooperation (IC)
Scheme.
(xxiii)Under Startup India initiative, the Government provides
financial support to startups at various stages of their business
cycles under schemes namely, Fund of Funds for Startups (FFS),
Startup India Seed Fund Scheme (SISFS) and Credit Guarantee
Scheme for Startups (CGSS). FFS has been established to
catalyse venture capital investments and is operationalized
through Small Industries Development Bank of India (SIDBI),
which provides capital to Securities and Exchange Board of
India (SEBI) registered Alternative Investment Funds (AIFs)
which in turn invest in startups. AIFs supported under FFS are
required to invest at least two times of the amount committed
under FFS in startups. SISFS provides financial assistance to
seed stage startups through incubators. CGSS is implemented
for enabling collateral free loans to startups through eligible
financial institutions. CGSS is operationalized by the National
Credit Guarantee Trustee Company (NCGTC) Limited and has
been operationalized from 1st April 2023.
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