India is providing detailed evidence to the World Bank on ease of doing business as it seeks to break into the top 100 countries on the bank’s index from its current rank of 130.
Officials said logs of construction permits, containerised cargo movement at ports and setting up of a company are being provided to World Bank as part of the Narendra Modi government’s efforts to ensure it does not miss any point to score to improve India’s rank.
World Bank officials had a few queries for the Department of Industrial Policy & Promotion (DIPP) when they met on August 1 after completing field inspection and verification of claims over the 14 parameters on ease of doing business.
While the World Bank does not share its findings, one observation made by its team was that people were carrying paperwork to the offices of the Employees’ Provident Fund Organisation even as registration was made free of all physical touch-points. “We clarified that it is only for claims that one needs to file the papers,” said a senior DIPP official, who did not wish to be identified.
Besides, DIPP is now gathering its own evidence for cases where it feels respondents have not have kept in mind the assumptions made by the World Bank study.
“In case of construction permits the study is limited to warehouses or buildings on the outskirts or setting up of a company parameter is only for domestic enterprises and not how long it takes for a foreign entity,” the official said.
DIPP is taking a proactive approach to provide evidence on its part even after the field investigations have been wrapped by the World Bank team. Final rankings will be announced in October. The ranking considers business environment in Delhi and Mumbai. India compares unfavourably even with countries such as Mexico, which is ranked 38, and Russia, which is at 51. Prime Minister Modi has set a target for India to be in the top 50 in three years.
Specific areas DIPP has targeted are starting business, insolvency procedures, construction permits, ease of trade across borders and electricity connections. According to the department, total number of days required to start a business has been reduced to 12 from 29 in the past year. A team of researchers spent two weeks in Delhi and Mumbai talking to actual users and stakeholders to study and verify implementation of reforms, officials said.
Companies which conduct online business will now have to provide on their websites details about their registration with the government, as well as information about persons to be contacted for grievances.
The government’s move to introduce the requirement comes against the backdrop of instances where people have been duped by way of fraudulent activities, including through online platforms. Tweaking the rules for incorporation of companies, the government has also put in place stricter conditions for conversion of unlimited liability companies into a company limited by shares or guarantee.
The corporate affairs ministry has amended the rules for incorporating a company under the Companies Act, 2013.
Now, “every company which has a website for conducting online business or otherwise, shall disclose/publish its name, address of its registered office, the Corporate Identity Number (CIN), telephone number, fax number, if any, e-mail and the name of the person who may be contacted in the case of any queries or grievances on the landing/home page of the said website”. CIN is the unique number allotted to an entity after getting registered under the Companies Act.
As for conversion of an unlimited liability company into a firm company limited by shares or guarantee, the ministry has made the norms stricter.
Under the amended rules, after conversion, name of the company should not be changed for one year and it will also not be allowed to give dividend unless past debt and liabilities are cleared.
In this regard, the ministry said “past debts, liabilities, obligations or contracts do not include secured debts due to banks and financial institutions”.
The Corporate Affairs Ministry, which is implementing the Companies Act, has already effected a number of changes to various rules under this legislation as part of larger efforts to protect investor interests as well as improve ease of doing business.
Most provisions of the Companies Act, 2013, came into effect from April 1.
Retail investors might soon be allowed to participate in the initial public offerings (IPOs) of start-ups with the Securities and Exchange Board of India (Sebi) planning to scrap the Institutional Trading Platform (ITP) for these firms. The move comes after the platform failed to witness a single listing since it was launched last year.
Sources privy to the development said instead of providing an exclusive platform for start-ups, Sebi is now planning to allow start-ups to list on the regular platform. However, some relaxations would be provided in terms of disclosures and compliance norms. Sebi is planning to amend both the Issue of Capital and Disclosure Requirements (ICDR) and Listing Obligations and Requirements (LODR) regulations, accordingly.
As per the regulations relating to Capital Raising and Listing on Institutional Trading Platform regulations for start- ups, only institutional investors and high-net worth individuals (HNIs) are allowed to trade on ITP and the minimum ticket size was `10 lakh. Retail investors were not allowed to invest in such issues as the markets regulator felt small investors should be safeguarded against a higher level of risks associated with the platform.
Several start-ups have expressed concerns about the liquidity on ITP. Further, not even a single company has filed for an IPO on the special platform till date. Hence, Sebi wanted to review the regulations and address the concerns raised by the start-ups,” said a member of Sebi Primary Markets Advisory Committee (PMAC).
Allowing start-ups to list on the regular platform would also address the concerns regarding the minimum institutional ownership clause in the regulations. As per the current regulations, to be eligible to raise funds via an IPO, 50% of the pre-issue capital of the company must be held by qualified institutional buyers (QIBs). In the case of e-commerce and technology start-ups, 25% of the pre-issue capital should be owned by institutional investors.
In August 2015, the regulator had announced a new set of listing regulations for start-ups operating in the e-commerce space in sectors such as information technology (IT), data analytics and biotechnology.The regulations provided several relaxations to start-ups keeping in mind the unique nature of the industry including removal of caps on the money spent by start-ups on publicity and advertisements as they need to spend much more for such purposes.
Infibeam, an e-commerce company that went for an IPO in the current calendar year, chose to list on the main board instead of the ITP. Although the company filed its draft prospectus with the regulator before the ITP was announced, the company had a choice to migrate, subsequently. According to investment bankers, the company didn’t choose ITP because of concerns about the platform.
All the 11 benches of the newly constituted National Company Law Tribunal (NCLT) will be fully functional in the next “couple of days”, a top Corporate Affairs Ministry (MCA) official said.
Infrastructure is ready in all the 10 cities where the NCLT benches are being set up. The human resources aspect has also been taken care of and adequate steps are being taken to start work immediately.
To begin with, NCLT will handle all pending cases before the Company Law Board and other matters not assigned to any other Court, the official said.
“There will be no transition problem for existing CLB cases,” the official added.
As on date, as many as eight members have joined NCLT, out of approved 25 members. “The remaining members are expected to join in the next few days. They will be posted in various benches,” the official said.
The MCA has also planned a 10-day colloquium in July for the NCLT members, the official added. Asked about the status of cases before High Courts (company cases), the MCA official said the High Court will be the second stage of transfer.
“We will let the CLB cases transition to stabilise for some time and then, in discussion with NCLT Chairman, decide on the High Courts related matter,” the official said.
The creation of NCLT from June 1 is expected to speed up delivery of justice in corporate cases. Sai Venkateshwaran, Partner and Head, Accounting Advisory Services, KPMG in India, hailed the MCA move to set up NCLT and NCLAT.
“We can expect to see the new Companies Act become a reality in its entirety in the coming months,” Venkateshwaran said. The time required for setting up of the NCLT and NCLAT was one of the key reasons for the Companies Act 2013 not being fully operationalised, he said.
However, with the setting up of these tribunals, the way has been paved for operationalising most of the remaining parts of the Companies Act 2013, he added. .
Meanwhile, the Company Law Board hearing in the Financial Technologies’ Board removal case did not take place on Thursday as the CLB stood dissolved on May 31 by virtue of the government move to set up NCLT from June 1.
Indications are that an NCLT bench will hear this matter in the coming days, sources said.
Extending the deadline for the third time, Corporate Affairs Ministry has now given time till July 7 for companies to submit their statutory filings as issues related to MCA21 portal are yet to be fully resolved.
MCA21 is used for making electronic filings under the Companies Act and is managed by Infosys for the ministry.
The upgraded system went live in the last week of March and stakeholders have been facing issues in using the portal.
The Ministry has extended the filing deadline for the third time in less than two months.
Initially, the extension was till May 10 and later the deadline was fixed for June 10.
Giving more time, the Ministry has extended the time limit for making the requisite filings under the companies law to July 10.
“…keeping in view, requests received from various stakeholders, it has been decided to extend the period for which the one time waiver of additional fees is applicable to all e-forms which are due for filing by companies between March 25 to June 30, 2016 as well as extend the last date for filing such documents and availing the benefit of waiver to July 7, 2016,” it said in a communication dated May 31.
While the communication does not mention anything about MCA21, Ministry officials expect to resolve the issues related to the portal soon.
On April 6, an Infosys spokesperson had said it was working with the Ministry to resolve the “minor teething problems” related to MCA21.
The portal is designed to fully automate all processes related to enforcement and compliance of legal requirements under the Companies Act.
Meanwhile, the Ministry has also extended the time limit for submitting Form 11 of LLP in respect of 2015-16 financial year without any additional fees to June 30.
With stakeholders facing glitches in using the upgraded MCA21 portal, the Corporate Affairs Ministry has extended the deadline for submitting various filings without additional fee till May 10.
MCA21, used for making electronic filings under the Companies Act, is managed by InfosysBSE -0.87 % for the ministry. The upgraded system went live in the last week of March.
“Since the launch of the system, a number of stakeholders have faced issues and representations have been received from stakeholders to resolve the issues including, for allowing waiver of additional fee until the new system stabilises,” the ministry said in a communication.
Considering the situation, the ministry has decided to relax the additional fee payable on electronic forms which are due for filing by companies between March 25 to April 30 as one time waive additional fee.
“If such due e-forms are filed after May 10, 2016, no such relaxation shall be allowed,” the communication, dated April 12, said.
After upgradation to run on SAP platform, MCA21 went live on March 27, and since then there have been some glitches such as difficulty in uploading documents.
On April 6, an Infosys spokesperson had said it was working with the ministry to resolve the “minor teething problems” related to MCA21.
The portal is designed to fully automate all processes related to enforcement and compliance of legal requirements under the Companies Act.
Panel has sought the overhaul of the bankruptcy framework to allow the speedy winding up of failed businesses to protect shareholders and lenders, aiming to modernise an outdated system.
A government panel has sought the overhaul of the bankruptcy framework to allow the speedy winding up of failed businesses to protect shareholders and lenders, aiming to modernise an outdated system that drags out closure proceedings.
It has recommended new institutions and structures for a fresh regime that will encourage entrepreneurship and foster a startup culture, among the stated objectives of the Narendra Modi administration. The government has indicated it will move a Bill in the winter session of Parliament to give effect to the recommendations, addressing one of the key issues that has kept India low on the ease of doing business rankings.
The Bankruptcy Law Reform Commission headed by former law secretary TK Viswanathan has proposed insolvency resolution within 180 days and a new regulator to oversee the process. It’s also laid down a clear and speedy system for early identification of financial distress and revival of companies.
The timelines are on par with international norms for insolvency resolution. “The endeavour would be to introduce the Bill in the next session of Parliament,” Finance Minister Arun Jaitley said at the World Economic Forum in the Capital on Wednesday. Viswanathan submitted the report to the minister later in the day. The report, along with the draft legislation, has been made public for feedback. “The Bill seeks to improve the handling of conflicts between creditors and debtors, avoid destruction of value, distinguish malfeasance vis-a-vis business failure and clearly allocate losses in macroeconomic downturns,” the report said.
The World Bank has ranked India at 136 out of 189 countries in ‘resolving insolvency,’ estimating that it takes 4.3 years on average in Mumbai to settle a case.
Jaitley had identified bankruptcy law reform as a key priority for improving ease of doing business in his February budget speech. He said that a comprehensive bankruptcy code, meeting global standards and providing the necessary judicial capacity, would be unveiled in the fiscal year. Under the current system, proceedings take several years, hurting investors and lenders besides costing taxpayers crores of rupees.
Banks are groaning under bad debt stemming from projects that have got stuck, drawing the Reserve Bank of India’s concern. “We need a bankruptcy code. We need equity to be seen as equity and debt to be seen as debt. Today there’s a lot of confusion… We need that confusion to be changed,” RBI Governor Raghuram Rajan has said previously.
90 Days for Key Categories. The prescribed resolution timeline of 180 days can be cut further to 90 days from the trigger date for key categories. The proposed insolvency regulator will cover professionals and agencies specialising in the field.
The proposals include information utilities that will collect, authenticate and disseminate financial information from listed companies. An Insolvency Adjudicating Authority will hear cases by or against debtors. The Debt Recovery Tribunal should be the adjudicating authority with jurisdiction over individuals and unlimited liability partnership firms, it said. The National Company Law Tribunal (NCLT) should be the adjudicating authority with jurisdiction over companies and limited liability entities, it added.
The draft bill has consolidated existing rules relating to insolvency of companies, limited liability entities, unlimited liability partnerships and individuals, all of which are currently scattered across a number of laws, into a single legislation.
According to the draft bill, during the transition phase, the Centre will exercise all regulatory powers until the agency is established. The panel’s report suggests that an insolvency resolution plan prepared by a resolution professional has to be approved by a majority of 75% of the voting share of financial creditors. As part of the insolvency resolution process, creditors and debtors will engage in negotiations to arrive at agreeable repayment plans.
The draft proposes that any proceeding pending before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) or the Board for Industrial and Financial Reconstruction (BIFR) before the new law goes into force should stand abated or stopped.
“However, a company in respect of which such proceeding stands abated may make a reference to Adjudicating Authority within 180 days from the commencement of this law,” the recommendation said, keeping in view continuity of the process. Minister of State for Finance Jayant Sinha said the required infrastructure needed to be put in place.
“We also have to ensure that necessary judicial capacity is available,” he said. “We also need to resolve many of the situations immediately because they are short of cash in most of these bankruptcy types of cases.” The minister said the government was trying to put together a comprehensive solution where “we can resolve default and bankruptcy cases as quickly and efficiently possible.”
Industry feels the new system will create a robust and globally competitive insolvency regime. This will significantly reduce the time taken for insolvency proceedings in India, which at present, on an average basis is estimated at about 4.3 years as against only 1.7 years in high-income OECD countries,” said Chandrajit Banerjee, director general of the Confederation of Indian Industry.
“The architecture proposed by the Viswanathan committee of establishing an insolvency regulator to have oversight of the new class of insolvency professionals, agencies and information utilities will enhance the systemic efficiency of dealing with insolvency cases in a timebound manner,” he said.
