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lndian CorporaLe SecLor

An Cvervlew
lndian CorporaLe SecLor
W lmporLanL area of naLlon 8ulldlng
W ConLrlbuLe Lo Lconomlc Soclal uevelopmenL of Lhe
W rofesslonals regulaLory auLhorlLles sLakeholders have Lo
work LogeLher
W 1owards enllghLened regulaLlons lncluslve growLh'
W 8egulaLory 8odles Cll llCCl ASSCCPAM All lndla
AssoclaLlon of lndusLrles lCAl AlMA lnsLlLuLe of Company
SecreLarles of lndla lnsLlLuLe of CosL Works AccounLanLs of
lndla MCx SLock exchange 8SL nSL SL8l 88l
lndlan CorporaLe SecLor
W lnefflclenL hlgh cosL noncompeLlLlve lndusLrlal sLrucLure
W 8esLrlcLlve lul pollcy leadlng Lo lnfrasLrucLural boLLlenecks
W 1lghL conLrol on Lechnology Lransfer llcenslng consulLancy
W lL8A resLrlcLed Lhe freedom of forelgn caplLal hampered
access Lo scarce forelgn exchange
W 8ureaucraLlc deLermlnaLlon of planL capaclLles roducL mlx
W lnefflclenL ubllc SecLor unlLs Lhelr Monopoly power
W ConLrol on LqulLy prlces amounL ralse
W CovernmenL lmposed lnLeresL raLes loans Lo agrlculLural secLor
W roducL reservaLlons for SSLs
W CvervaluaLlon of rupee maklng exporLs noncompeLlLlve
W lmporL resLrlcLlons dlscouraglng maxlmum uLlllsaLlon of resources
W Lack of CompeLlLlon lack of efflclency
CorporaLe erformance osL 8eforms
W uurlng early years of deregulaLlon Lhe proflLablllLy of Lhe
companles was noL so robusL
W CrowLh ln gross proflLs of Lhe companles wenL down from
222 per cenL ln 199192 Lo 37 percenL ln 199293
W Companles reglsLered average gross proflLs growLh of 13
per cenL durlng 1990s
W 1here was however lmprovemenL ln 20002006 when Lhe
average raLe of proflL growLh lncreased Lo 17 per cenL
W 1he 1993 onwards phase was dynamlc for mosL lndlan
hlgh sales growLh lmproved proflLablllLy
sLrengLhened flnances
W lreelng of cap|ta| markets and enLry of fore|gn |nvestors
broughL new f|nanc|ng and ownersh|p opportun|t|es and
slgnlflcanLly ralsed Lhe volume of new equ|ty |ssues
W Llberallzlng Lhe fore|gn trade reglme and openlng Lhe
f|nanc|a| sector
1he acceleraLlon ln real gross domesLlc producL (Cu)
has been conLrlbuLed by Lhe susLalned expanslon ln
|ndustry and serv|ces sector
CrowLh have been faclllLaLed by lmprovemenL ln
W |nvestor fr|end|y and sector spec|f|c po||c|es and
W focus on |mprov|ng the |nfrastructure fac|||t|es
W Plgher |nvestment |n power and transport sectors wlLh
lncreased efflclency and trade and |ndustr|a| po||cy reforms
had resulLed ln Lurnaround
W 1hls ls well reflecLed ln Lhe performance of Lhe
manufacLurlng secLors durlng Lhe post reform per|od
especlally afLer 2000
W lor example gross proflLs of Lhe companles have reglsLered
an lncrease of 17 per cenL per annum durlng 20002006
osL 1991
W CCv1 S1AkL ln 1PL lnSu8AnCL CCMAnlLS 8L 88CuCP1 uCWn 1C 30
W lC8LlCn CCMAnlLS SPCuLu 8L ALLCWLu 1C Ln1L8 1PL lnuuS18?
W An lnSu8AnCL 8LCuLA1C8? 8Cu? SPCuLu 8L SL1 u
W lnSu8AnCL 8LCuLA1lCn uLvLLCMLn1 Au1PC8l1? (l8uA) AC1 1PlS
AC1 WAS ASSLu ln 19992000 uLSl1L CCSl1lCn l8CM 18AuL
unlCnS Anu LLl1 A81lLS ends monopoly of CovL secLor
1 23102000 PulC S1AnuA8u LllL lnSu8AnCL CC
2 13112000 MAx nLW ?C8k LllL lnSu8AnCL CC
3 24112000 lClCl 8uuLn1lAL LllL lnSu8AnCL CC
4 10012001 CM kC1Ak MAPlnu8A LllL lnSu8AnCL CC
3 31032001 8l8LA Sun LllL lnSu8AnCL CC
6 12022001 1A1A AlC LllL lnSu8AnCL CC
7 30032001 S8l LllL lnSu8AnCL CC
8 02082001 lCn vLS?A LllL lnSu8AnCL CC v1 L1u
9 03082001 ALLlAnCL 8A!A! lnSu8AnCL CC L1u
10 06082001 ML1 LllL lnulA lnSu8AnCL CCv1 L1u
11 23102000 8C?AL SunuA8AM ALLlAnCL lnSu8AnCL
12 23102000 8LLlAnCL CLnL8AL lnSu8AnCL CC L1u
13 04122000 lllCC 1Ck?C CLnlnSCCM L1u
14 22012001 1A1A AlC CLn lnS CC L1u
13 02032001 8A!A! ALLlAnCL CLn lnS CC L1u
16 03082001 lClCl LCM8A8u CLn lnS CC L1u
CapiLal MarkeL Reorms
rlmary MarkeL
Companles lssulng caplLal ln Lhe prlmary markeL are
now requlred Lo dlsclose
W all maLerlal facLs and speclflc rlsk facLors wlLh Lhelr
W lnformaLlon regardlng Lhe baslc of calculaLlon of
Secondary MarkeL
W SL8l has sLarLed Lhe process of reglsLraLlon of
lnLermedlarles such as sLock brokers and sub
W SL8l has noLlfled regulaLlons on lnslder 1ralnlng
under Lhe provlslons of SL8l acL
W 1he governmenL has allowed llls such as enslon
funds muLual funds lnvesLmenL LrusLs eLc Lo lnvesL
ln Lhe lndlan caplLal markeL
anking SecLor Reorms
W Scheduled commerclal banks have now been glven freedom Lo
open new branches and upgrade exLenslon counLers
W 8educLlon of govL sLake Lo Lhe exLenL of 33
W 1en prlvaLe secLor banks have already sLarLed funcLlonlng
W uepollLlclze of 8oard's appolnLmenL
W 8educLlon of C88 and SL8
W lnLroduced ln Lhe Lok Sabha on 3
AugusL 2009 and lL was
referred Lo Lhe arllamenLary SLandlng CommlLLee
W MlnlsLry ls now preparlng Lo lnLroduce Lhe 8lll ln Lhe budgeL
sesslon of Lhe arllamenL durlng Lhe flrsL half of 2011
W Seeks Lo replace Lhe Companles AcL 1936 wlLh a new law
LhaL ls
modern ln consLrucLlon
provldes exibiity Lo respond Lo Lhe rapld changes ln Lhe
buslness envlronmenL
lncorporaLlng some of Lhe best proctices ln Lhe fleld of
corporaLe regulaLlon
W parLnershlp beLween Lhe governmenL and Lhe
W boLh are lnLrlnslc parLs of a democraLlc framework
W Lhe sLrucLure of corporaLe governance whlch ls
essenLlally rooLed ln democracy
W need Lo brlng ouL Lhe shareholders and sLakeholders
as real volces ln Lhe corporaLe democraLlc space
whereln relaLlons are deflned by muLual respecL
8eneflLs for Companles
Lhe common man
(l)8equlremenLs aL Lhe Llme of lncorporaLlon would be clear and preclse
(ll) 8esponslble self regulaLlon wlLh dlsclosures and accounLablllLy
(lll) LlecLronlc mode provldes for company processes
(lv) roLecLlon of rlghL of mlnorlLy shareholders
(v) lnLroducLlon of concepLs llke key Managerlal ersons (kM)
lndependenL dlrecLors and commlLLees of 8oard
(vl) More accounLablllLy on Lhe parL of audlLors
(vll) lnvesLor LducaLlon roLecLlon lund (lLl) clalms Lo be allowed even
afLer seven years and
(vlll) Shareholders AssoclaLlon / Croup of shareholders enabled Lo Lake legal
acLlon and lnLroducLlon of 'Class AcLlon SulLs'
Modern racLlces
ln lndlan CorporaLe SecLor
W nd|a orporateJeek
4 Lhe Lhlrd week of uecember observed as 'lndla
CorporaLe Week' (lCW) every year 1he flrsL was
organlzed ln 2009 wlLh Lhe Lheme 'CorporaLe
SecLor and lncluslve CrowLh'
4 Lhe second was on 'SusLalnable 8uslness'
Larly Warnlng SysLem (LWS)
W 1he MlnlsLry of CorporaLe Affalrs has devlsed an
LWS 8ased on 'ldenLlfled rlsk parameLers' Lhe
sysLem generaLes alerLs ln respecL of unusual
Lendencles ln flnanclal sLaLemenLs
W 8ased on Lhese alerLs respecLlve 8CCs examlne
Lhe concerned cases Lo flnd ouL lrregularlLles
W LSLamp or elecLronlc sLamp duLy paymenL a
successful [olnL lnlLlaLlve of CenLreSLaLe
W deLalls conLalnlng 17 lmporLanL company
lnformaLlon such as daLe of lncorporaLlon
reglsLered offlce address class of company
auLhorlzed caplLal pald up caplLal eLc are avallable
free of cosL for perusal
W LxLended 8uslness 8eporLlng Language (x88L)
enabled flllng process for daLa analysls
lnvesLor Awareness lnlLlaLlves
W lnvesLor awareness programmes
W A comprehenslve '8eglnners' Culde Lo Lhe CaplLal
MarkeL' publlshed ln Lngllsh Plndl and all Lhe
ma[or reglonal languages
W lnvesLor awareness webslLe wwwlepfgovln
lnLernaLlonal CooperaLlon
W MCu was slgned wlLh !apanese auLhorlLles where
lndlan experLs wlll be provldlng knowledge Lo
!apanese counLerparLs ln Lhe fleld of convergence
wlLh ll8S
W ArrangemenLs are belng worked ouL wlLh uSA
AusLralla 8ussla and neLherlands for muLually
beneflclal exchange of ldeas
lndlan lnsLlLuLe of CorporaLe Affalrs
W LsLabllshed by Lhe MlnlsLry of CorporaLe Affalrs ln
W 1o Lake up Lralnlng and capaclLy bulldlng especlally
of Lhe lndlan Company Law Servlce (lCLS) offlcers
and also Lo acL as a Lhlnk Lank on corporaLe
W A selfsufflclenL sLaLe of Lhe arL campus ls belng
bullL aL Manesar ln Paryana
AccounLlng SLandards ll8S
W hased convergence of lnLernaLlonal llnanclal
8eporLlng SLandards (ll8S) wlLh lndlan AccounLlng
SLandards from Aprll 2011 as parL of Lhe C20
W 1he Core Croup conslsLlng of members from
CAC 88l SL8l l8uA l8uA lCAl MCl has
flnallzed a roadmap on convergence wlLh ll8S
Company Law SeLLlemenL Scheme
2010 and Lasy LxlL Scheme 2010
W schemes deslgned Lo provlde a wlndow Lo Lhe companles Lo
flle sLaLuLory documenLs whlch Lhey have falled Lo flle ln Lhe
pasL and
W for closure of defuncL companles ln case Lhey do noL wanL Lo
conLlnue wlLh Lhelr buslness
W 1he LoLal number of reglsLered companles ln Lhe counLry aL
Lhe beglnnlng of Lhe currenL llnanclal ?ear was 789361
W Powever Lhere are abouL 192 lakh dormanL companles
whlch have noL flled Lhelr 8alance SheeL for lasL 3
consecuLlve years or more
CorporaLe Covernance
W 1he naLlonal loundaLlon of CorporaLe Covernance
(nlCC) has been expanded Lo funcLlon as Lhe
naLlonal apex plaLform on corporaLe governance
W 1he MlnlsLry had released volunLary Culdellnes on
CorporaLe Covernance ln uecember lasL year
W lssues relaLed Lo lndependenL dlrecLors audlL
compensaLlon Lo dlrecLors eLc
CorporaLe Soclal 8esponslblllLy
W relaLlonshlp beLween Lhe growLh of corporaLe
secLor and Lhe soclal economlc developmenL of
Lhe common man
W 1he MlnlsLry has released volunLary Culdellnes for
CorporaLe Soclal 8esponslblllLy" ln uecember
W lurLher reflnemenL of Lhese guldellnes ls belng
done Lhrough an elaboraLe consulLaLlve process by
Lhe llCA
lndian Corporate 5ector