Lok Sabha Question No. 1065 (UNSTARRED), answered on 2021-07-26
Subject: Ease of Doing Business
Ministry: CORPORATE AFFAIRS
Asked by: Rita Bahuguna Joshi

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA

## UN-STARRED QUESTION NO. 1065 ANSWERED ON MONDAY, JULY 26, 2021/ SRAVANA 4, 1943 (SAKA)

## EASE OF DOING BUSINESS

## QUESTION

1065. SHRIMATI RITA BAHUGUNA JOSHI: Will the Minister of CORPORATE AFFAIRS be pleased to state:

कारपोरेट कार्य मंत्री

- (a) whether the Government for ensuring 'ease of living'' and 'ease of doing business" is contemplating  to  get  rid  of  the  multitude  of  compliance  burdens  on  companies  and individuals;
- (b)  if  so,  the  details  thereof  along  with  the  steps  undertaken  by  the  Government  for convincing the States for downsizing their regulations so that businesses can save time and money; and
- (c) if not, the reasons therefor?

## ANSWER

MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION; MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF PLANNING; AND MINISTER OF STATE IN THE MINISTRY OF CORPORATE

AFFAIRS

[RAO INDERJIT SINGH]

(a)  to  (c): The  Ministry  of  Corporate  Affairs  (MCA)  administers  the  provisions  of  the Companies  Act,  2013(the  Act), the  Limited  Liability  Partnership  Act,  2008 and the Insolvency and Bankruptcy Code, 2016.

The Department for Promotion of Industry and Internal Trade (DPIIT) informed that the exercise of reducing regulatory compliance burden has been initiated across all Central Ministries and States/UTs with an aim of simplifying and rationalizing regulatory regime for  businesses  and  citizens.  The  initiative  of  reducing  regulatory  compliance  burden focuses on three aspects, viz., reducing compliances which are not relevant and add time and cost burden, repealing redundant laws and decriminalization of existing laws/ rules. Most of the initiatives have focused on simplifying and digitizing various processes, reduction in documents to be submitted along with applications, reduction in frequency of inspections, third-party inspections, auto-renewals, decrease in frequency of return filings and digital maintenance of registers/documents.

A Regulatory Compliance Portal (https://eodbrcp.dipp.gov.in/) has been launched by the DPIIT on 1st January 2021. The objective of this portal is to act as an online repository of  all  Central  and  State-level  compliances  and  to  minimize  Regulatory  Compliance burden. As part of this exercise, Ministries and States/UTs conducted a detailed selfassessment  of  compliances  that  ought  to  be  simplified/  rationalized  in  order  to reduce compliance burden on businesses and citizens. This assessment was based on third-party  reports  as  well  as  stakeholder  consultations.  Major  Industry  Associations have also been consulted for assessing compliance burden on businesses.

The MCA has taken steps to provide Ease of Doing Business and Ease of Living to law abiding corporates by simplifying the procedures for Starting a Business and by reducing

various compliance burden which is as under:

(1) Decriminalization of sections under the Companies Act:- Decriminalization of 46 Penal provisions  under  Companies  Act,  2013  was  carried  out  through  the  Companies (Amendment) Act, 2020 thereby taking the total number of provisions decriminalized to 62 (including the 16 decriminalized in 2018). In addition to decriminalization of penal provisions for minor procedural & technical defaults which do not involve any element of fraud,  deceit  or  injury  to  public  interest,  the  exercise  involved  the  rationalization  of quantum of monetary penalties as well and is expected to greatly improve the Ease of Doing Business climate in the country and lead to de-clogging of criminal courts and the NCLT from the burden of cases of routine nature. Such decriminalization would remove the fear of criminal prosecutions for non -substantive minor and procedural omissions and  commissions  in  the  normal  course  of  business  and  incentivize  micro  and  small, medium business enterprises to convert into body corporates such as companies and wou ld significantly enhance the confidence of Indian Corporates on the Government's resolve to provide greater ease and accord highest respect to honest wealth creators in the country and reduce the burden on the justice system.

- (2) Lesser Penalties for Small Companies, One Person Company (OPC), Start-ups, Producer Companies etc.:- Through Companies (Amendment) Act, 2020, lesser penalties for Small Companies/ One Person Companies / Start- ups/ Producer Companies or by any of its officer in default, or any other person in respect of such company has been provided for the non-compliance of any of the provisions of the Companies Act, 2013 which are to be dealt with under In-house Adjudication Mechanism (IAM). It shall lessen the cost of running businesses.

(3)  Simpler  process  for  Incorporation  of  new  companies:- The  Ministry  of  Corporate Affairs  has  deployed  a  new  Web  Form  christened  SPICe+  and  AGILE  PRO-S  which provides  eleven  services  by  three  Central  Government  Ministries  i.e.  Ministry  of Corporate  Affairs,  Ministry  of  Labour  and  Department  of  Revenue  (in  the  Ministry  of Finance), three States (Maharashtra, Karnataka and W. Bengal), NCT of Delhi and various Banks namely, (i) Name Reservation, (ii) Incorporation, (iii) PAN, (iv) TAN, (v) DIN, (vi) EPFO  Registration,  (vii)  ESIC  Registration,  (viii)  GST  number,  (ix)  Bank  Account  (x) Profession Tax Registration (Maharashtra, Karnataka and West Bengal) (xi) Delhi Shops and Establishment Registration. The new Web Form facilitates on-screen filing and real time data for seamless incorporation of new companies. This has resulted in reduction in the number of processes and time taken for Starting a Business in the country.

(4) Simpler process for renewal of reserved names:- This  Ministry  vide  notification  no. GSR (E) 765 dated 24.12.2020 through the Companies (Incorporation) Third Amendment Rules, 2020 has provide for extension of reservation of name in certain cases through a simple web service available at www.mca.gov.in. Rules amended to provide a framework for Renewal of Company Names beyond 20 days period.

- (5) Central Registration Centre (CRC):- Setting up Central Registration Centre (CRC) for name reservation and incorporation of companies & Limited Liability Partnership (LLP).
- (6) Zero fee for incorporation of all companies with authorized capital upto Rs. 15 lakh or upto 20 members where no share capital is applicable.
- (7) One Person Companies:- Provisions  with  regard  to  incorporation  and  functioning  of One Person companies (OPCs) revised significantly so as to incentivize incorporation of more OPCs. Now NRIs are also allowed to incorporate OPCs. Earlier only Indian resident citizens were permitted. Such companies are now allowed to convert into private or

- public companies at any point of time. The restrictions with regard to maximum amount of paid-up capital and turnover for OPCs has also been removed so that there is no undue restriction on the growth of OPCs. (8) Small Companies:The thresholds in respect of 'small companies' have been revised so that more companies get classified as 'small companies' and take advantage of a lighter compliance framework provided under the Companies Act, 2013 and rules made thereunder. (The limits in respect of paid-up share capital enhanced from Rs. 50 Lakh to Rs. 2 crore and in respect of turnover enhanced from Rs. 2 crore to Rs. 20 crores). (9) Revision  of  definition  of  listed  companies:- Certain  class  of  companies  has  been excluded  from  the  definition  of  listed  company  under  the  Companies  Act,  2013  vide notification no. GSR (E) 123 dated 19.02.2021. Henceforth, Private Companies which opt to  list  debt  securities  on  stock  exchanges  are  not  required  to  fulfill  compliances  as required from listed Companies and accordingly compliance burden has been reduced for such companies. (10) Extended the fast track process for mergers under the Companies Act, 2013 to also include mergers of Startups with other Startups and with Small companies, so that the process of mergers & amalgamations is completed faster for such companies. (11) Rules amended to ease the compliance burden on Independent Directors. (12) Rules amended to make it sufficient for companies to pass only one previous special resolution in order to make an offer or invitation of any securities to qualified institutional buyers on private placement basis during the year to make it easier for companies to raise capital. (13) Rules amended to enable purchase of minority shareholding held in demat form. (14)Introduction of fast track process for mergers & amalgamations of Startup with othe r Startups and Small companies. (15) Reduction of time limit up to which Rights Issues are required to be kept open. (16) New abridged & concise version of Annual Return introduced for Small companies and One person companies (OPCs) (17) Easier Process for conversion of a public company into a private company.

(18) Revision of definition of SMCs under the Companies (Accounting Standards) Rules, 2021:- The  Companies  (Accounting  Standards)  Rules,  2021  has  been  notified  on 23.06.2021 to mirror the Companies (Accounting Standards) Rules, 2006 (notified under the Companies Act, 1956) to bring the same under the Companies Act, 2013.  The said rule also amended the definition of Small and Medium Size companies for applicability of Accounting Standards under which the turnover limit has been increased from rupees fifty crores to not exceeding rupees two hundred and fifty crores and borrowings limit enhanced from rupees ten crores to rupees fifty crores. The aim of such amendment is to  reduce  the  compliance  burden  and  the  time  required  to  prepare  the  financial statements. As  a  result,  a  significant  number  of  companies  would  be  covered  in  the definition  of  the  SMC  companies  and  will  enjoy  the  exemptions  and  relaxations  from complying with detailed disclosures required under the various Accounting Standards such as AS-3 Cash Flow Statement, AS-17 Segment Reporting, AS-15 Employee benefits etc.

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