Lok Sabha Question No. 1942 (UNSTARRED), answered on 2022-03-14
Subject: Strenthening of Corporate Units
Ministry: CORPORATE AFFAIRS
Asked by: Malook Nagar

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS LOK SABHA

UNSTARRED QUESTION NO. 1942

ANSWERED ON MONDAY, THE 14 th  MARCH, 2022

[PHALGUNA 23, 1943(SAKA)]

## STRENTHENING OF CORPORATE UNITS QUESTION

1942: SHRI MALOOK NAGAR:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

- (a) the details of the number of corporate units which are incurring losses and earning profit separately after corona pandemic; (b)  the  efforts  being  made  by  the  Government  to  further  strengthen  the corporate units (industries) in this era of competition; and (c) the efforts being made by the Government to convert the loss making units
- into profitable ones?

## ANSWER

THE 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): 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 term 'Corporate Unit' is not defined in the  Act. However, as  per  the  records  maintained  in  the  MCA  portal,  the  number  of companies which are running in profits and the number of companies  which  are  running  in  losses  during  the  financial  year 2019-20 and 2020-21 in India are as given below:

| Particulars                    | 2019-20   | 2020-21   |
|--------------------------------|-----------|-----------|
| No. of Profit Making Companies | 4,00,375  | 3,33,887  |
| No. of Loss Making Companies   | 4,02,431  | 3,50,451  |

However, 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 would 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 / Startups/  Producer  Companies  or  by  any  of  its  officer  in  default,  or  any  other person  in  respect  of  such  company  has  been  provided  for  the  noncompliance 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:- MCA 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 paidup 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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