Lok Sabha Question No. 3496 (UNSTARRED), answered on 2025-08-11
Subject: Transparency and Investor Protection Mechanism
Ministry: CORPORATE AFFAIRS
Asked by: Shri Zia Ur Rehman

## 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  and

investor 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 Audit
- Committee 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.
- for  One  Person Producer
- (viii)New section 446B  for lesser penalties Companies, small companies, startups and 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 be

claimed 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,  PM

Vishwakarma 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.

- ******