Lok Sabha Question No. 4935 (UNSTARRED), answered on 2026-03-23
Subject: Protection of Interests of Investors
Ministry: CORPORATE AFFAIRS
Asked by: Dr. M P Abdussamad Samadani

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA

UNSTARRED QUESTION NO. 4935 ANSWERED ON MONDAY, 23 RD  MARCH 2026 CHAITRA 02, 1948 (SAKA)

## PROTECTION OF INTERESTS OF INVESTORS

## QUESTION

4935. Dr. M P ABDUSSAMAD SAMADANI:

WILL  THE  MINISTER  OF  CORPORATE  AFFAIRS  BE  PLEASED  TO STATE:

- (a)  the steps taken by the Government to protect the interests of investors;
- (b) the major investigations conducted  by  the Serious Fraud Investigation Office (SFIO);
- (c)   the assistance provided by the Government to new startups; and
- (d)    the amount spent as Corporate Social Responsibility (CSR) funds in areas such as education and healthcare?

## ANSWER

MINISTER  OF  STATE  IN  THE  MINISTRY  OF  CORPORATE  AFFAIRS; MINISTER OF STATE IN THE MINISTRY OF ROAD TRANSPORT AND HIGHWAYS

## (SHRI HARSH MALHOTRA)

- (a) The  Ministry  administers  the  Companies  Act,  2013  which includes various provisions of enforcement, compliance mechanism to  ensure  protection  of  interests  of  investors.  The  enforcement mechanism includes ordering of inquiries, inspections or investigations under sections 206,  210/ 212 of the Companies Act, 2013 in cases of misuse of funds, fraud, non-compliances of statutory provisions of the Companies Act, 2013. Similar enforcement actions are  undertaken  in  respect  of  Limited  Liability  Partnerships  (LLPs) under  the  LLP  Act,  2008.  Based  on  the  non-compliances  reported, proceedings of adjudication, fine and prosecution, as the case may be, are initiated against such companies / LLPs and / or their directors/ partners, Key Managerial Persons, auditors, etc. Further, compliance under different sections of the Act is implemented through mandatory filings by companies with a view to ensure that relevant information is available to the investors/ stakeholders.

In addition to above, this Ministry has constituted Investor Education and Protection Fund Authority under section 125(5) of the Companies Act,  2013.  This  Authority  is  entrusted  with  the  responsibility  of administration and utilisation of the Investor Education and Protection  Fund  (IEPF)  for  making  refunds  of  shares,  unclaimed dividends, matured deposits/ debentures, etc. to investors, promoting awareness among investors, thereby protecting the interests of the investors. (b) SFIO investigates the cases ordered by the Central Government under section 212 of Companies Act, 2013 and assigned to it. SFIO has  completed  68  investigation  cases  during  the  last  three  years including the current year. (c) The details of provisions in the Companies Act, 2013 to promote Start-ups are at Annexure-A. (d) The amount spent as Corporate Social Responsibility (CSR) funds in  areas  such  as  education  and  healthcare  on  the  basis  of  annual filings made by companies in the MCA21 registry from FY 2021-22 to FY 2023-24 are at Annexure-B.

- *****

|   Sr. No. | Section/Rules of Companies Act, 2013                                 | Subject                                                | Provisions in the Company Act, 2013 to support Start-ups                                                                                                                                                                                                                                                                     |
|-----------|----------------------------------------------------------------------|--------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         1 | Section 2(40)                                                        | Financial Statement                                    | Requirement of cash flow statement to be part of financial statement is optional for Start-ups.                                                                                                                                                                                                                              |
|         2 | Section 73(2) clause (a) to (e)                                      | Acceptan ce of deposits                                | Start-ups were exempted from procedural compliance at the time of accepting deposits from its members (such as issuance of a circular to its members showing the financial position of company, credit rating, depositing 20% of the maturing deposits, and certification regarding default in repayments).                  |
|         3 | Section 92(1)                                                        | Annual Return                                          | Directors of a start-up are allowed to sign annual returns of the private limited company if the Company does not have Company Secretary.                                                                                                                                                                                    |
|         4 | Section 173(5)                                                       | Meetings of Board                                      | Under Companies Act, 2013, Board of Directors of a company are required to meet at least once in 120 days, 4 board meetings in a year. However, Start-ups are exempted from holding quarterly board meetings and are allowed to hold two board meetings in a calendar year, i.e., once every six months.                     |
|         5 | Rule 6 of Companies (Incorporation) Rules, 2014                      | Conversio n of OPCs into Public and Private Companie s | The requirement that an OPC must convert itself after its paid-up capital exceeds Rs 50 lakh and its average annual turnover exceeds Rs 2 crore was omitted. Since many start-ups are One Person Company, this allows them to retain the status as an OPC.                                                                   |
|         6 | Rule 8(4) of Companies (Share Capital and Debenture) Rules, 2014)    | Sweat Equity                                           | In general, the issuance of sweat equity shares in a company shall not exceed 25% of the paid-up capital of the company at any time. However, in case of start-ups, this limit is upto 50% of its paid-up share capital.                                                                                                     |
|         7 | Rule12(1)(c) of Companies (Share Capital and Debentures) Rules, 2014 | Employee Stock Options (ESOPs)                         | In general, ESOPs are not given to employee who is a promoter or a person belonging to the promoter group and a director who either himself or through his relative or a body corporate, directly or indirectly holds more than 10% equity of the company. Start- ups are allowed to issue ESOPs to promoters and directors. |
|         8 | Rule 2 (1)(c) (xvii) Companies (Acceptance of                        | Convertibl e Note                                      | Start-ups can receive an amount of Rs 25 lakh or more by way of a convertible note (convertible into equity shares or repayable within a period not exceeding ten years from the date of issue) in a                                                                                                                         |

| Sr. No.   | Section/Rules of Companies Act, 2013                        | Subject                 | Provisions in the Company Act, 2013 to support Start-ups                                                                                                                                                                                                                                     |
|-----------|-------------------------------------------------------------|-------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           | Deposits) Rules, 2014                                       |                         | single tranche, from a person, and such transactions are not considered deposit.                                                                                                                                                                                                             |
| 9.        | Rule 3(3) of Companies (Acceptance of Deposits) Rules, 2014 | Acceptan ce of deposits | Companies may ordinarily accept or renew any deposits from its members not exceeding 35% of the paid-up share capital, free reserves and securities premium account of the company. But start-ups have been permitted to accept deposits from members without any restriction on the amount. |

*****

Annexure-B In reply to Part (d) of Parliament question No. 4935 for 23.03.2026. (Amount in Rs. Crores)

|   S. No. | Development Sector   | FY 2021-22   | FY 2022-23   | FY 2023-24   |
|----------|----------------------|--------------|--------------|--------------|
|        1 | Education            | 6,719.89     | 10,414.93    | 12,134.57    |
|        2 | Health care          | 8,049.49     | 7,023.60     | 7,150.81     |

(Data upto 31.03.2025) (Source: Corporate Data Management Cell) *****