New Delhi: Corporate Affairs Secretary Injeti Srinivas said on Monday that enforcement actions undertaken by the Ministry of Corporate Affairs has led to “a lot of soul searching” at corporates at a broad level and there appears to be a change in behaviour for the good.
“Overall audit quality, independent directors and valuation, these are areas where discussion papers are being prepared and consultations are to be held so that these get strengthened. Already, the enforcement actions have had the desired impact on audit. There is some soul searching and things are improving for the better,” Srinivas said.
Stringent action yielded results
The Ministry of Corporate Affairs has initiated stringent action in recent times against various entities, including auditors, for instance in the IL&FS scam, among others. The crackdown is part of the ministry’s attempt to improve the ease of doing business and ensure compliance with various legal requirements. According to Srinivas, stringent action has fostered an environment where both corporates and auditors are approaching account books with a lot more responsibility.
Amendments made to declog NCLT
Earlier in August, amendments were made to the Companies Act, 2013 to strengthen enforcement provisions and declog the National Company Law Tribunal (NCLT), among others. Commenting on these amendments, Srinivas said that a statutory auditor can be debarred, a director or a Key Managerial Person (KMP) can also be debarred if they are found to be not meeting the ‘fit and proper’ criteria.
“The NCLT can debar such people from holding such responsibilities for a period up to five years. It was there in the 1956 Act and now it has been brought in the 2013 Act,” he added.
“Out of the 81 sections, 16 were shifted from a fine/ imprisonment regime to a penalty regime after the committee’s recommendations. About the remaining 65, the committee has not recommended anything and they were retained under fine/ imprisonment regime. CSR (Corporate Social Responsibility) provision was also retained in this regime. We are looking at the remaining 65 sections and the idea is that around 50 percent of them also gets shifted to the penalty regime,” he noted.