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MCA’s research projects reveal future policy agenda; focus on ease of doing biz

One of the key projects for research is integration of the ministry’s database of statutory filings by businesses with that of other regulatory agencies.Premium
One of the key projects for research is integration of the ministry’s database of statutory filings by businesses with that of other regulatory agencies.

  • In a request for proposals for research issued on Thursday, the ministry explained how these projects, to be financed by it, will help in improving regulatory oversight, give early warnings about corporate failures and improve ease of doing business.

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NEW DELHI : The ministry of corporate affairs is exploring a set of research projects that reveal its policy agenda for the future ranging from predicting bankruptcy based on financial statements filed by businesses, integrating the ministry’s company database with that of other regulators and extending sustainability reporting framework to unlisted companies.

In a request for proposals for research issued on Thursday, the ministry explained how these projects, to be financed by it, will help in improving regulatory oversight, give early warnings about corporate failures and improve ease of doing business.

One of the key projects for research is integration of the ministry’s database of statutory filings by businesses with that of other regulatory agencies. “Integration of MCA21 database and databases of other departments and regulators will not only aid in avoidance of multiple filing requirements but also strengthen enforcement," the ministry said.

According to experts, reducing multiple filings will improve ease of compliance and it should have been tried earlier. “The same information is given to different regulators as part of statutory filings, all of which is online. So, why not make statutory filings available to all relevant regulators? The idea should be to help businesses," explained Rajat Bose, partner at Shardul Amarchand Mangaldas & Co., a law firm.

This move may also help the government to see the compliance of a business under various economic laws.

Another area of research is designing an early warning system considering factors such as increase in loans given to major shareholders (promoters), group companies vis-à-vis indebtedness of the company, regular write-off of loans, evergreening of these loans, mismatches in asset-liability for financial companies and increased pledging of promoter shares, the ministry said. Asset liability mismatches were cited by experts as the reason for the severe financial stress that non-banking finance companies went through in recent years. Non-bank lenders have to incorporate as companies.

Using the extensive database of financial statements available with the ministry to develop a model for predicting probability of bankruptcy in firms is another research proposal, the ministry intends to finance.

Improving the ease of doing business is a major area of research. Examining the feasibility of forming advance ruling authorities for Companies Act like those existing for Income Tax and GST is another area the ministry is keen to have a research project. Advance ruling authorities give opinion on the legal provisions applying to a proposed transaction, a scheme meant to reduce litigation.

Social goals of corporations that go beyond profit making for shareholders is a key area the ministry is exploring for insights for future policies. One of the research subjects proposed by the ministry is the feasibility of extending Sebi's Business Responsibility and Sustainability Reporting (BRSR) beyond listed companies and voluntary reporting.

Evolving a corporate governance index is another area for research. Along with measuring companies’ performance on this front, such an index may offer solutions to identified shortcomings, the ministry said.

Identifying the areas of over regulation in order to improve ease of doing business is also another area for research.

An email sent to the spokesperson for the ministry on Friday remained unanswered at the time of publishing. The ideas and insights emerging from the study is expected to go to a standing committee on company law matters that is assisting the ministry in studying and formulating policy proposals.

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