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Richa Mishra

NEW DELHI, May 10

IN tune with the changing business environment and to remain competitive, India Inc has urged the Government that small and private limited companies should be subjected to minimal regulatory compliance requirements.

"It is understood that there are about 3,365 laws applicable to the corporate sector. By and large, all the Acts in one way or the other come to affect the functioning of a private company. For such companies it is difficult to keep track on all the legislations. Moreover, they cannot employ a large number of employees to look into and comply with such laws, considering the cost involved in the same," a Federation of Indian Chambers of Commerce and Industry (FICCI) official told Business Line.

In fact, to ensure that the smaller entities with a few stakeholders are not bogged down in unnecessary and meaningless paper work and to simplify the entry and exit procedures (especially for non-functional companies), the Department of Company Affairs (DCA) has set up a committee. The committee, chaired by Mr Naresh Chandra, is to suggest a scientific and rational regulatory environment for the purpose.

Even while the DCA committee is looking into the aspects, FICCI, in a discussion paper for its internal Committee on Corporate Law and Governance, has suggested that a distinction may be made between a company listed on stock exchange and the other unlisted one. "The unlisted companies may be made eligible for certain exemptions," it said.

It is important that a separate law should be enacted for such companies. However, if the same is not possible, then at least a separate chapter should be provided for small and private limited companies under the existing Companies Act, the paper said.

Elaborating further, a FICCI official said that small and unlisted companies should be required to file the documents with the Registrar of Companies (RoCs) only once in a year. "Such companies should be required to file only an abbreviated version of the full balance sheet and there should not be any requirement of delivering a copy of the profit and loss account as also the director's report," the paper said. To avoid any misuse, the Government may lay down certain checks and balances, particularly for such companies that are promoted by `Group Companies', it said.

"There is a general feeling that such companies may provide funds in the form of loans and deposits to small and private limited companies promoted by them. While granting exemptions or exceptions to such companies, it must be ensured that the funds are not misused. This is because, public interest is involved in such funds (may be in indirect form)," the paper said.

Further, the paper also urges that relaxations and exemptions may be considered in regard to Union Government approvals, board's report, various rules and regulations under the Act, returns and registers, dividend distribution procedures and easy exit for such companies.

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