ROYAL COLLEGE OF ARTS, SCIENCE & COMMERCE

MINISTRY OF CORPORATE AFFAIRS

SEMESTER: VI

SUBJECT: 4.4 Submitted by: Azim Samnani {37} Ankur Kalani {35} Sunita Gupta {04} Gopi Patel {17}

Submitted to: Prof: Kapil Thakore

MINISRTY OF CORPORATE AFFAIRS

MINISTRY OF CORPORATE AFFAIRS

DEPARTMENT OF COMPANY AFFARS (MINISTRY OF CORPORATE AFFAIRS)

This is a declaration of mission, values, &commitment to achieve excellence in the formulation and implementation of policies and procedures of department of company of affairs for the benefit of the public, investor and corporate sectors, who are partners in progress. o Legal framework for incorporation as well as proper and efficient functioning of companies. Redressal forums for grievances of investors, creditors and other. Dissemination of information by issue of press notes and publication of official journal titled company news and notes. Interaction with professional bodies and business community for continuous feedback regarding general difficulties of corporate sector. Maintaining in the offices of ROC, various documents filed by the companies and making available the same for inspection of the general public. Surveillance over the working of corporate sector by conducting inspection to ensure financial health and compliance with statutory rules. Investigations into the affairs of companies especially where complaints are received. Prescribing the cost audit rules and ordering/approving the appointment under the companies act. Ensuring compliance with the prescribed AS under the companies act. Monitoring the development of the professional bodies, ie. The ICAI, ICSI and ICWAI. Coordination with other government department and other autonomous bodies like SEBI, RBI, and stock exchange, etc. Settlement of disputes through a quasi-judicial forum, ie.CLB regarding mismanagement and oppression of minority. Interaction with MRTP commission and the director general of investigation and trade practices indulged into by unscrupulous companies.

o o o o o o o o o o o o

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(SECURITY EXCHANGE BOARD OF INDIA)SEBI

SEBI is the regulator for the securities market in India. Originally set up by the government of India in 1988, it acquired statutory form in 1992 with SEBI act, 1992 passed by the Indian parliament. Chaired by CB .Behave, Sebi is headquartered in the popular business district of bandra-kurla complex in Mumbai, and has northern, eastern, southern and western regional offices in New Delhi, Kolkata, Chennai, and Ahmadabads B behave is the sixth chairman of the Sebi regulator. Prior to taking charge as chairman Sebi, he had been the chairman of NSDL (national security depository limited) ushering in paperless securities. Prior to his stint at NSDL, he had served Sebi as a senior executive director. He is a former Indian administrative service officer of the 1997 batch. FUNCTION AND RESPONSIBLITIES SEBI has to be responsive to the needs of three groups, which constitute the market: o The investors o The issuer of securities o The market intermediaries Sebi has three functions rolled one body quasi-legislative, quasi-judicial and quasi-executive. It draft regulation in its legislative capacity, it conducts investigation and enforcement action in its executive function and it passes ruling and orders in its judicial capacity. Through this makes it very powerful, there is an appeals process to create accountability. There is a securities appellate tribunal which is a three member tribunal and is presently headed by a former chief justice of a high court- Mr. Justice NK sodhi. a second appeal lies directly to the supreme court. Sebi has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (eg. the quick movement towards making the market electronic and paperless rolling settlement on T+2basis.)Sebi has been active in setting up the regulation as required under law.

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SEBIS RECENT PRIMARY MARKET REFORMS

Sebi in June 2009 announced a slew of reforms to the primary capital markets. The key reforms are as follow: ANCHOR INVESTORS The investor of anchor investors has been introduced in public issue whereby 30%of the institutional (OB) portion will be allocated to anchor investors on a discretionary basis. This is to ensure minimum commitments from key investor that not only boosts the prospects of the offering, but also acts as an indicator to retail investors whose decision to bid or not will follow. Anchor investors are required to bring in a 25% margin along with their application, while the balance 75% of the issue price is required to be paid within 2 days of closure of the public issue. There is also a 30 days lock in on shares issued to anchor investors to ensure that the stock is not volatile immediately upon listing and trading. RIGHT ISSUES
Historically, the offering process in a right for a listed company was far simpler compared to a full-blown public issue such as an IPO. There is some logic to this position because shares of such a company are already traded on a stock exchange and information about the company is available in the public domain. However, over a period of time, the disclosure norms for rights issues were progressively strengthened, so much so that right issue document began resembling public issue documents both in content and size. More recently, there has been a call for simplifying the rights issue process in terms of disclosure requirements as well as the process. Towards that end, sebi has now decided to streamline the disclosure for right issue, does away with disclosures such as summary of the industry and business of the issuer company, promise vs. .performance with respect to earlier/previous issue, management discussion and analysis. Other disclosure has been streamlined. This will help companies tap the right issue avenue for raising funds in a more efficient manner.

Superior voting rights

SEBI has prohibited the issue of share with superior voting rights by listed companies, in order to avoid the possible misuse by the persons in control to the detriment of public shareholders. The key question that arises is how different the shares with superior voting rights are from shares with differential voting rights, as it is the latter term that has attained some measure of popularity under Indian law and practice. The term differential voting rights emanates from its usage in Section 86 (a) (ii) of the companies Act. The validity of such shares has also been subjected to judicial determination. In Anad Pershad Jaiswal v. Jagatjit Industries Limited, MANU/CL/0002/2009, the Company Law

MINISRTY OF CORPORATE AFFAIRS Board (CLB) upheld the validity of issue of shares with differential voting rights as being valid under Section 86 of the Companies Act as well as the Companies (Issues of Share Capital and Differential Voting Rights) Rules, 2001. Unfortunately, the CLB did not have the opportunity do delve into the details of the issues raised in the matter because it was settled through a consent order. With the current suggestion by SEBI, it appears that while the expression differential voting right is more generic in nature, superior voting rights means any rights that give the shareholder more than one vote per share on a poll, which is the usual norm. this is to prevent persons in control of a company from issuing shares to themselves which provide equal economic benefits with other shareholder (thereby requiring equal outflow of financial resources to obtain those shares), but one which gives greater voting rights and hence better control. Hence, while it is possible for listed companies to issues shares with differential voting rights which provide voting rights below the normal one-share-one-vote rule, conferring voting rights greater than that is proscribed. In a sense, SEBIs current pronouncement goes beyond the general rule of differential voting rights. Even in the Jagatjit case where differential voting rights were approved, the shareholders were approved, the shareholders were conferred rights greater than the oneshare-one-vote rule. Hence, while listed companies will now be allowed to issue differential voting entitlements only with rights inferior to one vote per share, unlisted companies will still be governed by Section 86 and the law laid down in Jagatjit whereby they have greater flexibility in issuing shares with differential voting rights, both superior and inferior.

Other Reforms
1. An unlisted company making an IPO should list on at least one stock exchange providing nation-wide trading terminals, in order to provide a liquid trading platform to investors. 2. The holding period of one year for an offer for sale of shares will include the period when fully-paid convertible instruments have been held prior to conversion into equity shares. 3. No entry load for mutual fund schemes.

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RESERVE BANK OF INDIA (RBI)

The Reserve Bank of India (RBI) is the central bank of India, and was established on April 1, 1935 in accordance with the provisions of the Reserve bank of India Act, 1934. The Central Office of the Reserve Bank was initially established in Kolkatta but was permanently moved to Mumbai in 1937. Though originally privately owned, the RBI has been fully owned by the Government OF India since nationalization in 1949. D Subbarao who succeeded Y v Reddy on September 2, 2008 is the current Governor of RBI. The Reserve Bank of India was set up on the recommendations of the Hilton Young Commission. The commission submitted its report in the year 1926, though the bank was not set up for nine years. The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as to regulate the issues of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. It has 22 regional offices, most of them in state capitals. RBI was started with a paid up share capital of 5 crore on established it took over the function of management of currency from government of India and power of credit control from imperial bank of India.

MINISRTY OF CORPORATE AFFAIRS

Main objectives
Regulator and supervisor of the financial system Prescribes broad parameters of banking operations within which the countrys banking and financial system functions. Objective: maintain public confidence in the system, protect depositors interest and provide cost-effective banking services to the public. The Banking Ombudsman Scheme has been formulated by the Reserve Bank of India (RBI) for effective redressal of complaints by bank customers.

Manager of exchange control

Manages the Foreign Exchange Management Act, 1999.

Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency
Issues and exchanges or destroys currency and coins not fit for circulation. Objective: the main objective is to give the public adequate supply of currency of good quality and provide loans to commercial banks to maintain or improve the GDP. The basic objectives of RBI are to issue bank notes, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves. RBI maintains the economic structure of the country so that it can achieve the objective of price stability as well as economic development, because both objectives in themselves.

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Related functions
Banker to the government: performs merchant banking for the central and the state government; also acts as their banker. Bank to banks: maintains banking accounts of all schedule banks. There is now an international consensus about the need to focus the tasks of a country bank upon central banking. RBI is far out of touch with such a principle, owing to the sprawling mandate described above.

IRDA
The Insurance Regulatory and Development Authority {IRDA} is a national agency of the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. Mission of IRDA as stated in the act is to protect the interest of the policy holder, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.

Expectations
The law of India has followed expectations from IRDA 1. To protect the interest of and secure fair treatment to policy holders; 2. To bring about speedy and orderly growth ot the insurance industry {including annuity and superannuation payments}, for the benefit of the common man, and to provide long term funds for accelerating growth of the economy; 3. To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates; 4. To ensure that insurance customers receive precise, clear and correct information about products and services and make them aware of their responsibilities and duties in this regards; 5. To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery;

MINISRTY OF CORPORATE AFFAIRS 6. To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players; 7. To take action where such standards are inadequate or ineffectively enforced; 8. To bring optimum amount of self-regulation in day to day working of the industry consistent with the requirements of prudential regulation.

COMPTROLLER AND AUDITOR GENERAL OF INDIA {CAG}

The Comptroller and Auditor General {CAG} of India is an authority, established by the Constitution of India, who audits all receipts and expenditure of the government of India and the state governments, including those of bodies and authorities substantially financed by the government. The CAG is also the external auditor of government - owned companies. The reports of the CAG are taken into consideration by the Public Accounts Committees, which are special committees in the Parliament of India and the legislature. The CAG of India is also the head of the Indian Audits and Accounts Service, which has over 58,000 employees across country. The current CAG is Vinod Rai, who was appointed on January 7, 2008. He is the 11th CAG of India.

Scope of audits
Audit of government accounts {including the accounts of the state governments} in India is entrusted to the CAG of India who is empowered to audit all expenditure from the revenues of the union or state governments, whether incurred within India or outside. Specifically, audits include: Transactions relating to debt, deposits, remittances, trading, and manufacturing.

MINISRTY OF CORPORATE AFFAIRS Profit and loss accounts and balance sheets kept under the order of the President or governors. Receipts and stock accounts.

Duties and Powers of the CAG

The Comptroller and Auditor- General shall perform such duties and exercise such powers relation to the accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by parliament and, until provision in that behalf is so made, shall perform such duties and exercise such powers in relation to the accounts of the union and of the States as were conferred on or exercisable by the Auditor-general of India immediately before the commencement of this constitution in relation to the accounts of the Dominion of the India and of the provinces respectively.

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