Actions have generated lot of soul searching

New Delhi: Enforcement actions have generated "a lot of soul searching" at corporates at a broad level and there appears to be a perceptible change in behaviour for the good, according to a senior government official.

Amid continuing efforts to deal with corporate misdoings and strict actions being initiated against erring entities under the companies law, Corporate Affairs Secretary Injeti Srinivas said there is a lot of introspection happening at the level of boards of companies.

"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," he said.

He was responding to a query about corporate governance in the country.

"At a very broad level, enforcement actions have generated a lot of soul searching and there appears to be perceptible change in behaviour for the good.

There is a lot of introspection at board level, board committee level and statutory auditor level. The consciousness has increased," Srinivas said.

The corporate affairs ministry, which is implementing the Companies Act, has been taking steps to further improve the ease of doing business as well as ensure compliance with various legal requirements.

In recent times, the ministry has initiated stringent action against various entities, including auditors, in the IL&FS scam, among others.

Earlier in August, amendments have been made to the Companies Act, 2013, that would strengthen enforcement provisions and help declog National Company Law Tribunal (NCLT), among others.

Talking about some of the amendments, Srinivas said just like 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 '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.

A high-level committee -- headed by Srinivas that included members from industry and law firms, among others -- had looked at decriminalising certain violations under the companies law.

"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 per cent of them also gets shifted to the penalty regime," he noted.