That’s because the 20 registrars of companies (RoCs) across the country—the interface between the state and business houses—started undergoing a surprising metamorphosis this year. From a temperamental regulator burdened with tasks beyond its resources to a fully paperless service provider all set to give a ‘pleasant experience’ to corporates.
On September 16, it become mandatory for corporates to file all statutory documents like financial statements and compliance certificates online. Besides the ease to file records, the most important change is that officials have been stripped of any flexibility to work around the rules.
The system is programmed not to accept anything that is not in sync with the rules. The new regulator reflects the underlying philosophy of economic reforms. Wealth creation is no more a sin and regulators need not act too pricey. While being a transparent and accountable regulator, their job is also to provide professional services to entrepreneurs.
That is an impressive beginning. But enforcement of compliance is still a big challenge. RoCs, who are empowered to inspect the premises of companies and scrutinise their records, have not been able to cover even a small fraction of the corporate sector yet. That, despite the fact that only about a half of the more than seven lakh registered companies are functional.
When the UPA government took over, the number of inspections carried out by RoCs a year was just 200. Although it has gone up noticeably since then, inspections now do not cover even a per cent of the industry, which itself would run into a few thousand companies.
According to officials, about 60% of the work force was so far dedicated to registration of new companies and other document filing works. The government is now re-deploying them in enforcement activities, which include scrutiny of documents filed, inspection of companies and prosecution in cases of violation. But just re-deployment may not measure up to the task at hand.
A total restructure and strengthening of the field force is the solution. Cadre-restructuring of officials, which was one of the priorities of the ministry, is still to materialise. Officials said the ministry recently prepared a road map for the restructure of the entire system involving the four regional directors in Kolkatta, Chennai, Noida and Mumbai and the RoC offices under them. It has also hired a consultant to assess the requirement of man power at different levels.
It is understood that one of the proposals the ministry is working with the department of personnel and training (DoPT) is to recruit company law service officials through the union civil services exam. The pleasant experience the ministry has been promising to anyone dealing with RoCs may need a constant evaluation of their functioning too. To that end, a performance appraisal system for RoCs is on the cards. The ministry is now evolving the parameters of such an assessment.
But regulators are effective only when they perform from a position of strength. The new company law in the making is believed to reflect this thinking. The new legislation may give RoCs the power to impose fines. At present, they are able to launch prosecution against erring companies but cannot impose a fine, which is in the judiciary’s domain.
And a penalty, which is in tune with the gravity of the offence and the injury to the public, would be more effective a deterrent than a small fine at the end of a long drawn court proceeding. A recent SC judgement that companies can be fined although they cannot be imprisoned may facilitate this. At present, the Companies Act provides for imposition of fine only on ‘officers in default’ by a trial court.
Autor(en)/Author(s): Gireesh Chandra Prasad
Quelle/Source: The Economic Times, 25.12.2006
