The
Centre for Corporate Law & Regulation is designed to bring government policy
makers, regulators and stakeholders together in a dialogue to enable optimal response
to regulatory concerns and implementation of corporate laws and harmonization various
legal and regulatory jurisdictions.
Indian Corporate Laws, including statutes such as The Companies Act, 1956, The LLP
Act 2008, The Securities Exchange Board of India Act 1992, The Partnerships Act
1932, The Competition Act 2002, etc. provide a detailed and elaborate system of
regulation of corporate and business entities in India. However, corporate regulation
can be effective only when there is harmony in application of the diverse legislations
constituting the statutory framework.
The Indian regulatory system recognizes a diversity of regulators. Specialized activities
of various entities are regulated by sectoral regulators such as those for capital
markets, banking, insurance, electricity, telecom etc. Regulation of the activities
of an entity is seen as distinct from its structure and governance. This approach
is also important in defining regulatory jurisdictions.
Corporate regulation is effective when there is harmony in application of diverse
legislations effectively addressing and overcoming regulatory gaps or conflicts
of jurisdiction. In addition, the setting of standards for assessing an entity's
performance and regulating the conduct of professionals, including the relevant
professional bodies, needs to be periodically reviewed so that the relevance and
effectiveness of standards is maintained.
Compliance Management:
Compliance with Company Law is essential not only to make the regulatory system
more effective but also to enable uniformity, predictability and credibility of
corporate operations and disclosures. Ideally, compliance should take place through
modalities which encourage self-regulation and self-compliance while detecting and
punishing willful default and fraud. Compliance with Corporate Law, in the context
of the Indian statutory framework, is a combination of proper articulation of the
shareholders' democracy with articulation and assertion of the rights of minority
shareholders, disclosure of corporate information to stakeholders combined with
ease of access, attestation and certification of company information, particularly
financial information, through professionals who themselves are subject to regulation
and discipline for misconduct, detection of default and fraud through a system of
inspections and investigations, incentives for timely compliance, a structure of
civil and criminal liability with associated penalties and imprisonment where necessary,
and much more.
It is essential, however, to fine tune all aspects of compliance through a comprehensive
system of compliance management that is not only clear and unambiguous but also
appropriate to the nature of offence. This requires continuous research and evaluation
of company data to detect unusual or abnormal behavior that could be the result
of fraud or manipulation. Policy and legislative interventions in compliance management
have to be based on careful research into the behavior of companies along with in
response to regulation and law enforcement so that regulatory options keep pace
with the changing scenarios.