As of September 2002, 6,03,778 companies were registered in India. Of these, 76,429 were public limited companies. 

The companies are spread all over the country. The State-wise distribution puts Maharashtra on the top with about 22 per cent of the companies followed by Delhi, which accounts for about 18 per cent. About 35 per cent of the companies are in four other States - West Bengal, Tamilnadu, Gujarat and Andhra Pradesh. Between them they account for about three-fourths of the companies at work. 

In the present global scenario, India’s corporate sector has not only to compete with businesses world-wide but also has to achieve levels of management and governance that inspire confidence in investors – both domestic and foreign. The legal and regulatory framework must provide comfort to investors, especially foreign investors. Keeping this in view, the Department of Company Affairs (DCA) has taken several initiatives in the recent past. These include legislative changes and modernization of services with the help of information technology.

Legislative Changes
The DCA, in consultation with experts in the field as also the stakeholders, has ushered in several changes in the corporate law. The Companies Act, 1956 has been amended thrice since 1999 and some further amendments are under consideration to give effect to the policy of economic liberalization.

An Ordinance was promulgated on October 23, 2001 for easing terms and conditions for buy back of shares by companies. This was done keeping in view the continuing depression in the share market and also the recent developments that have taken place in the USA and elsewhere. The liberalization of conditions of buy back of shares is expected to help in improving market sentiments. This Ordinance has been replaced by the Companies (Amendment) Act, 2001.

The Government constituted a high level committee to examine and make recommendations for the legislative framework to enable formation and conversion of cooperative businesses into companies. Based on the recommendations of this Committee, a Bill was introduced in the Lok Sabha in August, 2001and passed by both the Houses of Parliament in December 2002. This legislation is to provide ‘primary producers’ an option to have a new kind of business organization (called a producer company) to produce and market the products in a modern and professional manner at par with other companies. It may enhance their efficiency and competitiveness in the present liberalized and globalized market. It would also contribute to the betterment of ‘primary producers’. 

The Government constituted a Committee to examine the existing law relating to winding up of companies in order to remodel it in line with the latest developments and innovations in the corporate law and governance. On the basis of the recommendations of the Committee, a Bill was introduced in the Lok Sabha in August, 2001 and was passed by both the Houses of Parliament. This Bill ushers in a new era of Insolvency Laws. It provides for constitution of a National Company Law Tribunal. The jurisdiction and powers presently conferred on the Company Law Board will be vested in the proposed National Company Law Tribunal and will result in the dissolution of the Company Law Board. It also envisages replacing the Board for Industrial and Financial Reconstruction (BIFR) by repealing the Sick Industries (Special Provision) Act, 1985 for accelerating the pace of revival. Besides, there are several substantive improvements in the law. It provides for initiation of restructuring of a corporate at a much earlier stage of financial sickness, thereby enhancing the possibility of its revival. It provides for a safety net for the workers and the investors through better terms by setting up a Rehabilitation Fund and other allied measures. The jurisdiction and powers relating to amalgamation and winding up presently vested with High Courts are also being brought under the purview of National Company Law Tribunal.

The Competition Bill, 2002 is another landmark development in economic legislation. The Government had set up a High Level Committee to examine the existing Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 for shifting the focus of the law from curbing monopolies to promoting competition and to suggest a modern competition law in line with international developments to suit Indian conditions. With globalization and opening up of the economy, the need was felt that the Indian market should be geared to face competition not only from within the country but from outside as well. Based on the recommendations of the Committee, the Competition Bill was introduced in the Lok Sabha in August 2001. The proposed legislation provides for prohibition of anti-competitive agreements, prohibition of abuse of dominance, regulation of combinations (acquisitions, mergers and amalgamation above a certain size). The Bill also envisages establishment of Competition Commission of India (CCI) in place of the existing MRTP Commission. The Bill has been passed by Parliament in December 2002. 

Initiatives
The law governing corporate has been fine tuned by amending the Companies Act to create the right ambience for the corporate enterprises to function effectively in the era of liberalization. With these amendments, corporate are now in a position to adopt the best practices in corporate governance in vogue elsewhere in the world.

The DCA has undertaken an ambitious programme to completely overhaul its services to the corporate sector by undertaking modernization and placing the services on the Internet. This is being undertaken with a view to reducing the time and resources spent by corporates in ROC offices, curb malpractices that arise out of the situation and also to tap the immense amount of economic data received through filing in ROC offices and through Cost Audit Branch in DCA. Computerization and modernization is planned to be undertaken through private or public partnership. 

A Committee has been set up to look into issues relating to auditor-company relationship such as rotation of auditors/auditing partners, restrictions on non-audit work/fee, procedures for appointment of auditors, determination of audit fees, the role of independent directors and disciplinary procedures for accountants. The recommendations of the Committee when implemented are expected to help improve the credibility of company accounts and the integrity of audit work. They would also help in strengthening the disciplinary mechanism against erring accountants. 

In exercise of the powers conferred by Section 205C of the Companies Act, 1956, the Central Government (Department of Company Affairs) has, in October, 2001 established an Investor Education and Protection Fund. The Fund will get contributions from companies having unpaid dividend, matured deposits and debentures and share application moneys lying with them for 7 years. This Fund shall be utilized for promotion of investors’ awareness and protection of their interests. A Committee to administer this Fund has already been constituted by the Department.

Recognizing the rising concerns about the levels of corporate governance and ethical practices in the corporate sector, the DCA has undertaken active measures by promoting good corporate governance and enhancing the image of the Indian corporate sector. In this regard it has also decided to set up a National Foundation for Corporate Governance in collaboration with national level industry associations and professional bodies. The National Foundation will be registered as a Trust with the objective of promoting good corporate governance in India. 

Investigations into the recent stock market ‘scam’, which are carried out by different agencies have underscored the limitation of a fractured approach. No agency seems to have a holistic picture of what really happened. In such a situation it is very difficult to effectively punish the fraudsters. With a view to investigating such frauds by multi disciplinary team of experts, it has been decided to set up a Serious Fraud Office (SFO) in DCA. The matter is in an advance stage and it is expected to set up the SFO in early 2003. 

In respect of companies in Special Economic Zones, a decision has been taken to increase the ceiling of remuneration of Rs. 20 lakh per month. It has also been decided to remove the minimum residency condition for the appointment of the top management. 

The threshold of paid-up capital requiring managerial appointment of a whole time company secretary under section 383A of the Act has been increased from Rs. 50 lakh to Rs. 2 crore. The threshold limit for companies located in rural areas/small towns has been raised to Rs. 5 crore of paid-up capital.