ISSUE XIV : MCA Initiatives: Towards effective corporate governance

MCA Initiatives: Towards Effective Corporate Governance


A significant feature of the growth of Indian economy is the increasing integration of the Indian corporate into the global business environment. The Ministry of Corporate Affairs (“MCA”) has been pursuing the agenda of providing an effective regulatory framework to the Indian corporate sector that enables them to freely utilize their entrepreneurial energies, while contributing to the overall growth of the society.1 In order to cut time lines in service delivery and give further ease to the stakeholders, the MCA-21 e- Governance Programme was initiated in 2006 to provide a user friendly and enabling environment for effective functioning of the corporate sector. Its main objective was to make transparent and timely information available with the registry and in the public domain so as to ensure proactive and effective compliance of relevant laws and corporate governance. It provides an online access to the registry from anywhere in the world and allows viewing/obtaining copies/extracts available from online registry on payment of a nominal fee.

This year has so far seen several proactive measures by the MCA to make the Indian regulatory framework more efficient. This bulletin highlights the recent MCA initiatives towards the promotion of effective corporate governance and discusses them in brief to analyze the impact thereof in corporate governance of companies.

1.0 Green Initiative in the Corporate Governance

As a first major green initiative, the MCA, in order to cut down the consumption of paper and save trees and environment, allowed for paperless compliances by the companies under the provisions of the Companies Act, 19562 (“Act”). Under section 53 of the Act, service of documents through electronic mode has been permitted in place of service of document under certificate of posting. This has been done to ensure speedy delivery of documents to save time and reduce the cost of posting. Similarly, service of copies of Balance Sheets and Auditors Report etc., to the members of the company as required under section 219 of the Act has been allowed to be served through electronic mode.3

In order to provide larger participation and for curbing the cost borne by the company, the directors and the shareholders have been allowed to attend various meetings under the provisions of the Act, through video conferencing subject to

certain conditions.4 The MCA has also given approval to Central Depository Services (India) Ltd and National Securities Depositories Limited to provide their electronic platform for capturing accurate electronic voting in General meetings of the company.5 This has been done in order to accurately record the votes and provide a secure platform for doing so. This will also result in the elimination of the huge amount of papers used for recording the votes. Further, in order to cut timelines and reduce the burden of paperwork, it has been decided that all certificates and standard letters issued by the Registrar of Companies are to be issued electronically under the Digital Signatures of the Registrar of Companies (“ROC”).6

Finally, the MCA issued a Circular mandating all listed companies and certain unlisted companies, to file their Balance Sheet and Profit & Loss account (financial statements) for the year ended March 31, 2011 onward using an eXtensible Business Reporting Language format (“XBRL”).7 This Circular marks an important step in ensuring XBRL compliance for financial statements filed by Indian companies, and is part of a series of XBRL initiatives by various regulators.

2.0       Provisions for defaulting and defunct companies

The MCA has taken several initiatives for defaulting and defunct companies to ensure that they are also given one more opportunity to become compliant by completing the necessary filings that they had failed to do. The companies which had defaulted in filing their annual returns and balance sheets for a continuous period of three years have been moved into a separate basket as dormant companies.8 No request, whether oral, in writing or through e-forms, for recording any event based information/changes shall be accepted by the ROC from such defaulting companies, unless they file their updated Balance Sheet and Profit & Loss Accounts and Annual Return. The directors of these companies are not allowed to do any e-filing with the ROC for any other company also. Even the company secretary and the auditors of these companies are not allowed to sign and certify the filing with MCA-21 system, in respect of these defaulting companies, till the defect is rectified. As a next logical step, the MCA issued guidelines for Fast Track Exit mode to give opportunity to the defunct companies to get their names struck off from the Register under section 560 of the Act in time bound manner.9 The MCA introduced Company Law Settlement Scheme, 2011 (“Scheme”) to provide an opportunity for the defaulting companies to make their default good by filing pending documents (pending annual returns and balance sheets till July 30, 2011) and become a regular compliant in future.10 The delay on account of non filing of the documents will be condoned and immunity would be granted against prosecution, on payment of an additional fee of 25% of the actual additional fee payable for filing belated documents under section 611(2) of the Act, in accordance with the Scheme. The Scheme has been extended up to December 15, 2011.11

3.0       Provisions for Automatic Approval

The MCA has introduced provisions for automatic approval of forms like Form 2, Form 3 regarding return of allotment of shares, Form 18 for change of registered office and for processing of Form 32 for change in directors details under Straight Through Processing (“STP”) mode. The MCA has also simplified the procedures and issued guidelines to obtain online approval from the Central Government under section 297 of the Act. If the proposed contract has been approved by the shareholders by way of special resolutions in a general meeting, approval for the same can be obtained online, subject to fulfillment of certain requirements.12

4.0       Powers of the ROC

The MCA has been taking initiatives to synchronies the powers of the ROC, so as to make it easier for the companies to identify the appropriate authority and bring in more transparency in its working. In order to bring in more transparency, the facility of marking a work item as urgent to bypass the First in First Out processing available to MCA officers has been withdrawn. Now the work items have to be processed in the order of their filings only. In order to reduce pendency of e-forms filed with the ROC, the MCA has decided to re-open all such pending forms and have the same placed in the category “Held in Abeyance” so that ROCs can view the same.13

Earlier the application for approval of license under section 25 of the Act to companies not for profit, was processed through the office of the Regional Director. To reduce the time taken in incorporation of the section 25 companies, the power of approval/rejection of such applications has been delegated to the ROC. The MCA has delegated the work relating to confirmation of shifting of registered office from one state to another and consequent alteration to the Memorandum of Association of the company under section 17 of the Act to the ROC under whose jurisdiction the registered office of the Company is situated.14 The companies being incorporated under the Limited Liability Partnership (LLP) Act, 2008 has also been brought under the purview of the ROC. The ROC has been given all the powers regarding the registration of the LLPs.15

5.0       Introduction of Refund Process

Earlier there was no process in MCA21 for refund of fees wrongly paid by the stakeholder while availing various services at MCA 21. Now the MCA has introduced a process for the refund of statutory fees paid for certain services with effect from May 1, 2011.16 The refund is available in case of multiple payments, incorrect payments & excess payment. Refund process is not applicable for certain services like public inspection of documents, request for certified copies, payment for transfer deeds, STP Forms, DIN eForm, etc.

6.0       Renewed Scheme for Certified Filing Centers (“CFCs”)

A scheme for CFCs managed through the practicing professionals (Company Secretaries, Chartered Accountants and Cost & Works Accountants) was earlier introduced in September, 2006 to facilitate the e-filing system and encourage paperless transaction. The aforesaid scheme expired on August 3, 2009 and was awaiting renewal. Since CFCs’ outreach is greater and extended to the length and breadth of the country and is operated by professionals whose support is continuous to the MCA program, the Ministry considered it appropriate to renew the Scheme for a further period of three years from July 01, 2010.


The introduction of MCA 21 was the first largest e-governance project and first large scale transmission project in the Indian history, as a part of the National e-Governance Plan. It reflects India’s Corporate Governance goals of 21st century for providing efficient, fast, transparent and reliable services at an affordable cost. The project was implemented through a PPP between MCA and Tata Consultancy Services. The purpose of MCA 21 was to introduce a paperless system and migrate the working of the ROC from physical mode to cyber mode. The aforesaid initiative has led to the simplification of the process of getting approval from the ROC and it is now possible for the companies to obtain instant approvals, saving a lot of time which was consumed earlier.

Not only the companies but even MCA has derived a lot of benefits from their aforementioned initiatives. It has become easier for it to detect financial statement frauds and identify the potential vanishing or defaulting companies in advance, as all the information is available at the click of a button. It saves officials from the cumbersome process of going through the physical copies of the documents and also from the hazards of maintaining physical documents. The MCA officials now have more time for qualitative analysis of corporate information rather than spending most of their time on requisition of the same. Clearly the present MCA initiatives usher to create a better mechanism towards effective corporate governance.

Authored by:

1 Results Framework Document for MCA (2010-11) highlights the objective of providing an efficient system for effective corporate governance. The aforesaid document is released every year to highlight the goals to be achieved by the MCA in that particular year. In addition to this, MCA has devised a “Strategic Plan Document” available at (accessed on November 2, 2011)
2 New Initiatives of Ministry of Corporate Affairs for Corporate Governance Press Release, dated May 23, 2011
3 General Circular No. 17/2011 dated April 21, 2011
4 General Circular No. 27/2011 dated May 20, 2011 and General Circular No. 28/2011 dated June 21, 2011
5 General Circular No. 18/2011 dated April 29, 2011
6 General Circular No. 29/2011 dated June 21, 2011
7 General Circular No. 9/2011 dated March 31, 2011
8 General Circular No. 33/2011 dated June 1, 2011
9 General Circular No. 36/2011 dated June 7, 2011
10 General Circular No. 59/2011 dated August 5, 2011
11 General Circular No. 65/2011 dated October 4, 2011
12 General Circular No. 52/2011 dated July 25, 2011
13 General Circular No. 40/2011 dated June 23, 2011
14 General Circular No. 50/2011 dated July 25, 2011
15 General Circular No. 45/2011 dated July 8, 2011
11 General Circular No. 65/2011 dated October 4, 2011
12 General Circular No. 52/2011 dated July 25, 2011
13 General Circular No. 40/2011 dated June 23, 2011
14 General Circular No. 50/2011 dated July 25, 2011
15 General Circular No. 45/2011 dated July 8, 2011
16 New Initiatives of Ministry of Corporate Affairs for Corporate Governance Press Release, dated May 23, 2011

We are using cookies to give you the best experience. You can find out more about which cookies we are using or switch them off in privacy settings.
AcceptPrivacy Settings




The Bar Council of India restricts advocates from maintaining a website as a source of advertising. This site contains general information for informative purposes only. The reader should not consider / construe information on this site to be an invitation for any attorney-client relationship.