12.1.1 The growing importance of the Corporate Sector calls for greater transparency and availability of data. Furthermore, the withdrawal of direct regulatory functions by the Government such as industrial licensing, import licensing, capital issues and exchange controls means that a number of avenues of collection of data have ceased to exist while the need for them has grown for indicative planning, forecasting and research purposes. Finally, the onset of the knowledge-based sectors or the new economy requires better reporting standards of certain attributes to help monitor the national economic performance and to assess its future prospects.
12.1.2 The responsibility for collection, compilation, maintenance and dissemination of basic statistics on the Indian Corporate Sector is vested with the Department of Company Affairs (DCA). The registered companies are required to file certain documents and returns with the Offices of various Registrars of Companies (ROCs) under the provisions of the Companies Act, 1956. The most important of these are the Annual Reports and Balance Sheets of the companies and returns on share capital. Thus, the Corporate Sector Statistics maintained by the DCA are basically a by-product of the administration of the Companies Act. No regular or ad hoc surveys are conducted by the department to collect data on corporate entities.
12.1.3 According to the available information, there are 5.44 lakh companies registered with the Office of the Registrar of Companies (ROCs) as on 1 April 2000. Among them, 5.41 lakh companies are limited by shares and the remaining are either guarantee companies or companies with unlimited liabilities. During the last decade, on an average, around 34,000 new companies were added annually. A consolidated list of all the newly-registered companies in the year with their names, addresses, industrial activities and authorised capital is available month-wise. The distribution of companies by various categories such as Government and non-Government, public and private, State of registration and industrial activity is available. The capital raised by the existing companies is available on a quarterly basis. This set of data along with that available in the balance sheets of large-sized companies (companies with paid-up capital Rs. 50 lakh or more) is used as an input for estimating the total paid-up capital of the private Corporate Sector at the end of each financial year and to identify large-sized companies.
12.1.4 Fact sheets containing selected financial parameters culled out from the Balance Sheets and Profit and Loss Accounts filed by the companies in the respective ROC offices are generated for: (a) Large-sized non-Government companies, (b) Government companies, and (c) Indian subsidiaries of foreign companies. Besides, certain basic information is maintained on the branches of foreign companies, which have established their places of business in India. The number of financial parameters covered in the fact sheet for large-sized non-Government companies has been enhanced from the year 1998-99. A list of parameters covered is given in Annexe 12.1.
12.1.5 Data are available on companies liquidated and/or struck off under Section 560 of the Companies Act detailing the names, paid-up capital, industrial activity, State of registration, date of liquidation, etc. Similarly, data on companies amalgamated or transferred from one State to another, and companies, which have changed their names, are also available on a monthly basis, and can be utilised in a suitable fashion.
12.1.6 Section 60 of the Companies Act, 1956, requires that the prospectuses issued by or on behalf of companies or in relation to companies inviting offers from the public and subscription or purchase of any share or debenture be delivered to the Registrar of Companies for registration. The prospectuses so registered in different ROC offices by non-Government, non-financial public limited companies are analysed and company-wise database created annually indicating the number of equity shares and preferential shares or debentures set aside for the public, existing shareholders, promoters, directors and associates, Non-Resident Indians (NRIs), foreign collaborators, financial institutions, banks, employees, mutual funds, underwriters and proprietors. Further, these prospectuses are analysed with reference to the cost of the project and its means of finance through public equity share capital, reserves and surpluses of the company, subsidies, debentures and bonds, deferred payment and loans from various financial institutions such as Industrial Development Bank of India (IDBI), Industrial Financial Corporation of India (IFCI), Industrial Credit and Investment Corporation of India (ICICI), Unit Trust of India (UTI), Life Insurance Corporation (LIC), State Financial Corporations (SFCs) and State Industrial Development Corporations (SIDCs), Banks, General Insurance Corporation (GIC) and insurance companies, promoters, directors and friends and others. This database created from the prospectuses is used by the Reserve Bank of India (RBI) for further analyses and studies.
12.1.7 The Department of Company Affairs has signed a Memorandum of Understanding with the Centre for Monitoring Indian Economy (CMIE) to bring out important Corporate Sector Statistics on CD-ROM as well as in book form, retrieving information from balance sheets, profit and loss accounts and other relevant documents of public limited companies from the year 1998-99 onwards. Items included in the CD are listed in Annexe 12.2. The CD-ROM contains information pertaining to roughly one-third (about 25,000) of the total number of public limited companies. Subsequently, the scope of the Memorandum has been extended to cover private limited companies also.
Strengths and Weaknesses
12.1.8 There are more than five lakh companies registered in the ROCs but the actual number of companies, which are operating, is not known. This situation seriously affects the reliability of various estimates. An exercise conducted in March 1999 indicated that about 47 per cent of the registered companies filed their balance sheet for the year 1997-98 with the ROCs. RBI studies on Company Finances are based on the annual reports and balance sheets of certain sample companies. In the absence of a reliable population frame, the RBI is not in a position to apply suitable sampling techniques. Further, the RBI is also constrained by the poor response from companies and non-receipt of annual reports directly from the ROCs. The RBI’s findings are thus based mainly on the data of responding companies and the Fact Sheets prepared by the DCA. The reliability of the estimates of gross savings and investment in the private Corporate Sector arrived at by blowing up the sample results available from the RBI’s studies in proportion to the coverage of the paid-up capital (PuC) of the sample companies to the PuC of all companies has been questioned time and again.
12.1.9 It is necessary that the DCA ensures supply of the company Annual Reports to the RBI. Furthermore, there should be no objection to the DCA supplying such Reports to private parties provided that, (a) wide dissemination, and (b) authenticity and reliability in use are ensured. All organisations that satisfy the above two requirements should have access to the same facility. These conditions could be incorporated in arrangements between the DCA and private parties.
12.1.10 The Working Group under Dr. Arun Ghosh on Modernisation of Indian Statistical System strongly recommended a one-time census of all genuine and operating companies to identify all bogus companies for de-registration. According to the group, the law may need an amendment and perhaps an Ordinance may be passed initially, followed by a Bill for presentation to Parliament, to enable this. Corporate winding up is a long-drawn procedure at present, but if the law provides for the disposal of assets and liabilities, there could occur a massive ‘cleaning-up’ operation. The Working Group also recommended that after a grace period of 3 months, any company which does not submit its accounts for the previous year be ‘de-registered’, and the fact be properly notified.
12.1.11 The DCA has recently introduced a scheme of assigning a unique 21-digit Corporate Index Number (CIN) for registration of companies. The CIN has been designed to help easily identify or group the companies by State, industry (whether listed or not), economic activity, ownership and year of incorporation and will be applicable to all companies registering themselves from 1 November, 2000. The older companies will also be given the new registration number subsequently. All the Registrars of Companies (ROCs) will be brought under a network to facilitate the monitoring of the submission of various documents under the Companies Act. This facility will enable the identification of defunct companies, once the complete database is prepared. As computerisation is being introduced in a phased manner, the availability of the database is likely to take some time.
12.1.12 Another initiative undertaken by the DCA is the introduction of an amnesty scheme, “Company Law Settlement Scheme” (CLSS) giving an option to defaulting companies to file their requisite documents, by paying a lump-sum fee. As an offshoot of CLSS, the DCA has initiated a fast track exit route for de-registration of the defunct companies and has also waived some of the conditions.
12.1.13 There is a need to have a proper system of entering the information from the Annual Reports and Balance Sheets, in respect of a minimum set of variables required for the purposes of monitoring the frame, policy formulation and economic trend analysis. For this purpose, necessary statutory provisions, if required, may be put in force, apart from identifying an organisation from DCA, RBI, Security and Exchange Board of India (SEBI), etc. which can be entrusted with this responsibility. Suitable strengthening of statistical personnel wherever required may be provided. It is imperative to have a suitable fallback mechanism in the ROCs for administering the Act and monitoring the frame.
12.1.14 The Commission, therefore, recommends that:
A one-time census of all registered companies to create a frame by eliminating closed down and defunct companies should be conducted. This will also facilitate the estimation of population parameters.
The Registrars of Companies (ROCs), vested with the responsibility of allotting the Corporate Index Number (CIN), should monitor the submission of Annual Reports rigorously for a proper implementation of the Act and for purposes of annual updation of the frame as well as improvement of the database.
In the long run, this process of assigning CINs along with updation in respect of closed down and defunct companies would result in a complete frame. It should be made compulsory through the provisions of the Companies Act to mention the unique code (CIN) in all returns submitted by the companies.
Since some attributes, like listing status, ownership, industrial activity and State of registration are likely to change over a period of time, the CIN should take into account the likely changes in these attributes with the passage of time, to maintain the continuity in information at the individual company level.
The procedure of de-registration should be simplified by incorporating suitable provisions in the Companies Act.
At present, the DCA or ROCs are not processing the information contained in the Annual Reports and Balance Sheets. They should be entrusted with the responsibility of processing and dissemination of information in respect of a set of variables for monitoring and policy formulation. To accomplish these tasks, suitable strengthening of the statistical personnel should be provided.
The DCA should also ensure that annual reports of companies required by RBI ─ whether listed, deemed or private limited ─ are available to RBI so that further detailed analysis can be conducted. A mechanism for smooth supply of annual reports of all companies, both public limited and private limited, and both listed and non-listed, should be mutually agreed upon by the DCA and RBI.