By: Sai Venkateshwaran
Budget 2021 with its focus on expansionary fiscal measures has been largely seen as positive, considering that the economy is emerging from a year of contraction due to the COVID-19 pandemic. With significant focus on growth and investment in various areas including infrastructure and healthcare, as well as reforms in the financial services sector together with the focus on education and upskilling, these measures generally bode well for the corporate sector providing an impetus for additional growth.
The CFOs in the sectors that are directly seeing the impact of these policy measures have a lot on their hands to deal with, while the changes impacting corporates and CFOs across the board are rather limited in the current budget. However, these limited changes are important and quite fundamental in some respects and could be a sign of changes to come.
The proposed overhaul of the corporate and securities laws is quite significant. The proposal to consolidate the provisions of the SEBI Act, Depositories Act, Securities Contracts (Regulation) Act, and the Government Securities Act into a rationalized single Securities Markets Code provides an opportunity to not just unify these laws but also an opportunity to make this a code that’s contemporary and forward looking, making our capital markets even more attractive and accessible.
The development of an investor charter aimed at protection of investors interests, across all financial products is also a welcome development. A simple and transparent framework would be welcome and would ultimately make the financial markets more attractive for investors and help increase financial inclusion. For corporates who are on the other side, it would mean strengthening measures towards enhanced governance and investor protection.
The launch of MCA21 Ver 3.0 will be a gamechanger in ensuring better monitoring and enforcement – a change that will ensure greater levels of compliance by corporates. Driven by data analytics, artificial intelligence and machine learning, this could pave way for a much sharper regulatory monitoring of the 14 lakhs plus companies in India as well as providing ease of compliance through e-scrutiny, e-adjudication, e-consultation and compliance management.
The deepening of our corporate bond market has been an area of focus and discussion for a while now, with progress being made over time with a requirement for large corporates to access a part of their long term fund requirements through bonds rather than the banking channels. As corporates now look to raise funds for investment and expansion, the proposed creation of a permanent institutional framework through a body that would purchase investment grade debt securities both in stressed and normal times, would be very welcome and will go a long way in helping the development of the corporate bond market in India.
The extension of social security benefits to temporary workers, including gig and platform workers is also an important development, and as corporates increasingly move towards a flexible workforce model, they should take into consideration the increased benefits that will accrue to this class of workers.
Lastly the ease of compliance burden on smaller companies through the amended definitions and also the encouragement to start-ups to avail the low compliance requirements of the One Person Company regime are also welcome moves. The decriminalization of offences under the LLP Act will also provide great relief to small businesses.
All of these are steps that can help in improving the ease of doing business, while also making the corporate legal framework simpler, with reduced compliance burden and costs. Clarity and predictability are what investors are looking for and if these measures are implemented well, it could provide a contemporary regulatory environment that’s robust and attractive to corporates.
About the Author: Sai Venkateshwaran is Partner, KPMG in India.
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