Ministry of Corporate Affairs , earlier known as Department of Corporate Affairs under Ministry of Finance, is primarily concerned with the administration of the Companies Act, 1956, and other allied Acts, etc framed there-under for regulating the functioning of the corporate sector in accordance with the law. It is also responsible for administering the Competition Act, 2002 and exercises supervision over the three professional bodies, namely, Institute of Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI) and Institute of Cost and Works Accountants of India (ICWAI), which have been constituted for proper and orderly growth of the professions concerned.

It also has the responsibility of carrying out the functions of the Central Government relating to administration of Partnership Act, 1932, the Companies (Donations to National Funds) Act, 1951 and Societies Registration Act, 1980.

Naresh Chandra Committee Report on Corporate Audit and Governance

The Ministry of Corporate Affairs had appointed a high level committee in August 2002 to examine various corporate governance issues. The committee had been entrusted to analyse and recommend changes, if necessary, in diverse areas such as:

• the statutory auditor-company relationship so as to further strengthen the professional nature of this interface;
• the need, if any, for rotation of statutory audit firms or partners;
• the procedure for appointment of auditors and determination of audit fees;
• restrictions, if necessary, on non-audit fees;
• independence of auditing functions;
• measures required to ensure that the management and companies actually present 'true and fair' statement of the financial affairs of companies;
• the need to consider measures such as certification of accounts and financial statements by the management and directors;
• the necessity of having a transparent system of random scrutiny of audited accounts;
• adequacy of regulation of chartered accountants, company secretaries and other similar statutory oversight functionaries;
• advantages, if any, of setting up an independent regulator similar to the Public Company Accounting Oversight Board in the Sarbanes Oaxley Act (SOX Act), and if so, its constitution; and
• role of independent directors, and how their independence and effectiveness can be ensured.

The Committee's recommendations relate to:

• Disqualifications for audit assignments;
• List of prohibited non-audit services;
• Independence Standards for Consulting and Other Entities that are Affiliated to Audit Firms;
• Compulsory Audit Partner Rotation;
• Auditor's disclosure of contingent liabilities;
• Auditor's disclosure of qualifications and consequent action;
• Management's certification in the event of auditor's replacement;
• Auditor's annual certification of independence;
• Appointment of auditors;
• Setting up of Independent Quality Review Board;
• Proposed disciplinary mechanism for auditors;
• Defining an independent director;
• Percentage of independent directors;
• Minimum board size of listed companies;
• Disclosure on duration of board meetings/committee meetings;
• Additional disclosure to directors;
• Independent directors on Audit Committees of listed companies;
• Audit Committee charter;
• Remuneration of non-executive directors;
• Exempting non-executive directors from certain liabilities;
• Training of independent directors;
• SEBI and Subordinate Legislation;
• Corporate Serious Fraud Office; etc.

National Foundation for Corporate Governance (NFCG)

Ministry of Corporate Affairs has set up a National Foundation for Corporate Governance (NFCG) in association with CII, ICAI and ICSI, as a not-for-profit trust. It provides a platform to deliberate on issues relating to good corporate governance, to sensitise corporate leaders on importance of good corporate governance practices as well as facilitate exchange of experiences and ideas amongst corporate leaders, policy makers, regulators, law enforcing agencies and non- government organizations.

The NFCG has a three-tier structure for its management, viz, the Governing Council under the Chairmanship of Minister of Corporate Affairs, the Board of Trustees and the Executive Directorate.

NFCG had framed an action plan, which includes development of good corporate governance principles on identified themes i.e. (i) corporate governance norms for institutional investors, (ii) corporate governance norms for independent directors, and (iii) corporate governance norms for audit.

The foundation has been set up with the mission to:

• foster a culture for promoting good governance, voluntary compliance and facilitate effective participation of different stakeholders;
• create a framework of best practices, structure, processes and ethics;
• make significant difference to Indian corporate sector by raising the standard of corporate governance in India towards achieving stability and growth.

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