Corporate Compliance Management (CCM) : A Systematic Approach

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Key highlights: 1. Corporate Compliance Management (CCM) System 2. Role of Company Secretaries (CS) 3. CCM & IT By Pavan Kumar Vijay (pkvijay)

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Corporate Compliance Management (CCM) : A Systematic Approach

  1. 1. A Systematic Approach Corporate Compliance Management 15.12.2007
  2. 2. Coverage
  3. 3. About ‘C+M’ of CCM? Compliance Management A framework to maintain and build community confidence to ensure that we meet agreed standards of ethics , behavior and responsibility .
  4. 4. HOW TO IMPLEMENT AN EFFECTIVE COMPLIANCE MANAGEMENT SYSTEM ???
  5. 5. . By Designing effective & user friendly Compliance Management System . To lay down strong foundation for Good Governance
  6. 6. Elements of Effective Compliance Program <ul><li>Customization of ….. </li></ul>LAWS RULES Regulations Circulars/ Notifications ECP At One Place
  7. 7. Professional needs to Analyze & Understand Management Structure & Information Flow
  8. 8. <ul><li>COMPANY POLICIES </li></ul>OPERATIONAL PLANNING AND EXECUTION BOARD OF DIRECTORS CORPORATE PLANNING LEGAL FINANCE AND ACCOUNTS HUMAN RESOURCES CORPORATE COMMUNICATION PRODUCTION AND OPERATIONS MARKETING INFORMATION TECHNOLOGY DEPARTMENTS IN A COMPANY EXTERNAL STAKEHOLDERS INVESTORS GOVERNMENT AND REGULATORS SOCIETY SUPPLIERS CUSTOMERS LENDERS DIR A DIR B DIR C DIR D DIR E
  9. 9. Company Secretaries to understand their role <ul><li>Coordinate between various departments and all stakeholders , </li></ul><ul><li>Ensure compliance of all applicable laws and </li></ul><ul><li>Develop mutual trust between various stakeholders </li></ul>
  10. 10. <ul><li>COMPANY POLICIES </li></ul>OPERATIONAL PLANNING AND EXECUTION BOARD OF DIRECTORS CORPORATE PLANNING LEGAL FINANCE AND ACCOUNTS HUMAN RESOURCES CORPORATE COMMUNICATION PRODUCTION AND OPERATIONS MARKETING INFORMATION TECHNOLOGY DEPARTMENTS IN A COMPANY EXTERNAL STAKEHOLDERS COMPANY SECRETARY CS is the Principal Officer of the Company DIR A DIR B DIR C DIR D DIR E INVESTORS GOVERNMENT AND REGULATORS SOCIETY SUPPLIERS CUSTOMERS LENDERS
  11. 11. Role of Company Secretary?? TO CHANGE THE MINDSET
  12. 12. <ul><li>Company Secretary is primarily responsible to coordinate with </li></ul><ul><li>COMPLIANCE OF ALL LAWS </li></ul><ul><li>Therefore, WE ARE ANSWERABLE…… </li></ul>
  13. 13. What is Compliance of all laws?? <ul><li>Compliance of all laws </li></ul><ul><li>Not just any other </li></ul><ul><li>compliance ……………… </li></ul>
  14. 14. HIDDEN KHAZANA for all STAKEHOLDERS Company Professional INVESTORS GOVERNMENT AND REGULATORS SOCIETY SUPPLIERS CUSTOMERS LENDERS
  15. 15. Right Proportion = Creating difference <ul><li>Understand your company </li></ul><ul><li>Proper Identification & Evolution of applicable laws </li></ul><ul><li>Analysis of applicable laws </li></ul><ul><li>Assessment </li></ul>
  16. 16. Different Corporate Structures UNDERSTANDING AT MACRO LEVEL Public Sector Undertakings Private Limited Companies Trusts And NGOs Coop Societies And Producer Companies Municipal Boards Semi-government Organisation Unlisted Public Companies Listed Public Companies
  17. 17. Different Industries Media And Entertainment Infrastructure, Power And Telecom IT Solutions IT Enabled Services And BPO Textiles Tourism And Hotel Capital Market And Its Intermediaries Engineering and Construction FMCG Agriculture And Food Processing Capital Goods Drugs, Pharma And Healthcare Banking And NBFC Financial Services
  18. 18. Different Geographies Global Operations Indian Operations
  19. 19. Time has come.. Corporate compliance is not merely a legal compliance but it is NECESSITY Now …………
  20. 20. Preparation for Implementing Compliance Management System
  21. 21. Understanding the Company <ul><li>Company’s History & Background </li></ul><ul><li>Capital Structure & Evolution </li></ul><ul><li>Promoters & Group Companies </li></ul><ul><li>Management & Administration buildup </li></ul><ul><li>Financial Soundness & Debt Structure </li></ul><ul><li>Risk Management & Protection </li></ul><ul><li>Licenses & Approvals </li></ul>
  22. 22. THE THREE STEP PROCESS Step I : IDENTIFICATION Step II : EVALUATION STEP III : ASSESSMENT
  23. 23. <ul><li>General application of laws. </li></ul><ul><li>Sectoral applications </li></ul><ul><li>Industry / Segment applications </li></ul><ul><li>Geographical applications </li></ul><ul><li>Number of Employees </li></ul><ul><li>Transaction applications </li></ul>IDENTIFICATION PROCESS
  24. 24. Evaluation: Preparation at home Evaluating the applicable laws after due identification process As for instance: A Company has its operations of exports which further Involve lots of foreign exchange transactions. Identification: FEMA, 1999 Evaluation : FEM ( Exports of goods & services) Regulations, 1999
  25. 25. Assessment Process <ul><li>Further improvements </li></ul><ul><li>Implication of Compliance System </li></ul><ul><li>Effective Usability </li></ul><ul><li>Bridging the gap of Compliance in letter & </li></ul><ul><li>Compliance in Letter & spirit </li></ul>
  26. 26. EXPLAINING THE PROCESS <ul><li>TEXTILE INDUSTRY </li></ul><ul><li>Manufacturing & Trading </li></ul><ul><li>1000 workers </li></ul><ul><li>Export process </li></ul><ul><li>Polluting Unit </li></ul><ul><li>Unlisted Company </li></ul><ul><li>Surat based </li></ul>IDENTIFICATION, EVALUATION & ASSESSMENT AT ONE PLACE…
  27. 27. Identification of applicable laws <ul><li>General Laws </li></ul><ul><li>Companies Act, 1956 </li></ul><ul><li>Income Tax Act, 1961 </li></ul><ul><li>Area Specific </li></ul><ul><li>All laws applicable to Particular State </li></ul><ul><li>Sector Specific </li></ul><ul><li>Central Excise Act </li></ul><ul><li>Value Added Tax Act </li></ul><ul><li>International Transaction </li></ul><ul><li>FEMA , 1999 </li></ul><ul><li>No of Employees </li></ul><ul><li>Factories Act, 1948 </li></ul><ul><li>Payment of Wages Act, 1936 </li></ul><ul><li>Contract Labour (regulation & abolition) act, 1970 </li></ul><ul><li>Subjective </li></ul><ul><li>Air (Prevention of Pollution Control) Act, 1981 </li></ul><ul><li>Environment (Prevention of pollution control) Act, 1986 </li></ul>
  28. 28. Taxation Laws Corporate laws Industrial & Labour Laws 10 or more 20 or more 25 or more 100 or more 1000 or more Property laws General Laws (Applicable to all companies) (Based on Number of employees)
  29. 29. Listed Company Un-listed Company Public Company Private Company Govt. Company On the basis of Status of the Company
  30. 30. Event Based Laws Intellectual Property Laws Foreign Exchange Laws Custom Tax laws
  31. 31. Manufacturing Trading Service Insurance Tourism Power FMCG Banking Pharmaceutical Entertainment IT enabled services & BPO Industry Specific Laws Automobiles Computers Aluminium Products Cables Cement Cigarettes Breweries & Distilleries Sector Specific Laws
  32. 32. Maharashtra Punjab Gujarat Labour Welfare Act National Festival Holiday Act Shops and Commercial Establishment Act State Wise Laws
  33. 33. Compliance Timings: Evaluation Compliance Timings Fixed / Regular Event Based
  34. 34. The assessment process: <ul><li>Identify the gap between the present compliance system and the results of evaluation process </li></ul>
  35. 35. Simplification: The Next Move <ul><li>Developing Compliance Management Tools </li></ul>C hecklist Law wise Period wise
  36. 36. Effective Usability S oftware Developing Compliance Management Tools..contd Triggering date & time Triggering information input Organisation type, Capital deployed, Business type Product profile
  37. 37. Effective Usability U pdations <ul><li>Newsletters & Magazines </li></ul><ul><li>Discussion e-Groups </li></ul><ul><li>Software carried automatic updating options </li></ul><ul><li>Attending seminars & workshops </li></ul><ul><li>Newspapers & Business News Channels </li></ul><ul><li>Regular visits at Authority’s website </li></ul>Developing Compliance Management Tools..contd
  38. 38. Unsystematic Compliance System… the aftermath
  39. 39. CURRENT PROFILE 80% 20% TRADITIONAL ROLE STRATEGIC ROLE Form Filing Registers& Returns Good Compliance Risk Mitigation Corporate Governance PRESENT FACE ChecE Checklists
  40. 40. Let IT works for you………….
  41. 41. Compliance Tool by PWC
  42. 42. Compliance Tool by PWC
  43. 43. complianceonline.com by Metric Stream
  44. 44. bizfilings.com
  45. 45. <ul><li>Compliance Tool by </li></ul><ul><li>Corporate Professionals </li></ul>
  46. 46. Striking Features of CCM Tool <ul><li>Coverage of more than 200 Act, Rules, Regulations, Guidelines, Circulars & Notifications effecting the compliance requirement of a Company </li></ul><ul><li>Covers all Industry Specific & Location based laws </li></ul><ul><li>Real Time updations by Expert Professionals located all over India </li></ul><ul><li>Customization of Checklist according to the applicable laws to your Company </li></ul>
  47. 47. <ul><li>Rights/option to create a complete system of compliance managemen t </li></ul><ul><ul><li>Creation of Different Users to comply with different laws </li></ul></ul><ul><ul><li>Fixation of dead lines for compliance by each user </li></ul></ul><ul><li>Creation of Three Tier Hierarchy for compliance Reporting System </li></ul><ul><li>Alerts at different levels as the last date of compliance comes closure </li></ul><ul><li>Alerts & Reminders by way of mails & messages </li></ul>Features of CCM Tool
  48. 48. <ul><li>Online support in the form of Query Box </li></ul><ul><li>Facility of getting Opinion on any of the Topic of Compliance from Eminent Professionals of the field on our panel </li></ul><ul><li>Discussion Forum & Archive of Topic-wise Discussions </li></ul><ul><li>Library of Forms of all laws covered </li></ul>Features of CCM Tool
  49. 49. <ul><li>Reporting of Compliance & Non-Compliance </li></ul><ul><ul><li>On Real-time Basis </li></ul></ul><ul><ul><li>On Quarterly Basis </li></ul></ul><ul><ul><li>Archive of Quarterly Compliance Reports </li></ul></ul><ul><li>Risk Assessment of Non-Compliances </li></ul><ul><ul><li>Reporting of Consequences segregated in High, Medium & Low financial & Other Risks </li></ul></ul>Features of CCM Tool
  50. 50. <ul><li>How it works?? </li></ul>
  51. 51. Compliance Organisation Structure Low Resposibilities High All Rights available Reporting Duty Allocation Compliance Officer CEO Corporate and Securities Law Department Labour and Industrial Law Department Taxation Department Executive Executive Executive Executive Executive Executive
  52. 52. Compliance Reporting Level 2 Securities Law Department Mr. R Sharma Proof of Compliance attached Proof of Compliance attached Assignment Task 1 Task 2 Task 3 LISTING AGREEMENT Submit CG Compliance Certificate Submit Shareholding Pattern Submit Financial Results Complied/ Not Complied Not Complied, because I was out of town and I forgot to delegated work
  53. 53. Compliance Report
  54. 54. Compliance Scheduler Income Tax Factories Act Companies Act Listing Agreement Today This Week This Month Select Period Title Notice by Occupier Form No ------ Due Date At least 15 days before he begins to occupy or use Title Shareholding Pattern Form No Fixed Format Due Date Within 21 days from the end of each Quarter Title Return of Income Form No ITR-6 Due Date On or before 31st October of the assessment year Title Appointment of Director Form No Form 29 & 32 Due Date Within 30 days of appointment
  55. 55. Compliance Scheduler File Form1
  56. 56. Alerts & Notifications Assigned To Mr. Sumit Reminder Date Compliance Due Date Level III (Executive) Level II (Department Head) Level I (Compliance Officer) CEO Submit CG Compliance Certificate 15/04/2007 05/04/2007, 08/04/2007, 11/04/2007, 14/04/2007, 15/04/2007 Submit Shareholding Pattern 21/04/2007 11/04/2007, 14/04/2007, 17/04/2007, 20/04/2007, 21/04/2007 Submit Financial Results 23/04/2007 13/04/2007, 16/04/2007, 19/04/2007, 22/04/2007, 23/04/2007 Note: Reminders in case of Non Compliance
  57. 57. Reminders
  58. 58. Forms Library Download
  59. 59. Compliance Statistics No status 37% Not Complied Complied 52% Status on the basis of information provided 11%
  60. 60. High Risk Moderate Risk Low Risk Risk Assessment & Analysis Penalty Risk Classification Significance Type Probability I year prosecution High Urgent Moderate Fine of Rs. 1,00,000 High Not Urgent Moderate Fine of Rs. 1,000 Low Avoid Low
  61. 61. Risk Reporting
  62. 62. USING COMPLIANCE SYSTEM 80% 20% STRATEGIC ROLE TRADITIONAL ROLE Corporate Compliance Risk Management Form filing System Driven organisation Registers & Returns Checklists & Modules IT based Compliance System can change the face……
  63. 63. Advantages of Corporate Compliance <ul><li>Easy Quantification of risk </li></ul><ul><li>Establishing Risk appetite </li></ul><ul><li>Identify and prioritize controls </li></ul><ul><li>Multitude of Compliance obligations . </li></ul><ul><li>Building Strong Foundations </li></ul><ul><li>Extended Confidence to Investors </li></ul><ul><li>Gaining Competitive Edge </li></ul><ul><li>Good Compliance System leads to Excellence in Operations </li></ul>
  64. 64. Effect of Technology <ul><li>Easy Compliance </li></ul><ul><li>Impossible Non- Compliance </li></ul>
  65. 65. Company Secretary is like back bone of any Compliance Management System to any organisation and with its Proactive Approach & Intelligence make an organisation front runner in its field…
  66. 66. Good Corporate governance Reduces Risk Higher Profits Higher Valuation of Company RESULT OF GOOD CORPORATE COMPLIANCE MAKING YOUR COMPANY DIFFERENT & LEADING TOWARDS EXCELLENCE
  67. 67. E xellence <ul><li>Happy Company </li></ul><ul><li>Happy Management </li></ul><ul><li>Happy Investors </li></ul><ul><li>Happy Customers </li></ul><ul><li>Happy Regulators </li></ul>EXCELLENCE PAYS…
  68. 68. <ul><li>A Solution for Today and Beyond…… </li></ul>C orporate C ompliance M anagement
  69. 69. Conclusion is … Make Your Company GOOD GOVERNED COMPANY

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