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Corporate Compliance Management

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Corporate Compliance Management

  1. 1. Mr. Pavan Kumar Vijay Past President, ICSI Managing Director, Excellence for achieving better Corporate Governance
  2. 2. Do you usually confront with these?? I don’t know which laws are applicable How to make compliances on time? I am bored of Stereotyped Compliance system
  3. 3. Are Industry & Professionals ready with the answers? Do we consider Corporate Compliances as just another burdensome, complicated , back office operations, monotonous work? OR Do we see any opportunity in it ?
  4. 4. A famous teaching…. <ul><li>Opportunity is missed by most people because it is dressed in overalls and looks like work. </li></ul><ul><li>Thomas Elva Edision </li></ul>
  5. 5. Where Opportunity lies?? The opportunity lies in GOOD CORPORATE GOVERNANCE Where DISCLOSURE accompanies TRANSPARENCY
  6. 6. Outstanding Performance, Higher Profits, Expanded Market Reach and the like FAILS to protect a company which has put good governance & ethics at the back burner…. History is Witness S U C E S S D I S A S T E R
  7. 7. Secret behind building foundations ..…Only the culture of strict adherence to good compliance can keep a company ahead on sustainable basis , bring in larger profits…
  8. 8. Disclosure & Transparency Compliance in Letter Compliance in Letter & Spirit Filing the Gap
  9. 9. Compliance in Letter Details of complaints resolved during the financial year 2007-08 are as follows. Complaint Received Complaint Resolved Pending 430 360 70
  10. 10. Compliance in Letter & Spirit EXAMPLE :– INVESTOR’S COMPLIANT MODEL Reasons of Complaints Total Complaints Complaints Resolved & Time involved (in days) Pending Complaints Reason for Pendency 0 – 7 8 – 15 16 – 21 Non-receipt of Bonus 145 67 32 16 30 Wrong address, Legal Issues Demat 65 24 20 16 5 Wrong Folio no. Non-receipt of dividend 130 62 28 15 25 Wrong address, Court Cases Non-receipt of Notice 90 42 24 14 10 Undelivered, Wrong address Total 430 195 104 16 70
  11. 11. Designing effective & user friendly COMPLIANCE MANAGEMENT SYSTEM to lay down strong foundation for GOOD GOVERNANCE
  12. 12. Compliance of Rules & Regulations Good Corporate Governance
  13. 13. IMPLEMENTING EFFECTIVE COMPLIANCE MANAGEMENT SYSTEM
  14. 14. CORPORATE GOVERNANCE in System <ul><li>Clause 49 of Listing Agreement: </li></ul><ul><li>“ The Board shall periodically review compliance </li></ul><ul><li>reports of all laws applicable to the company , </li></ul><ul><li>prepared by the company as well as steps taken by </li></ul><ul><li>the company to rectify instances of non-compliances.” </li></ul>
  15. 15. Compliance of ALL LAWS
  16. 16. <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 DIR A DIR B DIR C DIR D DIR E INVESTORS GOVERNMENT AND REGULATORS SOCIETY SUPPLIERS CUSTOMERS LENDERS
  17. 17. <ul><li>ROLE OF </li></ul><ul><li>Company Secretary ?? </li></ul>
  18. 18. <ul><li>Company Secretary is primarily responsible </li></ul><ul><li>to coordinate with </li></ul><ul><li>COMPLIANCE OF ALL LAWS </li></ul><ul><li>Therefore, WE ARE ANSWERABLE…… </li></ul>
  19. 19. Corporate Compliance Management <ul><li>Systematic - Well Organized </li></ul><ul><li>Compliant - Compliance </li></ul><ul><li>Valued - Build Value </li></ul>Enhancing Value through Governance Process of Help in
  20. 20. Corporate Compliance Management M A X imizing Value PROGOVERNANCE SYSTEMATIC APPROACH RISK MANAGEMENT
  21. 21. ProGovernance – “Achieving Purpose” Growth of Company Growing Revenues Growing Profits Growing Market Value
  22. 22. Time has come……. Corporate compliance is not merely a legal compliance but it is a NECESSITY Now …………
  23. 23. <ul><li>Corporate Compliance Management </li></ul>Step II : Identification Step III : Evaluation Step IV : Assessment THE FIVE STEP PROCESS Step V : Compliance Structure Step I : Understanding the Company
  24. 24. STEP I : 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>
  25. 25. <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>STEP II : IDENTIFICATION PROCESS
  26. 26. 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 application of Laws (Based on Number of employees)
  27. 27. 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
  28. 28. 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
  29. 29. Different Geographies Global Operations Indian Operations
  30. 30. STEP III : EVALUATION PROCESS <ul><li>Through Questionnaires </li></ul><ul><li>Evaluating the applicable laws after due identification process </li></ul>
  31. 31. 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 EVALUATION PROCESS…. Contd.
  32. 32. STEP IV : 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>
  33. 33. 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>Chandigarh based </li></ul>IDENTIFICATION, EVALUATION & ASSESSMENT AT ONE PLACE…
  34. 34. 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>Value Added Tax </li></ul><ul><li>Labour Laws </li></ul><ul><li>Sector Specific </li></ul><ul><li>{Manufacturing & Trading} </li></ul><ul><li>Environment (Prevention of pollution control) Act, 1986 </li></ul><ul><li>Excise 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>Industry Specific </li></ul><ul><li>{Textile} </li></ul><ul><li>National Textile Policy </li></ul><ul><li>Textiles Committee Act, 1963 </li></ul>
  35. 35. COMPLIANCE TIMINGS: EVALUATION Compliance Timings Fixed / Regular Event Based
  36. 36. THE ASSESSMENT PROCESS <ul><li>Identify the gap between the present compliance system and the results of evaluation process </li></ul>
  37. 37. <ul><li>Establishing Controls & Standard </li></ul><ul><li>Delegation of Responsibility </li></ul><ul><li>Analysis & Assessment </li></ul><ul><li>Compliance Reporting </li></ul>STEP V : CREATION OF COMPLIANCE STRUCTURE
  38. 38. C hecklist Law wise Period wise Developing Compliance Management Tools Simplification: The Next Move
  39. 39. Periodically On Transaction Basis Developing Compliance Management Tools..contd Simplification: The Next Move
  40. 40. Effective Usability S oftware Developing Compliance Management Tools..contd Triggering date & time Triggering information input Organisation type, Capital deployed, Business type Product profile
  41. 41. 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
  42. 42. Unsystematic Compliance System… the aftermath
  43. 43. CURRENT PROFILE 80% 20% TRADITIONAL ROLE STRATEGIC ROLE Form Filing Registers& Returns Good Compliance Risk Mitigation Corporate Governance PRESENT FACE ChecE Checklists
  44. 44. Let IT works for you………….
  45. 45. Questionnaire
  46. 46. Applicable Laws Answer company info based questions and know Laws applicable on your company.
  47. 47. Assignment of Rights Manage your compliances by delegating responsibilities with Rights Assignment .
  48. 48. Compliance Organ Structure Create your own Compliance Hierarchy Structure.
  49. 49. Compliance Dashboard Compliance Register containing the details of all the compliances under various applicable laws.
  50. 50. Compliance Scheduler Compliance Schedule shows due dates for the compliances to be done.
  51. 51. Alerts & Notification Check your every move and reminds you about compliance due date.
  52. 52. Compliance Report Check compliance flow status
  53. 53. Non Compliance Report Reporting of compliance not done with their consequences
  54. 54. Compliance Statistics Hits & Misses report in Figures & Numbers.
  55. 55. 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……
  56. 56. 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>
  57. 57. Effect of Technology <ul><li>Easy Compliance </li></ul><ul><li>Impossible Non- Compliance </li></ul>
  58. 58. Professionals are 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…
  59. 59. Good Corporate governance Reduces Risk Higher Profits Higher Valuation of Company RESULT OF GOOD CORPORATE COMPLIANCE MAKING YOUR COMPANY DIFFERENT & LEADING TOWARDS EXCELLENCE
  60. 60. 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…
  61. 61. The Conclusion is ………. Make Your Company GOOD GOVERNED COMPANY

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