Compliance by Govt. Companies Vs. Non- Govt. Companies Part-I

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Hello friends,

Today i have somehow dared to upload my foremost post ……., have lots of confusions and hesitations in mind about the topic, content, words, etc. Have lots of thinking to present but lack of words to represent them. Therefore it would be very nice of you if you can ignore mistakes committed inadvertently in my below post. 

Friends, some of you would be aware that I have recently joined a Government Company. So by default i have some privilege to have some extra time for myself. Therefore I chose to interact with you by sharing those information which i have and i anticipate your comments on the same. See since i joined a Government Company recently, i would like to start with a topic on my new experience related to a Government Company only.

Government Companies are also known as Public Sector Undertakings and Public Sector Enterprises (PSEs) which have been further divided into Central Public Sector Enterprises (CPSEs) and State Public Sector Enterprises (SPSEs) depending upon the controlling authority thereof. 

General phenomenon prevailing among the corporate professionals is that the Government Companies have relaxation of most of the laws as compared to Non-Government Companies. Friends, its a pure myth in the corporate world, specifically among the professionals who are involved in the corporate compliance e.g. Company Secretaries, Chartered Accountants, Law Graduates, etc.  When we talk about the corporate compliance that doesn’t mean the compliance of Companies Act only there are various other compliance apart from the above.

As far as it concern to Non-Government Companies, yes it is true that they have to comply with various provisions of the Companies Act, 1956 which are generally exempt to a Government Company. But the question is whether Companies Act, 1956 is the only statute which is required to be followed by a Company. The answer is no, there are several other statutes too. Without delving into the depth of other statutes let us assume that the Government Companies have more exemption under other statutes too as compared to that of the Non- Government Companies. But what about the guidelines issued by Department of Public Enterprises (DPE).

Now the foremost thing hit into the mind of every corporate professionals are that why to bother about guidelines, guidelines are not mandatory to follow, we can skip guidelines and stick to only that which have become an statute. Here there is a blunder, if we talk about the Government Companies. Those who think that guidelines are not mandatory they are taking it wrongly, specifically those who have been assigned the work of Corporate Compliance of a Government Companies e.g. Company Secretaries in such Companies. Guidelines issued by DPE is of greater importance than any Act in the Government Companies, not legally but by the conduct of the administrative ministries.

If any one has any doubt about the Department of Public Enterprise, let me clear it, the Department of Public Enterprise is the part of the Ministry of Heavy Industry and Public Enterprise and acting as a nodal agency for all Government Companies whether it is a CPSEs of SPSEs and assists in policy formulation pertaining to the role of PSEs in the economy as also in laying down policy guidelines on performance improvement and evaluation, financial accounting, personnel management and in related areas. It also collects, evaluates and maintains information on several areas in respect of PSEs. DPE also provides an interface between the Administrative Ministries and the PSEs. In fulfilling its role, it associates itself with other Ministries and organisations as also premier management institutes in the country. Thus in a layman language the DPE is the manager of every Government Company, and as such every Government Company needs to follow the directions of DPE. If any one want more information about DPE, he may reach to http://www.dpe.nic.in.

Pursuant to the power conferred to the DPE, it has issued various guidelines for Government Companies, some of theme are as follows:

1. Guidelines on Corporate Social Responsibility and Sustainability for Central Public Sector Enterprises,

2. Guidelines on Corporate Governance by CPSEs 2010

3. Guidelines on PSEs under various heads namely Accountability, Personnel Policies, Financial Policies, Wage Policies, Memorandum of Understanding, Price/Purchase reference, Permanent Machinery of Arbitration, Voluntary Retirement Scheme, Maharatna/Navratna/Miniratna status of PSU, Counselling, Retraining and Redeployment, Employees Stock Option Scheme and Miscellaneous.

Though the above stated issues are in the nature of guidelines, yet no CPSE can afford to violate provisions thereof. Because compliance of all of the above said guidelines are somehow, directly or indirectly, related to the Performance Related Pay (PRP) of the employees of the CPSEs. PRP is nothing but like incentives for better performance in private sector enterprises. 

There are various requirements in the above said guidelines which a CPSE needs to strictly follow. Requirements in this regard can be summarized as to constitution of Audit Committee, constitution of Remuneration Committee, constitution of Sustainable Development Committee, adherence of MoU Targets as signed between Department of Public Enterprises and PSEs every year.

I would like to rest my pen here for a while. In my forthcoming posts i would strive to share various required compliance of the above said guidelines which may be useful for all of us.

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