Regulatory bodies under the purview of the Corporate Affairs Ministry (MCA) —IBBI, CCI, ICAI, ICSI and Cost Accountants Institute—may have to soon start adhering to a uniform practice on the issue of pre-legislative public consultations towards regulation making and periodical review of existing rules and regulations.
MCA has now circulated a draft policy for pre-legislative consultation to the regulators and concerned divisions within the Ministry for response within two weeks. MCA intends to make and implement a policy on pre-legislative consultation and periodic review of rules/regulations, sources said.
The proposed policy aims towards carrying out public consultations both at the time of framing original rules and regulations and also at the time of review with an objective of simplification, ease and reduction in the cost of compliance as outlined by the Finance and Corporate Affairs Minister Nirmala Sitharaman in her Budget speech (para 100) this year.
While currently Rules are framed by the MCA, Regulations are basically within the domain of the respective regulators. Currently, the practice of public consultation for regulation-making is not uniform across all regulators. Even in the case of amendment in existing rules—the exclusive preserve of MCA—the process of public consultation is not followed in all cases, although original rules for the Companies Act 2013 and Limited Liability Partnership Act 2008 were published for carrying out consultation.
The draft policy has four main components—policy with regard to framing of regulations by Regulators; policy for periodic review of existing regulations by regulators; policy with regard to framing of rules by MCA and policy with regard to periodic review of existing Rules. As per the draft policy, all principal regulations as well as amendments to the principal regulations must be placed in the public domain by the regulators for prior public consultations at least for 30 days. Regulators would be required to devise a template for seeking public consultations which should enable seeking clause-by-clause feedback from the stakeholders and experts.
Also, the regulators should review each regulation every three years unless a review is warranted earlier. Significantly, any rule change by MCA would have to be accompanied by an explanatory note mentioning the issue/difficulty that the proposed amendment seeks to address; manner of implementation of the proposed rule among others. The concerned division in MCA should review each rule every three years unless a review is warranted earlier. Another interesting proposal in the draft policy as regards framing of rules is that the MCA may also consider placing a General statement in the public domain specifying the manner in which public and other comments received have been considered by them while finalising the Rules.