5 KEY COMPLIANCE RECOMMENDATIONS FOR FY 2025-26

As the regulatory landscape continues to evolve, it is imperative for companies, professionals, and regulators to streamline compliance practices in a way that promotes transparency, accountability, and ease of adherence. Based on current gaps and recurring challenges in corporate governance and regulatory filings, the following are five key recommendations for improving compliance mechanisms in the financial year 2025–26:

1. Inclusion of Promoters in the Definition of Related Party under the Companies Act, 2013

The definition of a "Related Party" under Section 2(76) of the Companies Act, 2013, currently excludes promoters, unless they fall under other specific categories. However, promoters often exercise significant influence over company affairs. To ensure better governance and accountability, it is recommended that the term "promoter" be explicitly included in the definition of a related party. This change would enhance transparency in related party transactions and help stakeholders better assess the influence of promoters on business decisions.

2. Enablement of E-Form MR-1 for Appointment of Executive Directors on the V3 Portal

The Ministry of Corporate Affairs’ (MCA) V3 portal has seen significant upgrades in recent years. However, one key limitation remains: the non-availability of E-Form MR-1 for the appointment of Executive Directors. Enabling this form would ensure uniformity in reporting managerial appointments and provide a centralized database for executive management details. It would also enhance the ease of doing business by simplifying the compliance process for companies.

3. Enhanced Disclosure in E-Form MGT-7 Certified by Practicing Company Secretaries

To improve transparency and traceability in the annual return filing process, it is proposed that E-Form MGT-7 (certified by a Practicing Company Secretary) be enhanced with specific fields for:

• Mentioning the Unique Document Identification Number (UDIN) issued by the Institute of Company Secretaries of India (ICSI).
• Disclosure of the Resolution passed for the identification of the Beneficial Owner, in accordance with the provisions under the Companies Act and related SEBI regulations.

These additions will serve as a verification mechanism and help in reinforcing the authenticity of the filings.

4. Expansion of Promoter Group Definition under SEBI (ICDR) Regulations

Currently, the SEBI (Issue of Capital and Disclosure Requirements) Regulations define the "promoter group" with certain thresholds and relationships. It is recommended that individuals holding 20% or more in a promoter entity of a listed company also be explicitly included within the promoter group. This revision would plug existing loopholes and provide a more comprehensive view of the controlling stakeholders, enhancing investor protection and market integrity.

5. Issuance of a Consolidated Monthly Circular for All Legal and Regulatory Amendments

One of the persistent challenges in corporate compliance is the scattered dissemination of regulatory changes. Errors and omissions often arise from the lack of consolidated communication. To address this, it is recommended that regulatory bodies (such as MCA, SEBI, RBI, and others) jointly issue a monthly circular consolidating all significant amendments and clarifications across various applicable laws. This will:

• Help compliance professionals stay updated.
• Minimize the risk of inadvertent non-compliance.
• Foster a culture of proactive governance and regulatory alignment.

Conclusion

These recommendations are aimed at enhancing the effectiveness and efficiency of corporate compliance in India. By aligning legal definitions, improving digital infrastructure, mandating additional disclosures, and streamlining communication, the regulatory framework can be significantly strengthened to meet the growing expectations of investors, regulators, and corporate stakeholders in FY 2025–26 and beyond.

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Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including Newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, Research Papers etc.

From the desk of CS Sharath