Union Ministry of Corporate Affairs has put in place a set of rules to eliminate unfair business practices in the sectors like pharmaceuticals, cosmetics, healthcare, medical and pharmacy education, having a turnover of Rs.25 crore. Stringent audit regime for the purpose is already in place from June 30, 2013. It pertains to the cost records and audit rules, 2014 under section 148 of the Companies Act 2013.
All pharma companies, healthcare providers and colleges of medical and pharmacy in the country will need to adhere to this strict audit procedure. These sectors among other industries including power, defence will need to make their expenses incurred more transparent. Particularly for pharma, audit in costs incurred for manufacture, research, for hospitals on drugs purchased, services offered and colleges will need to disclose details of admissions offered and fees collected.
According to officials from the Karnataka government, the new rules enforced from June 30, 2014, will apply to medical colleges where prospective students are facing the challenge of seeking admission to MBBS and BDS besides post graduation despite their performance. The sector is marked by touts who interface between the candidate and the colleges especially in the medical education. “Such transparency through an audit on cost will keep malpractices at bay,” they added.
In a notification on June 12,2014, via Official Gazette G.S.R. 398(E) sections 173, 175, 177, 178, 179, 184, 185, 186, 187, 188, 189 and section 191 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government has introduced the rules to amend the Companies (Meetings and Powers of Board) Rules, 2014. The rules will be referred to as the Companies (Meetings and Powers of Board) Amendment Rules, 2014.
The Companies (Meetings and Powers of Board) Rules, 2014, under rule 6, has included that public companies covered under these norms which were not required to constitute Audit Committee under section 292A of the Companies Act, 1956 (1 of 1956) would now need to form their Audit Committee within one year from the commencement of these rules or appointment of independent directors by them.
Further, the Ministry of Corporate Affairs has also mandated that public companies covered under this rule would need to constitute their nomination and remuneration committee within one year.
Now with the new rules, every company in the pharma sector, healthcare besides medical and pharmacy colleges will need to maintain cost records and which will be scrutinised at any point of time by a team of officials, said the Karnataka government sources.
According to the pharma companies, the stringent audit regime now creates an environment of transparency in operations. Such a move was long overdue and the Indian companies including drug manufacturers would now be forced to operate in a far more professional environment.