Peeved at the opaqueness with which several high-profile multi-state societies in the country like the Board of Control for Cricket in India operate, the Union government is planning to bring them under its direct regulatory oversight.

The corporate affairs ministry is working on a set of measures that would require every multi-state society to be registered with the Centre. As per the proposal, societies having operations in more than one state would need to register as a non-profit organisation under section 25 of the Companies Act.

Currently, these bodies are governed by the respective state laws. Of course, there is a central Act under which multi-state cooperative societies like fertiliser major Iffco are registered. But the ministry reckons that several other prominent multi-state bodies including societies and partnerships need to be regulated by the Centre.

The proposed change is going to be a part of the new Multi State Societies and Multi State Partnerships Bill that would be introduced in Parliament in the Winter Session.

According to top government sources, the move is aimed at bringing transparency in operations of those societies that have large commercial operations with a direct public interest involved in them. The central government has little or no control on them at present.

?Societies are now registered under state Acts. As a result, the central government or any other regulatory body has no control over their affairs,? an MCA official told FE. He said that the Bill would be fast tracked and brought to Parliament latest by December. The ministry is going to send the draft version to other ministries soon, he said. The new Bill would be separate from the Companies Bill that is going to be tabled in the parliament in the Monsoon Session.

According to the source the government would make two key distinctions in the matter. On the one hand, it would identify those societies whose activities are restricted to just one State. They would not be covered under the new Act. However societies that work across multiple States and have a significant public interest involved owing to their financial activities, they would have to be registered on MCA 21 (e-governance portal) and file their annual returns and balance sheets.

For instance, the BCCI is currently registered under the Tamil Nadu Societies Registration Act 1975 but it runs various cricket academies in other States like Punjab, Maharasthra and Karnataka among others. They files the profit & loss account and balance sheets with the registrar of societies (RoS) of the Tamil Nadu government only.

The official source said that the proposal to convert societies into non-profit companies under section 25 was being studied. According to him the matter gained urgency in the backdrop of the IPL saga which made it very difficult for central government to seek details from the parent body BCCI.

Apart from that the government also feels that the move is going to bring transparency in the functioning of housing societies as well that take huge deposits from public but are not required to make enough disclosures.

The government had introduced a similar legislation to govern cooperative societies under the Multi State Cooperative Societies Act 2002. ?The new legislation would be on similar lines,? the official source quoted above said.

The new Multi State Society Bill would replace the 150 year old Societies Registration Act 1860. According to experts though the extant law mandates every society to file their annual returns and balance sheets, it lacks enforcement powers. ?The Registrar of societies (RoS) is responsible for ensuring that every society registered with them file returns. However, there are instances of many such societal bodies not filing their balance sheets for years but the RoS is powerless to intervene,? senior corporate lawyer Lalit Bhasin said. He added that the new Bill under MCA would pass the buck to registrar of companies (RoC) that is more effective. ?RoCs can send show cause notices to the erring societies who do not follow the law,? he said.

Head of accounting advisory services at KPMG Jamil Khatri said that though MCA’s move is welcome it should also look introduce penal mechanism in the new bill to make it more effective. “The issue is not of the law but of its implementation. It needs to be thought through that whether such a mechanism would actually solve the problem of bring transparency in their operations?

Though MCA has put a framework in place, it now needs to have a penal mechanism to ensure that all entities comply with the law,” he said.