Govt to soon finalize amendments to Companies Act
Jul 2, 2014, 05.27AM IST TNN
[ Sidhartha ]NEW DELHI: The government is expected to finalize amendments to the Companies Act after a meeting with industry bodies on Wednesday. Based on the first round of talks with corporate sector representatives 10 days ago, the ministry has already clarified on several issues and has also identified 46 areas where concerns were expressed.
Sources said that presidents of four industry chambers — Ficci, CII, Assocham and PHD Chamber of Commerce — have been called for a fresh round of dialogue even as India Inc continues to protest over the new law, which was meant to promote good corporate practices and crackdown on wrongdoers. The BJP government has acknowledged that there are concerns and some corrective measures will be announced soon.
Sources said that presidents of four industry chambers — Ficci, CII, Assocham and PHD Chamber of Commerce — have been called for a fresh round of dialogue even as India Inc continues to protest over the new law, which was meant to promote good corporate practices and crackdown on wrongdoers. The BJP government has acknowledged that there are concerns and some corrective measures will be announced soon.
But several corporate bosses, auditors, lawyers and independent directors are complaining that the law is too restrictive and suffers from several flaws. For instance, Shailesh Haribhakti, chairman of accounting and consulting firm DH Consultants, pointed out that the new law, probably due to a drafting error, has made it mandatory to seek e-vote or have a poll at a general meeting. As a result, at two recent AGMs — Reliance Industries and Raymond —instead of show of hands, there had to be a vote on all decisions.
Deloitte chairman P R Ramesh added that some of the rules related to the debenture redemption reserve had made it impossible for non-bank finance companies and housing finance companies to raise funds. The mistake was pointed out to the government and the entities were excluded. "Similarly, even normal borrowings have become difficult due to the provisions related to related-party transactions. Companies in the automobiles sector have subsidiaries dealing with engines or transmission systems or those in infrastructure sector are finding it tough to operate because of these provisions," he said.
CII president Ajay Shriram, who is also DCM Shriram chairman & senior MD, said he has approached three women to be directors on his company's board but they have turned down the proposal, saying too much burden has been imposed on independent directors.
TVS Motors CMD Venu Srinivasan also complains of some of the provisions, which give too much powers to the government, that may lead to interference.
In several cases, the government seems to have put in place norms without taking adequate steps to roll them out. For example, there is a provision related to insurance of public deposits taken by companies. "But there were no insurance products available," said Ramesh.
"The whole issue of related-party transactions has been taken to such an extreme that it has become too expensive, and sometimes impossible, to comply with the provisions of the law," said Haribhakti.
TVS Motors CMD Venu Srinivasan also complains of some of the provisions, which give too much powers to the government, that may lead to interference.
In several cases, the government seems to have put in place norms without taking adequate steps to roll them out. For example, there is a provision related to insurance of public deposits taken by companies. "But there were no insurance products available," said Ramesh.
"The whole issue of related-party transactions has been taken to such an extreme that it has become too expensive, and sometimes impossible, to comply with the provisions of the law," said Haribhakti.
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