DK Mittal, former ministry of corporate affairs (MCA) secretary, says the forward-looking Companies Bill will have long-term consequences in the way Indian companies are governed right from the day of its inception to them being liquidated.
However, Mittal adds that the Bill should empower the shareholders to ask questions to the management and that would be a very legitimate demand.
On the divide between corporate India and the Government, Mittal said that both the parties should bear in mind that the company belongs to the shareholders and the Bill should empower them to ask questions to the management and that would be a very legitimate demand.
One concern the debate on the Bill in Parliament raises is that of corporate social responsibility (CSR). Politician D Raja said companies' spend on CSR should be converted into a cess. However, Dinesh Kanabar, deputy chief executive officer, KPMG says, "Sometimes we all start looking in the future and start seeing a ghost. There has been this debate as to whether CSR should be mandatory or discretionary. There are also issues on interpretation of what happens if the monies are not spent, is this merely a reporting requirement or this is really an implementation."
Kanabar adds that the MCA has been very clear in its intention to do something on the social responsibility front and that concern is not "unwarranted"
Lingering Concerns…
Harish Salve, senior lawyer, SC says the powers given to Serious Fraud Investigation Office (SFIO) in the new Bill raises some serious concerns
"With the kind of complaints that are filed against companies and the way the CBI has been acting on complaints relating to corporate offences, then I think this will be yet another major set back to the Bill.
On The Road Ahead
Kanabar says the rules on the 'declaration of dividend out reserves' part of the Bill will have to be prescribed sooner rather than later so that a few provisions can be operative.
Additionally, Kanabar says, "If the rules are not brought out sooner rather than later we might have a degree of ambivalence in the implementation of many of the rules. Otherwise I do not really see a problem at all."
Reiterating Kanabar's view, HP Ranina, corporate tax lawyer says the drafting of the Bill is of utmost importance as improper drafting of Bills has led to more confusion in the past. He says the regulations should not leave any room for litigation or for any type of controversies.
"So, I think chambers of commerce Federation of Indian Chambers of Commerce and Industry (FICCI), Associated Chambers of Commerce and Industry of India (ASSOCHAM) and others must now sit down and really make sure that the rules are properly framed and are in confirmative with the spirit of the new Companies Bill," he says.
Other shared concern among the experts is when the Bill will finally be fructified. Ranina says the real issue will now be how soon the rules will be passed to make the Bill really effective and if that can be done within 4-6 months or even before that time-frame.
However, NK Singh, member of Parliament, Rajya Sabha believes a 3-4 months timeline is far too short but a 6 months target should see the Bill come into effect. His only fear he says is the legislation languishing for sometime, defeating the very spirit and purpose of the legislation.
All Eyes Now On Sachin Pilot
All experts are banking on the minister of corporate affairs, Sachin Pilot to drive the Bill to its logical conclusion.
"So really we have to now see how fast the government is able to come up with these regulations. I am sure Sachin Pilot will push it through because Sachin Pilot is a very dynamic, young minister and I think he is aware of the fact that his government itself will be running out of time and therefore I think he will push it as fast as possible," adds Ranina.
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