Company politics PDF Print E-mail
Monday, 26 December 2011 00:00
AddThis Social Bookmark Button


Why this bill should get stuck is really unfortunate


The decision to allow FDI in multi-brand retail was put off, whether you agree or not with the impact analysis, because of the fear that kirana shops would be badly hit. The Pension Bill was put off because of the view, rightly or wrongly, that Indian citizens were better served by a government—or Indian-firm-run pension businesses. The UIDAI Bill ran into trouble because, in the ultimate analysis, there was no assurance that the biometrics collected by the UIDAI would be used by the home ministry. What’s not clear, in this context, is why the Companies Bill continues to face the kind of problem it does, and not just right now, since many governments have brought in amended Bills and then failed to get them passed in Parliament. You could take the view that all parties play politics when in

Opposition, but it seems curious that it is this Bill that gets affected so often. Right now, finance minister Pranab Mukherjee has agreed to bring before the Standing Committee some new clauses in the Bill that were introduced after the Committee had suggested its amendments, but there is no guarantee the Bill will get passed after that.

On the face of it, the Bill seeks to both ease as well as put restrictions on corporates, raises the bar on auditors colluding with company managements, and seeks to grant more powers to minority shareholders. Some of the provisions have been long overdue and some look like they’ve been made keeping in mind the exceptions which may not be a good thing, but on the whole it is difficult to argue the Bill is bad news. The BJP, it is true, was keen to not allow companies to have more than one layer of subsidiaries as this is what makes policing flows of funds near impossible and doesn’t allow even savvy investors to really know what’s going on inside a firm. With the government not agreeing to this, BJP wants to stall the Bill, but surely a way could be found around this? While India Inc argues that layering is important for ease of business, one way out could be to mandate making accounts of all subsidiaries public. Some firms get around this by investing small sums directly, and very large amounts indirectly through preference capital—since they then don’t have a substantial stake, the accounts of these firms don’t need to be disclosed. One way to fix this could be to make reporting mandatory in ‘variable interest entities’—this is something the US does and is also part of the new IFRS standards. The issue of private placements by unlisted companies—to decide whether they fall under Sebi’s purview—is also a

serious one and is believed to be one of the major sticking points. Hopefully, there will be a consensus on the Bill soon—it will be a pity if a non-political Bill becomes a casualty of politics.



You are here  : Home Goverment Company politics
intalk.eu - This website is for sale! - intalk Resources and Information.