Concerned over suggestions on Companies Bill: India Inc

India Inc has raised serious concerns over the recommendations of the Parliamentary Standing Committee of Finance regarding the Companies Bill.

India Inc has raised serious concerns over the recommendations of the Parliamentary Standing Committee of Finance regarding the Companies Bill,2009,and has asked the Ministry of Corporate Affairs (MCA) to address its apprehensions in the bill.

Top corporate houses including Tatas and Godrej and CII have written to the ministry raising several such concerns,the prime one being the disallowance of setting up subsidiaries of a subsidiary.

Making changes in the regulation of inter-corporate investments,loans and guarantees,the standing committee in its report has said a company should not have step-down subsidiaries and have only one investment company. It reasoned that such pyramid-like structure of companies is often misused by various companies for siphoning off funds or in some cases,routing terror money.

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However,the proposal has not gone down well with corporate India as limiting such subsidiaries would result in practical difficulties,JJ Irani,a director with Tata Sons and chairman of the Expert Committee,which framed the Companies Bill,said in a letter to corporate affairs minister Salman Khurshid.

Irani said the Act should not pre-empt the structure appropriate for controlling businesses as such prescriptions will make the business environment rigid and put Indian companies at disadvantage vis-a-vis their global competitors. CII has said the provision is regressive as it will restrict the options available with the companies for managing and restructuring business.

Companies use subsidiaries and subsidiaries of subsidiaries for mergers and acquisitions,formation of joint ventures and special purpose vehicles,which facilitate various business transactions. In the absence of this facility,the companies will not be able to compete with their counterparts globally,CII argued.

Irani suggested that for addressing the concern of money laundering,the law should make disclosure norms more stringent. Further,the government may also extend the listing agreement applicable to listed companies to unlisted companies as well.