Delay of Companies Bill a disappointment: BMR Advisors

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In a sort of anti-climax to the anticipation, sources suggest that the Companies Bill has been sent back to the Standing Committee and will now be tabled in the budget session. Speaking about the same, Mukesh Butani, chairman of BMR Advisors, tells CNBC-TV18 that he is extremely disappointed that such an important bill was delayed.

"The Bill, which is a substantive change to over a 60 year old law, should have gone through because it has new provisions which deal with the realities of the 21st century," he said. He further adds that if there were any unresolved controversial clauses, they should have been delayed.

The Bill introduced in Parliament was already and diluted one, and the corrigendum issed today seems to suggest more dilution.

Below is an edited transcript of his interview with Shereen Bhan and Siddharth Zarabi. Also watch the accompanying video.

Q: This was a Bill that finally got tabled in Parliament after intense lobbying from corporate India, but barely a week after that we now learn that it's probably going to be sent back to the Standing Committee. What do you make of it?

A: I think it's ironical that the Bill has to go back because everybody anticipated that given that most changes that were recommended by the Standing Committee were undertaken, the Bill will go through. Even if there are a few controversial provisions which have not been resolved, they should have delayed the introduction of those provisions.

The Bill, which is a substantive change to over a 60 year old law, should have gone through because it has new provisions which deal with the realities of the 21st century. I don't know whether we have the appetite to live any longer with a legislation which was a part of the earlier century.

Q: I just want to get your comments in on the changes that have now been notified via a corrigendum that's been issued. The imprisonment provisions have been dropped for some clauses, the Securities Contracts (Regulation) Act (SCRA) will not apply if private placement norms are violated. So this seems to be a further dilution of what went to Parliament.

A: Absolutely because many of these changes were put forth in the May 2011 draft wherein the amendment to the Companies Act tried to bring within its ambit two broad changes. One, putting a kind of restriction on the ability of private companies to raise funds from the public and second was certain procedural changes where share application money have to be allotted in a timeframe of six months time and more importantly all payments for share application has necessarily to be through the banking channels.

I don't think that any of these changes recommended was something that corporate India was opposing. Yes there were some stringent provisions which were dropped. So I do not why despite these changes the Bill has not gone through.

Q: One bit that is coming up repeatedly is about private placement. The fact that unlisted companies post enactment of this law would find it extremely difficult to raise money seems to be the reason why this has been deferred for the time being. You think that is the key reason, because for everything else there is absolutely no explanation from the government?

A: Yes it is true. This is precisely what I was saying earlier. The draft that was introduced in May 2011 was the one which had stringent provisions, but they were diluted to a larger extent. The one that was introduced in the Parliament recently is a diluted version and I haven't heard anything by way of objection to that.

Yes to a large extent it is true that through these amendments the Companies Act is trying to control the ability of private companies to raise money from the public, but the fact is that given some of the high profile cases that are pending, the government was exercising an overarching authority through the Companies Act to do so. In my view, that is a noble objective.