Awaiting clarity on CSR: BMR Advisors

Also read: Govt may find the going tough in Parliament over reforms

Below is the edited transcript of his interview to CNBC-TV18.

Q: This bill was in the making for over two decades and now it has finally gone through, fine print details are still awaited but confusion still persist with regards to the controversial CSR clause. What is your view?

Abhishek: This is a very welcome move. Several economic legislation like GST, DTC or others were stuck at the governments end. We need to check which amendments the cabinet has approved. It is a good signal that the government is moving forward with much pending and much awaited legislation. I think CSR should not be made mandatory. We need to see the fine print and particularly what kind of addition disclosures have been provided in the revised format that the cabinet has cleared.

Q: We are still waiting for the fine print but there were concerns on private placement, there were concerns on subsidization and layering, what would your key concerns be? What would you be watching out for?

Abhishek: I think those would be some of the key concerns. So, the provisions in the draft in terms of the number of layers of subsidiaries can be worrisome. On the positive side, there were some relaxation and rationalization of the merger provisions. The industry will be eagerly looking to see if those are carried out. Several practical amendments were proposed like single member company, which will again ease the burden of many private companies including some foreign companies which plans to set up shop in India. The first draft or the draft which was placed before the cabinet was always a mixed bag. Any action on M&A will be eagerly looked out for.

Q: The confusion persists as far as CSR is concerned, what is your view?

Abhishek: Personally, I am not in favor of mandatory spending but the final view would be helpful. If the presented bill has clarity and does not lead to several interpretation and that will leave companies in a worse of position from where they are today.

Q: In a sense we have been calling this the anti-Satyam or the post Satyam Companies Bill. The measures there to strengthen the role of auditors, audit rotation and the other points, what is your reaction to this?

Abhishek: It is really an outcome of the Satyam episode. Generally, most of these provisions and changes should be welcome. My only concern is that are there enough provisions to strengthen the regulators as well? So, we had the Registrar of Companies, Company Law Board and other wings that are responsible for administrating the Companies Act. But they have really been used to an environment where the Companies Act was a very different piece of legislation. So, if it going to go now into such a drastically different piece and I think there should also be a lot of focus by the government to strengthen the regulator, otherwise the enforcement will still remain a big concern.

Q: What is your view on the go ahead given by the government on this bill?

Rahul: There have been several versions of the bill and it will be good to see that the bill getting translated into an Act, because many corporations would like to structure their transactions. I think particularly for the transactions in pipeline the earlier the clarity the better.

Q: You also track the competition issues very closely. We understand that the Competition Act is also been cleared by the cabinet, what is your view?

Rahul: Politically, this looks a good idea that the government is trying to send out a positive signal on reforms. However, I am very skeptical in terms of amendments to the Competition Act. The National Competition Policy Committee had suggested some of the suggestions on national competition policy as such which were put out in public domain for comments but the national competition policy never had put out in public domain the suggested amendments through the Act and therefore the entire process was quite fine.

Everyone is speculating that what amendments will be carried out in the Act. The most troublesome part about suggestions on amendments through Competition Act is that, The Competition Act is relatively new in India.  I think it's a very young law and it would be premature to think about amending enactment without getting some experience and expertise surrounding the enforcement of this young law.