New law allows ease in opening co; CSR not cess: Pilot

After fifty-seven years, the Companies Bill has finally been rewritten and passed into law by the Rajya Sabha on Thursday after a 4-hour long debate.

In an interview to CNBC-TV18’s Malvika Jain, corporate affairs minister Sachin Pilot said that this was second time in the last 100 years where a new Companies Law was passed. "The Bill was a long-pending one and has received the widest possible consultations from all the stakeholders possible." Below is the edited transcript of the interview on CNBC-TV18. Q: By August-end, the ministry of corporate affairs is expected to initiate the consultation on rules. Are the draft rules ready?
A: This Bill was first discussed 11 years ago. It has taken us that long to come to a consensus on what the Bill should be. But I can’t give you a fixed timeline. It will be our endeavour to make sure that rules are framed as soon as possible. Q: How are you going to allay concerns of the accounting community?
A: It is wrong to say that this law is a knee-jerk reaction and chartered accountants will continue to play a very worthy role as we move forward. The National Financial Reporting Authority is a quasi-judicial body envisaged to take punitive action on any noncompliance of the law. Q: How are you going to make sure that these officials do not misuse their office?
A: First of all, let us not be condescending to our bureaucrats. They have contributed largely to the growth of the nation. But are strengthening our institutions and have created a National Company Law Tribunal (NCLT) and courts that will take care of issues related to company law. We want faster mergers and acquisitions, quicker winding up and easier liquidation. It is important to have safeguards in place. Q: There are almost 336 subordinate legislations or rules that will have to be formulated by the ministry of corporate affairs (MCA). The rule on corporate social responsibility (CSR) spending has attracted a lot of attention. What is the roadmap for CSR?
A: CSR is a new concept in terms of legislation. India is perhaps the first country in the world to have CSR in a statute. The reason we have done this is to make sure that companies that are large and profitable for a certain amount of years are able to qualify to spend on CSR.
Let me clarify, it is not a tax, not a cess, not a levy, not money that comes to government of India or the state governments. It is the company's money and will remain with the company.
The companies have been given the opportunity to conduct CSR in a structured format. Q: What about tax exemption on CSR spend?
A: I am the minister for corporate affairs, not finance. That issue has to be taken up with Chidambaram and we will cross that bit when we get to it. Q: How will you allay the fears regarding the setting up of companies and class action suits?
A: First of all, the idea is to smoothen the process of setting up companies. Though class action suits are prevalent around the world, it is a new concept in India. But we decided not to be so negative in our approach to say that this will be misused, that will be misused.
Class action suits have proven to lower the burden of the courts without going through the whole litigation process. I don’t know what the future holds but I am confident that this law will reap benefits for the economy.