The taste of the pudding lies in the eating. One must say this of the companies bill tabled in the parliament last Thursday. In an interview, the company affairs department secretary has said that all the genuine criticism of the draft bill has been taken into account in the preparation of the bill and care has been taken to make adequate provision for good corporate governance.

But this will be known only later. Yet, the government must be commended for setting at rest the confusion over depreciation rates and the longstanding discrepancy between Companies Act and Income Tax provisions has been removed. Empowering the government to make postal ballot compulsory where desired in the interests of corporate democracy and introduction of national accounting standards are also in the right direction. Likewise, bringing the plantation companies within the purview of Sebi for purposes of public issues and doing away with the favoured treatment meted out to government companies are a demonstration of the Companies Act finally coming of age.

Yet, one is not convinced that the revised legislation is a step towards loosening of controls on the corporate sector and giving India Inc the kind of lift it needs in facing up to the growing competition from MNCs. For instance, in the independence day article in The Financial Express Rahul Bajaj of Bajaj Auto, one of the few Indian corporates with a global presence, asks whether we will be happy and proud if a large percentage of our big companies are subsidiaries of foreign corporations. It does not seem if the department of company affairs has even heard this.

Agreed that disclosures by Indian companies have to be globally comparable and there has to be a high degree of investor protection, still we cannot have too much of openness on the one hand in respect of MNCs and little or no encouragement to the domestic industry. With all the changes envisaged, the Companies Act is not best positioned to give the competitive edge that Indian companies need and must have. While the investor must be protected and no company should take the investing public for a ride, yet a critical instrument of liberalisation like the Companies Act has to be tailored to give the native companies the strength that is increasingly called for in coping with the MNC threat.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.