 "Ajay Shriram")
Ajay Shriram, president, Confederation of Indian Industry, and chairman & senior managing director of DCM Shriram, shares with Sudipto Dey his concerns about the new company law. Edited excerpts:
Why does industry feel the need for an overhaul of the new company law?
Industry has always been in favour of bringing the (company) law in sync with the need of the times. We provided inputs at every stage of the evolution of the new Companies Act, 2013, to help create an enabling regulatory environment for growth. Even while welcoming the law, industry had represented that new provisions should be introduced cautiously, its applicability thought out carefully, and time for evolution of practices be provided. A major part of the law is contained in the form of Rules - which have been issued in haste.
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Has the industry arrived at some sort of cost for compliance to the new company law?
We are currently only in the third month of implementation of the new Act - where the entire focus is on legislative intent, industry interpretation and transition to the new regime. On the issue of cost, we feel that complex rules, formation of various board committees, approvals from shareholders, additional record keeping, would certainly add to the cost of compliance.
CII is planning to conduct a detailed 'Survey on cost of governance compliance' which will give us a fair idea of the monetary aspect of the implementation of the new law, and international benchmark in the area.
However, apart from cost, it might add to the discomfort level of doing business in India.
One perception gaining ground is that the industry is trying to wriggle out of a stricter corporate governance regime.
We have always been a proponent of the highest standards of corporate governance in India. In fact, a number of requirements of the new law were already being followed by listed companies to comply with SEBI requirements.
However, to enforce the requirements across all companies (private and closely-held) with no public stake has swung the pendulum to the other extreme. There needs to be a balance between minority and majority shareholders. Being the structural law for the operation and functioning of companies, it is very important for the new Act to regulate corporate procedures in a way that enables business growth.
The implementation of provisions should be better planned, structured and staggered, instead of being thrust on industry. This will ensure wilful compliance, as opposed to a tick-box approach.
Shouldn't the industry focus more on issues that help "ease of doing business" in India?
We have been focusing on improving ease of doing business. Despite being one of the fastest growing economies in the world and a potential investment hub, India lags behind in terms of ease of doing business.
CII has recently released a report aimed at improving India's position in the World Bank's Ease of Doing Business rankings, where India has repetitively been ranked low compared to 189 other economies.
The report highlights that if we were to adopt existing best practices in different states uniformly, India's ranking would improve significantly.
These are quick wins that need to be pushed.CII is currently putting together high-impact suggestions for consideration by the government.
These would be short, medium and long-term. The objective is to place India in top 50 economies in the World Bank's rankings in shortest time frame possible.
Another piece of legislation that industry seems to be unhappy with relates to the issue of land acquisition. Any specific measures that may help ease the logjam?
While we have welcomed the Right to Fair Compensation and Transparency in Land Acquisition and Rehabilitation & Resettlement Act, as it strives to improve the quality of life of affected families, an important aspect that seems to have been overlooked is the cost of land acquisition.
According to our calculations, with current provisions, the cost of land acquisition is bound to increase by 3-3.5 times.
