Thursday, January 3, 2013

SR Looks Set to Emerge as an Independent Stream with Measurable Output

Currently, in most companies, CSR activities are a part of other management areas, mainly HR, marketing and corporate communication. Some companies undertake activities, including education, environment and housing, with the subtler objective of gaining business by establishing a relationship with communities.

MUMBAI / NEW DELHI: Barely a couple of weeks after the new Companies Bill made it mandatory for firms to spend 2% of their net profit on social welfare, corporate social responsibility (CSR), which has mostly been just a splash in other functional management areas, looks set to emerge as an independent stream with measurable output.

csr-looks-set-to-emerge-as-an-independent-stream-with-measurable-output Some companies are already reviewing existing programmes to have a more independent professional league of people in CSR, a move that could lead to competitive salaries, job creation and need for more heavyweights at the top. “The amendment will help the social responsibility sector in India get more corporate attention. That may trigger greater investment of financial and human capital,” says Milind Sarwate, group CFO, Marico.
Even if the “initial ripple” is felt at the top, it will cascade to the creation of larger CSR teams in corporates, says Adil Malia, group president (HR), Essar Group. “Whilst strategic alignment of CSR with brand strategy will create jobs at the top of the pyramid, these programmes will have to finally be executed at the grassroots,” he adds.
Dabur  is reviewing its existing CSR programmes in the wake of the latest developments. It will hire more professionals if it feels the need to extend and enhance existing programmes, says A Sudhakar, executive director, HR.
This month, the Companies Bill made it mandatory for firms to spend 2% of their average net profits on CSR. Companies that are not able to meet the norms will have to give explanations or face action, including penalty.
csr-looks-set-to-emerge-as-an-independent-stream-with-measurable-output1Currently, in most companies, CSR activities are a part of other management areas, mainly HR, marketing and corporate communication. Some companies undertake activities, including education, environment and housing, with the subtler objective of gaining business by establishing a relationship with communities.
Others interpret CSR as simply abiding by the law of the land, like paying taxes on time. While for some more, CSR is deeply integrated with their businesses and helps social causes.
However, companies that already have a significant contribution to social development say the Bill per se will not affect their strategies too much. Several large conglomerates like Tata Group, Aditya Birla Group, Essar Group, Marico among others, are involved in a wide range of such activities in a systematic manner. “For those who are already doing a lot of work in the area, it might just increase some paperwork. Companies who are relatively new in the journey will have to decide how to work on it,” says Santrupt Misra, carbon black business CEO and group HR director, Aditya Birla Group. The Bill could also give a structure to what many companies, particularly those in the infrastructure sector, have been doing.
“It will raise the bar for companies that have been spending less than 2%, but will have no bearing on those traditionally spending much more through structured CSR activities,” says Malia. “People were not taking CSR too seriously, but with this development, I see companies moving from a responsive to strategic CSR,” adds Prakash Tewari, VP, CSR and education, Jindal Steel and Power. However, the government needs to have a control mechanism to check if there is a return on spends, suggests Gourab Barik, assistant general manager — corporate HR at Emami.
According to placement firm Executive Access, the development could lead to about 30% increase in CSR-linked jobs. While search firm Randstad has a more modest estimate of 10% to 15% increase in CSR jobs. “The Bill will add not only numbers, but greater capability and depth to CSR roles. It will increase financial payout and positioning of the role in organisations,” says Ronesh Puri, managing director, Executive Access.
Currently, average compensation for most CSR roles at various levels is low compared with similar levels in other functions.

Gunpoint charity: How India Inc can rescue the CSR idea

Gunpoint charity: How India Inc can rescue the CSR idea

by Jan 3, 2013

If charity is demanded at gunpoint, would that be charity? But this is precisely what the Companies Bill passed by the Lok Sabha last December, and which the Rajya Sabha will probably approve, proposes.
Clause 135 of the Bill says companies with at least Rs 5 crore of net profits should earmark 2 percent of their average net profits in the preceding three years for activities lumped under the term “corporate social responsibility (CSR)”. In fact, CSR will have to be done even by loss-makers, for the other criteria for compulsory CSR are a minimum net worth of Rs 500 crore or turnover of Rs 1,000 crore. This means, if a Rs 1,000 crore company made a loss in the latest year, but still had a positive average net profit in the previous three years, it will have to do CSR.
According to a Business Standard computation, 457 of the 500 companies on the BSE 500 Index will have to provide for CSR, and based on the average net profits for three preceding years, they will have to fork out Rs 6,751 crore in CSR spends. ONGC would have to spend around Rs 405 crore a year and Reliance Rs 377 crore, the newspaper says.
The only obligation is to earmark the funds, form a committee, formulate a CSR policy, and spend the cash. If you don’t spend the money, you have to explain why in the annual report.AFP
Let’s be clear. CSR is always a good thing for corporate image if done well. It is an even better idea if it genuinely tries to address serious development issues – from providing drinking water in villages, to improving farming techniques, to training school teachers, to even running low-cost rural hospitals.
Even a legal nudge – gunpoint charity – is not such a bad idea though.
But the real issue in mandating 2 percent spending on CSR is that the Bill makes no effort whatsoever to define CSR – only that companies should create a committee from among their directors, of whom at least one director will be an independent one. So, it seems the law has no problems whether I think feeding beggars on Mumbai’s streets or building temples in Rajasthan is part of my corporate social responsibility.
The only obligation is to earmark the funds, form a committee, formulate a CSR policy, and spend the cash. If you don’t spend the money, you have to explain why in the annual report.
The Bill also does not take cognisance of the money already being spent on CSR. For example, the profits of Tata Sons go substantially to charity. But would that count as a Tata Sons CSR when Tata Sons is not an operating company?
Clause 135 on CSR is probably mere political posturing to show us the government is doing something without bothering to understand the how, why and what of CSR. A law is legislated without defining the goalposts of CSR except in terms of spending.
The only real specification is that “the company shall give preference to the local area and areas around it where it operates for spending the amount earmarked for corporate social responsibility activities.” (Read the full Companies Bill here)
If the government had thought through the idea, it could have integrated India Inc in many of its social projects, most of which are facing huge leakages and chronic inefficiencies.
For example, the Right to Education Act focuses on the 10 percent of privately-run schools that are better run than the state-run schools. But this won’t solve the problem of educating the poor. To dent that problem, you have to fix the 90 percent of schools that are not in the state sector. What prevented the government from allocating all public schools in one district to one major corporate to upgrade them to minimum standards – with private inputs and teacher training and better course material?
In rural areas, the big issues relate to excess use of urea due to heavy subsidies on this fertiliser. What prevented the government from allocating several districts to corporates to economise on fertiliser usage and/or improve soil conditions – and thus enabling the government to reduce the fertiliser subsidy? Why couldn’t Wal-Mart be asked to pay for all the fertiliser subsidies in a few districts allotted to it in return for the privilege of opening more stores in cities?
In urban areas, water, sanitation and transport are pathetic. Why shouldn’t urban companies be given the responsibility of running private bus networks or low-cost urban housing not only for their own staff, but the public, at subsidised rates? That would soak up most of the CSR money earmarked by the big companies even while reducing urban congestion and pollution caused by private cars.
An even bigger idea would be to allot one district to India’s top 600 companies to provide multiple social infrastructure – from schooling to healthcare to vocational training. Why not experiment with public-private partnership in managing NREGA?
Clearly, the idea of CSR itself is not bad, given the poor ability of the Indian state to deliver services to its citizens.
What the CSR provision actually tells us is that there is an absolute poverty of ideas in India’s legislating class.
The best thing India Inc can do is to take the CSR nudge in the right spirit and show the netas what can be achieved with corporate management and a results-oriented approach. There is no shortage of social causes and opportunities to spend the 2 percent on. Corporate India just has to make sure that the money really goes to support important social goals, and not dubious private purposes.
Go for it.

How India Inc can make their CSR spends count

How India Inc can make their CSR spends count

Labonita Ghosh, ET Bureau Jan 3, 2013, 05.09AM IST

(CSR in India will have come…)
How that the new Companies Bill has mandated that organisations of a certain financial strength spend 2% of their net profit on corporate social responsibility (CSR), two things are likely to happen right away. First, the general spend on development projects will shoot up, with more companies having to set aside funds for this.

And second, with the government keeping tabs, companies will have to become more transparent about what they are investing in, how and where. Only a handful of companies meet the 2% criterion (or come close) as of now. Fewer still have well-structured, sustainable and far-reaching CSR programmes. But here's a thought: as they up the ante - and their budgets - for social sector activities, companies might want to pause and think about the best way to make their CSR spend count.
India Inc has gone from chequebook philanthropy and backing causes on a whim to spending more (and in different ways) on stakeholders, be it customers or employees, or rural and semi-urban populations affected by the setting up of factories in their neighbourhoods.
"It's good to be engaged with people who live in and around your plants, but companies need to look beyond their business interests," says Amita Joseph, director of the Business and Communities Foundation. "If companies aspire to be national and global entities, their reach [in the social sector] must also be national and global." Industry gets so many incentives from the government, she adds, that surely companies can have more responsible practices in place.
Some companies are looking beyond their operational imperatives. Thermax, for example, didn't feel the need to focus on environment and alternative energy (a popular CSR plank) because it is already involved with solar power, wastewater treatment and reducing carbon footprint as part of its business. "We didn't want to link our CSR activities to our work," says Manabedra Nath Sanyal, manager, outreach programmes. "We wanted to look at areas completely de-linked from our business, like education and skill-building."
As Thermax director Anu Aga puts it: "There are enough causes staring at us in India, like malnutrition, women's empowerment, rural development and even city planning. I can't think of a single area where we cannot contribute." Thermax, which spends about 3% of its net profit on CSR activities, has invested Rs 24 crore on education and other development projects in the last six years, says Sanyal.
As part of the affirmative action programme of the Confederation of Indian Industry (CII), an industry grouping, Thermax looks to increase the employability of youngsters from marginalised communities by arming them with the soft skills they might need to land a job. Of the 500 people trained under the affirmative action programme so far, most already had the requisite academic qualifications and domain knowledge; what they needed was help with personality development, knowing how to interact and work with colleagues, the confidence to max interviews and be more 'job-ready'.
Thermax tied up with Pune's English Language Training Institute of Symbiosis to create 60-hour modules administered as a crash course to the students on weekends, and also found placements for most of these youngsters. "There are certain sections of people who are deprived of opportunities or are unable to express themselves properly," says Sanyal. "Our 'finishing school' model helps them develop these skills."

Tuesday, January 1, 2013

CSR Initiatives of Indian Companies - A Study by Dr. V.V.S.K. Prasad

SR Initiatives of Indian Companies - A Study

Dr. V.V.S.K. PrasadM.Com, MBA, Ph.DProfessor in MBA
The Hindu College-MBAMachilipatnam

Corporate social responsibility (CSR) also called corporate responsibility, corporate citizenship, responsible business and corporate social opportunity is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment. This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.

The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; still others argue that it is an attempt to preempt the role of governments as a watchdog over powerful multinational corporations.
The objective of this paper is to examine the nature and extent of corporate social responsibility (CSR) initiatives under taken by Indian companies and to study its relevance in business.
Corporate social responsibility is necessarily an evolving term that does not have a standard definition or a fully recognized set of specific criteria. With the understanding that businesses play a key role on job and wealth creation in society, CSR is generally understood to be the way a company achieves a balance or integration of economic, environmental ,and social imperatives while at the same time addressing shareholder and stakeholder expectations. CSR is generally accepted as applying to firms wherever they operate in the domestic and global economy. The way businesses engage/involve the shareholders, employees, customers, suppliers, governments, non-governmental organizations, international organizations, and other stakeholders is usually a key feature of the concept. While business compliance with laws and regulations on social, environmental and economic objectives set the official level of CSR performance, CSR is often understood as involving the private sector commitments and activities that extend beyond this foundation of compliance with laws.
From a progressive business perspective, CSR usually involves focusing on new opportunities as a way to respond to interrelated economic, societal and environmental demands in the marketplace. Many firms believe that this focus provides a clear competitive advantage and stimulates corporate innovation.
CSR is generally seen as the business contribution to sustainable development which has been defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs", and is generally understood as focusing on how to achieve the integration of economic, environmental, and social imperatives. CSR also overlaps and often is synonymous with many features of other related concepts such as corporate sustainability, corporate accountability, corporate responsibility, corporate citizenship, corporate stewardship, etc..
CSR commitments and activities typically address aspects of a firm's behaviour (including its policies and practices) with respect to such key elements as; health and safety, environmental protection, human rights, human resource management practices, corporate governance, community development, and consumer protection, labour protection, supplier relations, business ethics, and stakeholder rights.
Corporations are motivated to involve stakeholders in their decision-making and to address societal challenges because today's stakeholders are increasingly aware of the importance and impact of corporate decisions upon society and the environment. The stakeholders can reward or punish corporations. Corporations can be motivated to change their corporate behaviour in response to the business case which a CSR approach potentially promises. This includes:
1. stronger financial performance and profitability (e.g. through eco-efficiency),
2. improved accountability to and assessments from the investment community,
3. enhanced employee commitment,
4. decreased vulnerability through stronger relationships with communities, and
5. improved reputation and branding.
Criticisms and concerns
Critics of CSR as well as proponents debate a number of concerns related to it. These include CSR's relationship to the fundamental purpose and nature of business and questionable motives for engaging in CSR, including concerns about insincerity and hypocrisy.
Critics concerned with corporate hypocrisy and insincerity generally suggest that better governmental and international regulation and enforcement, rather than voluntary measures, are necessary to ensure that companies behave in a socially responsible manner. CSR could prove to be a valuable asset in an age of Mergers & Acquisitions, as it helps firms spread their brand name
Even much before the issue became a global concern, India was aware of corporate social responsibility (CSR), due to the efforts of organisations such as the Tata Group. (Around 66 per cent of Tata Sons, the holding group of the Tata Group, is today owned by a trust).
Corporate companies like ITC have made farmer development a vital part of its business strategy, and made major efforts to improve the livelihood standards of rural communities. Unilever is using micro enterprises to strategically augment the penetration of consumer products in rural markets. IT companies like TCS and Wipro have developed software to help teachers and children in schools across India to further the cause of education. The adult literacy software has been a significant factor in reducing illiteracy in remote communities. Banks and insurance companies are targeting migrant labourers and street vendors to help them through micro-credits and related schemes.
In June 2008, a survey was carried out by TNS India (a research organization) and the Times Foundation with the aim of providing an understanding of the role of corporations in CSR. The findings revealed that over 90 per cent of all major Indian organizations surveyed were involved in CSR initiatives. In fact, the private sector was more involved in CSR activities than the public and government sectors. The leading areas that corporations were involved in were livelihood promotion, education, health, environment, and women's empowerment. Most of CSR ventures were done as internal projects while a small proportion were as direct financial support to voluntary organizations or communities.
In a survey carried out by the Asian Governance Association, which ranks the top 10 Asian countries on corporate governance parameters, India has consistently ranked among the top three along with Singapore and Hong Kong, for the last eight years.
In another study undertaken by automotive research company, TNS Automotive, India has been ranked second in global corporate social responsibility. State-owned Bharat Petroleum and Maruti  Udyog were ranked as the best companies in India.  Bharat Petroleum and Maruti Udyog came on top with 134 points each, followed by Tata Motors (133) and Hero Honda (131). The study was based on a public goodwill index and India received 119 points in the index against a global average of 100. Thailand was at the top slot with 124 points.
Several foundations run by corporate houses plan to devise a common strategy to ensure transparency in their social and community development operations, such as tracking spending in and progress of such projects in their annual reports.
The effort is significant because it brings together a wide range of Indian companies to share ideas on innovating sustainable programmes. Among them are Multi Commodity Exchange of India Ltd, Anil Dhirubhai Ambani Group and media company Bennett, Coleman and Co. Ltd,
Audit firm KPMG will partner with them to offer guidance on evaluating corporate social responsibility or CSR programmes—a trend companies are slowly embracing as India's expanding economy contrasts sharply with growing local protests over land for future industrial projects.
The network alliance stems from the first sustainability summit that was organized in January by the Associated Chambers of Commerce and Industry of India.
CSR could prove to be a valuable asset in an age of mergers and acquisitions, especially as it helps companies spread their brand name, The new network will also serve as a common ground to lobby with the government for tax exemptions and safeguard other interests in the future.
Indian companies have made little progress in reporting development projects. And only 48 companies have so far given their commitment to support the United Nations Global Compact, a charter for improving the global business environment through standards, such as labour rights and fighting corruption.
Addressing business leaders in May last year, Prime Minister Manmohan Singh said "Corporate social responsibility must not be defined by tax planning strategies alone. Rather, it should be defined within the framework of a corporate philosophy, which factors the needs of the community and the regions in which a corporate entity functions."
Some say companies have an inherent "mental block" in reporting development programmes. A recent KPMG study among 27 Indian companies showed that a mere 8% mentioned their social expenditures in their annual reports, and only 25% filed CSR reports at all. But a quarter of them are also signatories of the Global Reporting Initiative, a 10-year-old movement started by an NGO called Coalition for Environmentally Responsible Economies (CERES) and the United Nations Environment Programme. This encourages companies to make voluntary disclosures and lays down framework on improving reporting principles.
"Most companies tend to give to charities than make long-term development commitments. When a company voluntarily opens up for self-evaluation, it creates value for shareholders when competing with other companies," said Parul Soni, associate director of KPMG's Aid and Development Services.
An estimated 100 corporate foundations and 25 foreign firms are involved in CSR activities in India, but statistics on input and output are elusive.
According to Times' Pandey, the Indian corporate sector spent Rs30,000 crore on social expenditure during the last financial year, up from Rs17,500 crore the previous year. Quoting from a government report, he said, companies drew a total exemptions of Rs5,500 crore under income-tax laws last year. These figures, an analyst said, sound improbable as Indian companies still do not distinguish between philanthropy and internal practices to benefit stakeholders such as employees and community.
Companies, too, continue to rely on different models to earmark its social expenditure, making it difficult to measure the overall impact.
For instance, the Steel Authority of India Ltd (SAIL), the country's largest steel company, spent Rs100 crore on CSR last year; this was 2% of its profit after tax, exclusive of dividend tax, according to SAIL spokesperson N.K. Singhal. Yet others, such as Tata Steel Ltd, which runs a 850-bed hospital and rural projects in 800 villages around Jamshedpur, spends an average of Rs150 crore as part of its annual revenue expenditure.
What eventually makes up for CSR of a company ultimately depends on leadership; as part of company decision, about 66% of Tata Sons, the holding group of the Tata group, is today owned by a trust.
Pharmaceuticals company Jubilant Organosys Ltd, already runs an anti-tuberculosis programme with the government of Uttar Pradesh. Apart from schools and hospitals that are run by trusts and societies, the government, too, is exploring to widen the scope of public-private partnerships to build and maintain schools and hospitals in return for a fixed annuity payment.
The concept of corporate social responsibility has gained prominence from all avenues. Organizations must realize that government alone will not be able to get success in its endeavor to uplift the downtrodden of society. The present societal marketing concept of companies is constantly evolving and has given rise to a new concept-Corporate Social Responsibility. Many of the leading corporations across the world had realized the importance of being associated with socially relevant causes as a means of promoting their brands. It stems from the desire to do good and get self satisfaction in return as well as societal obligation of business.
 The Indian corporate sector spent US$ 6.31 billion on social expenditure during 2007-08, up from US$ 3.68 billion spent during the previous fiscal. The Steel Authority of India Ltd (SAIL), the country's largest steel company, spent US$ 21.05 million on CSR last year; Tata Steel Ltd, (which runs a 850-bed hospital and rural projects in 800 villages around Jamshedpur), spends about US$ 31.58 million as part of its annual revenue expenditure. Now there are plans to also introduce CSR in the small and medium enterprises (SME) sector to increase its reach in remote areas.
1. Corporate Social Responsibility in India - An Empirical Research
    By Bernadette Dsilva
2. CSR could prove to be a valuable asset in an age of M&As, as it helps firms spread their brand name  - Maitreyee Handique
3. Corporate Social Responsibility is no longer just an addition, it is a key  differentiator."   Prasad Chandra, CMD, BASF South Asia 

Dr. V.V.S.K. Prasad M.Com, MBA, Ph.DProfessor in MBAThe Hindu College-MBAMachilipatnam

Two Cheers for Companies Bill

The proposed amendments on CSR and on regulation of private limited companies are quite excessive in scope.
The recent reform announcements ought to shake the Indian economy and corporate houses out of their slumber, provided Parliament does not stop the government in its tracks.
opposition parties have raised an uproar in Parliament against FDI in retail. If the policy changes earlier announced by the government survive the onslaught of Parliament, the lost excitement is expected to return.
This should not only restore, but revitalise foreign investors’ confidence in the India Inc story. Many corporations have started reviving their plans for making an entry into India.
One such announcement was made by the Cabinet in October to amend the Companies Bill, 2011, which is expected to be introduced in its amended avatar in the ongoing winter session of Parliament.

One critical proposal in the amended Companies Bill that should worry businesses is that of corporate social responsibility (CSR) being made mandatory for companies with net worth exceeding Rs 500 crore, or their turnover exceeding Rs 1,000 crore, or their net profit exceeding Rs 5 crore.
Under this proposal, both private and public companies will be treated alike. Thus, a company that crosses any one of these limits will be legally required to contribute 2 per cent of its average profits of the preceding three years towards CSR activities listed in the Companies Bill. The errant company’s board of directors will also need to provide reasons for non-compliance.
This could hit companies hard, since 2 per cent of a company’s average profits is a significant chunk of money, especially when there is no clarity on whether such spending will be eligible for tax deduction from the income of the company.
The amendment further emphasises that preference should be given to local areas where the company operates.
In effect, it could generate more benefits to Indian States with a larger number of companies. Ideally, the location of CSR activities should have been left to the company’s discretion.
Another change is the shift of the benchmark rate for inter-corporate loans from the existing prevailing ‘bank rate’ of the RBI to the prevailing ‘interest on dated government securities’.
Consequently, interest rate on inter corporate loans cannot be lower than the prevailing interest on dated government securities. This shouldn’t be a significant change.
Other amendments include punishing a person who falsely induces a person to enter into financing arrangements with a view to obtaining credit facilities; retirement by rotation not being applicable to independent directors; the auditing partner of the statutory audit firm to be rotated at the discretion of the members of the company and not necessarily on an annual basis, and; the appointment of auditors for five years to be subject to ratification by the members at each annual general meeting.

The above amendments do not address some defective provisions in the Companies Bill. One of them is the limiting of the layer of subsidiaries to a total of two, for the purpose of making investments. This will unnecessarily restrict the investment structures that companies choose to adopt.
The concerns that companies operate with a complicated, opaque web of subsidiaries could have been addressed by enhancing disclosure standards, rather than imposing limits on the layers of subsidiaries.
Another concern is that private companies will be subject to greater control and regulations.
Presently, private companies are subjected to fewer compliance requirements than public companies.
The basis for relatively less statutory control is that these companies do not access public funds and thus public interest in them is minimal.
On this basis, the Companies Act, 1956, gives them an array of exemptions, some of which would now be taken away by the Companies Bill. This is going completely in the opposite direction — from a less controlled regime to one of greater control, which would adversely alter how private companies manage their affairs.
For example, private companies will require shareholders’ approval for preferential allotment of shares; they can issue only two classes of shares — equity and preference shares; voting rights will have to be proportionate to shareholding; they will be unable to commence business unless a prescribed declaration is filed with the Registrar of Companies (RoC); the profit and loss account will not be separately filed with RoC, meaning that their profit and loss positions will now come within the public domain, consent from directors will be required prior to appointment, loans to directors and their affiliated persons and inter-corporate loan, guarantee and investments will be subject to stringent conditions; and, interested directors will be debarred from voting.
Interestingly, a new Clause 462 has been introduced in Companies Bill giving power to the Central government to notify class or classes of companies to which certain provisions will not apply.
Possibly, the exemptions to private companies may be provided by way of separate notifications of the Central government. Whatever be the case, it would have made more sense if the private companies had continued to be less regulated.
Further, the Companies Bill does not clearly provide that acts and actions undertaken pursuant to the Companies Act, 1956 will be grandfathered i.e. the Companies Bill will not repeal them.
If that is the intention, then the language of Clause 465 dealing with this subject needs to be corrected.
Last but not the least, the benefits to ‘small companies’ should now be significantly enhanced.
Presently, these newly introduced categories of companies are exempted from preparing cash flow statements, their annual returns have to be signed by a company secretary, they can hold board meetings once in six months, and any merger will be through the Central government approval route, instead of National Company Law Tribunal route.
While the market reaction to the amendments has been largely positive, its long-term effects cannot be anticipated at this stage.
All in all, it’s a welcome step in the right direction, but still lacks complete transparency as to the intent, and the cause-and-effect relationship between the drafting and the interpretation of numerous clauses.
One hopes that the outcome is unequivocally a boost for India Inc. We hope it gets passed in this session of Parliament.