Subhomoy Bhattacharjee: Tell us about the new Companies Bill that you have worked on and any other major initiatives youve taken.
Premchand Gupta: In a changed global scenario,unless we encourage our corporate sector we cannot create new jobs and wealth; unless we provide a level playing field for them to grow,we will not have jobs for our youth. We are a young nation,with millions of trained,untrained youth looking for jobs every year. So the first thing we did was to make a revision of the Companies Act. The present Act was enacted in 1956. It was amended 25 times. We realised we need a comprehensive new Companies Act. For that,I initiated a consultative process. I decided to appoint a committee headed by Dr. JJ Irani. I didnt have any government representative on this committee except for representatives from the Reserve Bank of India which is mandatory. Based on the recommendations,I introduced a new bill in Parliament during the winter session.
This new Companies Bill is a very good piece of legislation once it is approved. It is a simplified Companies Bill; if any adjustment is required then it can be done through notification. In the current Act,there are limitations and for every small thing one has to go to Parliament for approval. We have also decided there will be no limitation in the number of partners in the partnership firms. So the new Limited Liability Partnership (LLP) Bill was cleared by Parliament. Now there can be multifarious activities under the LLP umbrella. Chartered accountants,company secretaries,lawyers,cost accountants and others can all come together as partners. The present system doesnt permit a chartered accountant to have a company secretary as a partner.
Again,unless we have a better delivery system,our working wont improve. We have introduced the concept of MCA 21. Until the interface of officers with the corporate sector is reduced to nil,there can be no improvement in the system. The formation of a company used to take three months,now it can be done in 48 hours. And if states agree,a company can be formed in two hoursthat is,if the stamp duty issue is resolved.
Neha Pal: After the Satyam scandal,how does the government plan to prevent such kinds of frauds in the future?
The government is looking into the role of regulators and of regulations. Whatever action was required has been taken by our ministry. I think we have reacted swiftly. I cannot share the report of the Registrar of Companies; all I can say is that on the basis of that,the government has asked the Serious Fraud Investigation Office to probe into this matter. Please be patient.
Neha Pal: How closely is the government working with the new Satyam Board?
The secretary of Corporate Affairs,Anurag Goel,is in constant touch with the new board members and whatever decisions need to be taken will be taken as and when required.
Neha Pal: What do you have to say about the investigation into the eight Satyam subsidiaries?
The investigation has just started. It will take some time. The SFIO will look into the eight subsidiaries of Satyam and all their financial affairs. It will submit its report in three months.
Shekhar Gupta: Are we doing something about companies squatting on a name? What if a company has registered many names and squats on them?
There was a time limit of six months and now it has been reduced to one month. You can block a name and if you dont use if for a month then it automatically goes to the website and anybody can register the name.
Shekhar Gupta: Can people float a company and sit on it forever? Closing a company is very tough.
Now that has also become easy. There were nine lakh companies registered and no exit route. I gave them easy access to an exit. I gave them six monthsthose who are defunct could just file a simple form about the last three years with a statement that there are no statutory liabilities outstanding. Then they can file the documents and have the name deleted. One hundred and fifty thousand companies came forward and adopted this exit route.
Shekhar Gupta: It used to be said that between the troika of Companies Act,the Foreign Exchange Regulation Act (FERA) and the Income Tax Act,there was not one thing that you could do right if you were a businessman.
FERA has been repealed,now it is FEMA. FERA had an important role to play but it was misused.
Dheeraj Nayyar: There is an absence of an orderly bankruptcy law. Is there a way in which a company can reorganise itself if it is hit by the financial crisis?
We conceived the concept of the National Company Law Tribunal. The purpose was to create one window: NCLT will take care of all acquisitions,mergers,readjustments,liquidations,bankruptcies,sick companies. We decided that NCLT should replace the Board for Industrial and Financial Reconstruction; it should also replace the Company Law Board. Unfortunately,the issue is pending in the Supreme Court but I hope it will be resolved soon. Once NCLT is in place,everything can be done from one place.
Dheeraj Nayyar: In the current economic crisis,does your ministry have any plans to deal with firms that are going sick? Will those firms be rescued?
Well,the government has given two packages already to the corporate sector and a massive relief through the banking system too. Every arm of the government is trying to ensure that the corporate sector gets some relief so that we dont go into recession.
Rishi Raj: Your ministry is in the limelight on the issue of corporate governance. In the Nagarjuna Finance case,two executives of the company have been arrested. There is also a warrant out against Nimesh Kampani,one of the independent directors of the company. Why should independent directors be hauled up for day-to-day operations?
Nagarjuna Finance is a non-banking finance company (NBFC). Such NBFCs are regulated by the RBI and not by us. People depositing money in them see the name of celebrities and assume nothing can go wrong. The present Companies Act holds all the directors on a par. An independent director is supposed to be a person of integrity,a person of repute and one with no vested interests,direct or indirect,in the working of the company or in its equity or even of its subsidiaries. But in the new Company Bill,we are recognising them in a different category. We call the key executive personnel as key managerial persons. For any omission or commission of the company,they would be responsible and not the independent directors unless their involvement is proved beyond doubt and that too by the government. In the present Act,it is the person who has to prove that he is innocent.
Subhomoy Bhattacharjee: Kampani is an independent director. You said many companies raise funds in the name of celebrity directors. But who,finally,bears the responsibility?
In this particular case,we may term Mr. Kampani an independent director. The present Act does not distinguish between directorsall the directors are alike and are responsible for any omission and commission of the company. As I said,in the new Act we have recognised the concept of key managerial person.
Subhomoy Bhattacharjee: Will it be safer for independent directors to resign en masse if they dont want to take the risk of being hauled up for any act of omission by the company 10 years later?
I will reiterate: the present Act doesnt recognise the concept of independent directors. Thats why we decided on the key managerial concept so that all the directors are not responsible,unless and until a particular director has been a party to the omission and commission of the company.
Rishi Raj: Once the New Companies Act is passed,will all other existing Acts be overruled?
Different states can pass their own Acts.
Neha Pal: If a company does not follow the corporate governance norms,can it be prosecuted?
The subject of corporate governance is not a written theory. It is a mindset,a way of doing business,a way of thinking.
Neha Pal: How exactly is LLP going to help the whole economy?
My target is that on the first of April,we should be able to register the LLP regime. It will help our professionals. Suppose,a scientist has some innovation but does not have the money to give it commercial shape,he can take a commercial partner and say that the technology and the idea would be his responsibility while finance and marketing would be the partners job. In LLP,you would have both partnership as well as a limited company.
Surabhi Agarwal: The Competition Commission of India is still not fully functional. When do we expect to see it working?
There is no delay on our part. The issue was pending in the Supreme Court because of certain legal challenges. But we have got all the issues resolved now and both houses of Parliament have passed the amended Competition Commission Bill. The selection committee has been formed,the selection has been made and the appointments are in the process. In a matter of months,the Commission should be functional.
Sandeep Das: What happens to the problem of vanishing companies and plantation companies?
We have identified about 100-odd companies and prosecuted their directors,promoters,and some of them were put behind bars. The plantation companies are regulated by the Reserve Bank of India.
Maneesh Chibber: How will you ensure the passage of the new Companies Bill considering that the next session of Parliament will probably be the last one and the next government may not act on it?
Enactments like this are not closed by subsequent governments. I feel no one would do that because this Act is required in todays context and the Standing Committee of Parliament comprises all political parties. Only controversial Acts are not taken forward.
J.P. Yadav: There is a strong perception that you are Lalus Amar Singh?
People may say many things. The fact of the matter is I believe in myself,my work,and I work for the party,for the leadership. I dont believe in certain types of activities.
Subhomoy Bhattacharjee: Where did Lalu Yadav go wrong in Bihar?
Laluji is a misunderstood person. He is a great reformist. But no state can progress without the support of the Central government. At least 80 per cent of the states resources go towards fixed expenses. The NDA government blocked resources for Bihar. The UPA government has ensured that the Bihar government gets its due share.
J.P. Yadav: What have you,in your individual capacity,done for Bihar?
The first MCA 21 projectthat of computerisation of registrar of companieswas completed in Bihar. I have encouraged various corporate houses to invest in the state. As a part of the Cabinet,I have always advocated maximum grants for the state. I took up the issue of regional imbalance. The projects which were pending like 2000 MW super thermal power plant in Badh was given top priority. In Motihari,we encouraged a Kolkata-based corporate house to set up a large composite sugar factory.
Ravish Tiwari: What are your views on corporate funding of political parties?
Political funding by the corporate sector should be allowed if paid by cheque.
Subhomoy Bhattacharjee: In the current global financial situation,companies are worrying about how to mark their losses. Is there any proposal to give specific waivers on some provisions in 2009?
Unless and until we have more transparency in the reporting system,these problems will continue and for that,our corporate sector should cooperate. Today,we are a part of the global economy; we cant have an accounting system that is different from western countries. It is important that we have IFRS (International Financial Regulatory Standards) in place by 2011 and our corporate sector should adopt those.
Transcribed by Urmila Rao