The Hindu Business Line : No rap if wrapped well

THE Companies (Amendment) Bill, 2003, vide Section 205(10), proposes to clampdown on gifts being given or demanded at any annual general meeting (AGM) either in lieu of, or in addition to, dividend. But it post-haste makes a climb-down when the subsequent sub-section goes on to define gift not to include any discount coupon or any food or beverages offered at any general meeting.

The Department of Company Affairs (DCA) has, over a period of years, been unfavourably disposed towards the practice of companies giving gifts to its members.

Even without legal mandate, it seems it has instructed public sector companies not to give gifts at general meetings. But what exactly is the harm in giving a harmless gift to members who have hotfooted to the meeting venue?

There is a view that offer of gifts results in a mad scramble throwing the meeting into a tizzy. But experience shows that this is not always true. Good managements arrange for the orderly distribution of gift packets at the entry point itself where members'/proxies' credentials are verified.

At any rate when food packets can be distributed, why cavil at non-food items. Or is it that the Department goes whole hog with the saying "the way to a man's heart is through his stomach"?

Obstreperous members perhaps can be counted to maintain supine and stoic silence once their hunger is sated. But then that would be a hammer blow to healthy debate, the raison d'etre of any meeting.

The thaw in favour of discount coupon virtually turns the initial prohibition on its head.

After all, all items of gifts can be camouflaged as gift coupons. In other words, gifts can be coupon packed. Companies in the event would thumb their nose at what appears to be a solemn ban.

Should the Department invite such a brazen and widespread ridicule engineered by its own flip-flop?

Let us assume that a company wants to gift a watch worth Rs 1,000 to each member attending the meeting.

Outright gift of the same at the meeting may make the company fall foul of the mandate of the law. But if the company ties up with the watch distributor or seller, it can practically achieve the same results. After all, there is no cap on the extent of discount a company can offer to its members.

In the event, the discount coupon specially designed may even beget a 99 per cent discount reducing the whole thing to a mockery. There is a view that the thaw in favour of gifts is restricted to gifts of company's own products. But this impression is belied by the use of the prefix `any' before the word `gift'. Yes, companies can stare at the gift horse. Only they have to adopt the legalised subterfuge. But that would be no big deal. As far as shareholders are concerned, they will in the new denouement make a scramble for coupons. But scramble they will.

Let managements, however, be forewarned — do not distribute eggs though it is a food item and not in the Department's hate list. Because far from being used to satiate one's hunger, it could be used as a missile.

Angry members may make a dash for collection of eggs. Eventually the chairman of the meeting could end up with egg on his face.

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