The Hindu Business Line : Easy exit route for companies sought

WHILE appreciating the consultative approach adopted by the Government towards framing legislation and enforcement mechanism to monitor and regulate companies, India Inc has suggested that certain provisions in the law should have a sunset clause that requires review after three to five years.

With less than a fortnight to go before the deadline for submission of their views on the concept paper for simplified company law circulated by the Ministry of Company Affairs expires, the PHD Chamber of Commerce and Industry (PHDCCI) has said that issues such as corporate reporting norms and those relating to disclosure of employees getting remuneration beyond the limit, should be periodically reviewed.

In fact, the entire legislation should be reviewed after every 7 to 10 years to bring about desired modifications in line with the changing environment. "There is no doubt that law is needed as a deterrent to impose discipline in any society, but more important is the manner in which its implementation is ensured," the chamber stated.

One aspect that needs to be addressed is that of providing an easy exit route to the companies.

"There are a number of companies that are either non-operational or are sick but have to continue in the absence of a simplified exit route. The Simplified Exit Scheme of the Government did not have a very encouraging response due to lack of clarity on certain issues. Even in cases where a company was not operational, it was required to file a return," chamber official pointed out.

Besides, the financial cost of the scheme for the companies, which are already defunct, should be minimal, the chamber said.

The proposal to impose cess for the revival of sick companies is also uncalled for, the official stated.

Elaborating further, sources said, "In the present times when the business is faced with stiff competition, providing of assistance to the sick companies by the Government will be grossly unfair to the companies that have more efficient management. The economic cost of revival of the company in such cases would be much more than the gains from revival."

Therefore, instead of trying to revive sick units and penalising efficient managements, an easy exit route may be provided for companies where the management feels that the company may not remain competitive or operational, PHDCCI said.

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