Chidambaram Asks Dca To Submit Report On Cos Bill

Finance minister P Chidambaram has directed the department of company affairs to submit a section-by-section analysis of the draft Companies Bill following several objections being raised by professional groups, industry organisations and investor protection forums.

The minister has given a month's time for the submission of the report.

One of the most vocal critics of the report is the Institute of Cost and Works Accountants of India (ICWAI) which has convened two press conferences to protest the removal of mandatory provisions for cost audits.

The draft bill provides for maintenance of cost (of production) data, but cost accountants argue that no company would maintain such data (for which a company would be required to hire a cost auditor) unless they know that there is a possibility that such data could be called for by the government.

 

The government's argument is that with the dismantling of price controls, cost audit has no relevance.

The opinion of the committee has been that since the government cannot promise the confidentiality of the data, cost audit should be done away with.

The committee had revived another recommendation of the Sachhar Committee that the cost accounting can be avoided by appointing of a chief financial officer (CFO) who is either a cost accountant or a chartered accountant.

Interestingly, the chambers of commerce and industry are objecting to this provision since hiring a chief financial officer (CFO) would entail additional cost to the company.

Investor protection organisations have been unhappy with the draft bill on the grounds that it is weak on investor protection measures.

For instance, despite the abuse of the provision of special resolution by companies (by registering corporate offices in inaccessible places to hamper proper investor representation at AGMs) the definition of special resolution remains untouched.

This provision defines a special resolution to mean approval for a proposal by 75 per cent of the shareholders present at an AGM.

Extensive abuse of this provisions has led to extended debate over that last few years as to whether postal ballot should be provided for.

Postal ballot has, however, been rejected by the expert committee on the grounds that the postal department is inadequate to the task of taking on this burden.