Is the Companies Bill 2013 carrying away India Inc's flexibility?

However, the Bill has given immunity to Indian companies acquiring foreign companies with more than two layers of subsidiaries, and to subsidiaries that are required to have investment subsidiary under any rules or regulations in force.

The Bill is expected to prevent companies creating several layers of investment companies to fulfill their hidden motives.

However, there is incongruity between the Companies Bill and the RBI in allowing the number of layers of Investment companies, as pointed out by Vineet Agarwal, Managing Director, Transport Corporation of India. While the new Companies Bill restricts Indian Companies from having more than two layers of investment subsidiaries, the RBI has restricted the number to only one. “This anomaly needs to be cleared,” says Agarwal.

The Bill, however, is not criticized by all. “Although this will reduce flexibility to make investments, it will help prevent creation of a web of investment companies leading to diversion of funds,” says Ashok Haldia, former Secretary of the CA Institute.

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