Problems relating to Trade and Investment on India

 
24. Indigested legislation, abrupt changes
Issue
Issue details
Requests
Reference
(1) Inadequate Delisting Rules - A firm established in India its subsidiary, which is listed due to the prevailing circumstances upon entry. It is difficult to delist such enterprise. In the event of delisting, the seller must be ready for risking the share prices to soar, since in India, public shareholders determine the selling prices. Such practices are not found in any other countries. In effect, it is costly to maintain the listed status, obstructing flexible and prompt actions for business reorganisation and effective management of group enterprises. The delisting rules remain unchanged by the 2009 amendment of the delisting guidelines. On the other hand, the means are not streamlined in India to force out the public shareholders for reasonable consideration. (There is no readily available means, to say the least.) Thus, even after delisting, there remain many public shareholders to the detriment of optimising the efficiency in corporate governance. - It is requested that GOI:
-- amends the delisting rules to make them more flexible (in the manner comparable to TOB rules in leading countries), and
-- streamlines the Act in the way that facilitates conversion of MFS into a fully owned subsidiary.		 - Securities and Exchange Board of India (Delisting Of Equity Shares) Regulations, 2009
(2) Opaqueness in Implementation of Laws and Taxation System - Legislative and taxation systems are quite complex, varying by each region, In addition, judgement in implementation varies by persons in charge. - It is requested that GOI takes steps to overhaul legislation and taxation systems and to ensure transparency in their implementation.
(3) Nebulous Preparation of the System Accompanying Introduction of New Companies Act - New companies act, which would not get passed over many years of deliberations, suddenly was carried at the diet. There is no denying that discussions have not yet been exhausted at the competent ministries and agencies and at the working level alike, clarification in detail is hoped for by decree, etc. that follow hereafter. However, there has been no announcement of the substantive schedule, frustrating the formulation of the new business plan that reflects the consequent amendments of legislative provisions under the new companies act.
- The new companies Act enforced since 2014 had to allow grace period of 6 to 12-months due to insufficient preparation.
Substantive example: modified depreciation cost
Shrinkage in the depreciation period by 2 to 4-years has compelled abridgement of the depreciation period. That resulted in increasing the depreciation cost and made it difficult to secure the budgeted profit.
- The new companies act promulgated by the Notice of 26 March 2014 was enforced on 1 April 2014. The extreme brevity of the period between the date of promulgation and enforcement has forced all concerned into a great consternation to make the requisite preparation.		 - It is requested that GOI clarifies, to the maximum extent possible, the precise details of the kind of decrees to be promulgated and the time-line for their preparation and implementation.
- It is requested that GOI takes step to ensure promulgation of new laws after a careful scrutiny into the sufficient preparation period and the implementation methods.
- It is requested that GOI takes step to ensure provision of time, adequately sufficient to make the needed preparation before the implementation.		 - Companies Act
- Companies Bill, 2013
- Companies Act 2013
- New Companies Act 1957
  (Action)
- In August 2013, the New Company Act (NCA) passed the Diet, without, however, resulting enforcement.
- On 26 March 2014, NCA's enforcement was abruptly promulgated. Since 1 April 2014, numerous provisions of the NCA have been implemented.
(4) Uniformity of the Fiscal Term under the New Companies Act - The New Companies Act (NCA) enforced in April 2014 sets forth the principle of the fiscal term to begin in April and end in March of the following year. In the case of a member firm, NCA applies from the fiscal year 2016, while all its subsidiaries abroad adopt the calendar year from January to December in their respective financial statements. It frustrates the member firm's preparation of the consolidated financial statement. - It is requested that GOI accepts the Fiscal Term of January through December as before, in response to the request of each affected company.
(5) Indefinite Accreditation Criteria for CSR Activity under the New Companies Act - The new companies act amended and enforced since year 2014 compels CSR activity upon enterprises, without, however, a clear-cut definition of the accreditation standard. It is time consuming to ascertain what it is. - It is requested that GOI establishes the clear criteria and guidelines. - The Companies Act
(6) Incompatible Labour Act and Judicial Decisions - Due to the premature labour act enforcement, MFS is struggling to respond it.. Employers acting exactly as written in labour act meet with judicial decision that totally ignores what's written in the law. For example, while the law expressly prohibits the district court from handing down decisions crossing the borders of more than 2-states excluding special location, district court ordered to move objects across the state border. The high court decided in support of the decision in district court. - It is requested that GOI takes step to overhaul the labour act in line with the prevailing circumstances. - Labour Act
(7) Lack of Information on Eligible Preferential Measures - Information on the following is hardly available regarding Indian policies:
(1) MPA policy (preferential market access) requires all goods procured by GOI or related institutions to be manufactured in India. It is assumed that MPA policy applies to printers.
(2) FPS policy (focus product scheme) provides preferential measures on goods listed in FPS policy. Whether printers are covered under this policy remains unconfirmed.		 - It is requested that GOI elucidate the details of PMA / FPS policies.
(8) PPP Scheme Unfair to Enterprises - The PPP project scheme precludes reasonable possibility for private sectors' earning profits. It is devoid of the basic principle of PPP for sharing risk and cost between public and private sectors.
For example, in railway transportation, GOI's compulsion of unfair ridership calculation and private sectors absorption of additional cost resulting from delays in the GOI's land expropriation.
Upon change to Modi administration, it was announced to kickoff public-private partnership projects (the 3P India) toward improvement of the scheme.
(Note) 3P India: Organisation to survey issues relative to regulations, administrations on the planned 3P India will examine, for the sake of improvement, issues related to regulation, management of contracts on public-private partnership projects.		 - It is requested that GOJ and the related organisations, etc. will approach GOI, urging improvement of the PPP scheme.

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