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Govt to review cap on investment company
Abhijit Roy Chowdhury in New Delhi |
May 20, 2003 17:39 IST
After the introduction of the Companies Amendment Bill 2003 in the Rajya Sabha recently, the government is contemplating to examine the merits of the proposed provision that would make it mandatory for every corporate to route its investments only through one investment company.
"After a review of the proposal, we will may make appropriate changes," official sources told rediff.com.
In the wake of the findings of the Joint Parliamentary Committee on the stock market scam that surfaced in 2001, the Centre has, through the Companies Bill, brought about certain changes to the existing provisions on inter-corporate investments and loans.
The Bill stipulates that "every company shall make investment only through one investment company."
Corporate India, however, is agitated with the proposal. This, say industry organisations, will limit the ability of companies to grow laterally and horizontally. They argue that the corporate sector have always gone for investment subsidiaries partly due to regulatory pressures and partly to contain the risk in the parent company's balance sheet.
They also highlighted that Indian companies have been forming subsidiaries to invest in overseas companies, to form joint ventures or establish new projects that are not directly related to its core business.
In particular, the Bill provides that the Centre would prescribe, for class or classes of companies registered as stock broker or any other intermediary under section 12 of the Securities and Exchange Board of India Act, the limit up to which such companies may receive inter-corporate loans or deposits and the extent to which any company may make loan or inter corporate deposits or inter corporate investments.
Industry is likely to pitch for withdrawal of the proposed provision on investment companies.