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Companies Amendment Bill Passed, Draws Flak From India Inc

Companies Amendment Bill Passed, Draws Flak From India Inc

Finance Minister said that the bill is aimed at promoting ease of doing business

Startups called the bill contrary to the govt’s Digital India plans

The amendments also mandate companies to explain their CSR spend

The Companies (Amendment) Bill has been passed by the Rajya Sabha this Tuesday on July 30. According to the new amendments, all companies are mandated to have a physical address and have to maintain a physical register of their operations.

“Now it has become mandatory that companies do have a physical address. Physical register is to be maintained so that people can go and check them and there is a veracity of their claims.” said India’s Finance Minister Nirmala Sitharaman. 

Speaking about the bill, Nirmala Sitharaman said that the amendments are aimed at enforcing a check on ‘shell companies’ and promoting ‘ease of doing business’ in the country. 

However, the industry response has been quite contrary to the government’s focus. As remote workforces become a popular trend in the Narendra Modi’s Digital India, mandatory physical office and register maintenance has been seen as a regressive step by the startup community. 

CommonFloor cofounder, Vikas Malpani said in a tweet, “Such a retrograde step, Estonia is providing e-residency and remote company starting up and India is going in reverse. You need younger team members to provide technology led solutions to your problems.”

While, an early-stage startup founder asked whether working from a coworking space be considered illegal now. Founder of a blockchain startup BlockVigil pointed towards the regressiveness of these amendments and said, “you are clueless about distributed teams, remote work, borderless payment systems that’s the norm in the rest of the world.” 

Shyamal Parikh, founder of SmartTask said, “small companies shouldn’t fall under the ambit, don’t harass startups please!” Another startup founder, Manish Upadhyay also questioned the motives of Modi-led government and said, “Looks like moving towards physical India rather than digital India.”  

In addition to this, the amendments have required companies to explain where they have spent their corporate social responsibility (CSR) fund. In cases where a company’s CSR fund is not spent under the span of three years, all the remaining funds will have to be moved into an escrow account. 

Also, the section 135 of the bill is being amended to provide for a specific penal provision in case of non-compliance of company CSR. 

In reply to the debate over Companies Amendment Bill in Rajya Sabha, Indian Finance Minister, Nirmala Sitharaman said, “Gandhiji’s trusteeship principle is with which profit-making can not be devoid of social responsibility. The amendments we are bringing now are only to sharp focus that and make it far more effective.”

This amendment also received resistance from companies who saw this as an overburden for as they are already paying taxes on the earned profits. The popular opinion remained that it’s the government’s responsibility to utilise company taxes for the social welfare and not the tax-paying companies. 

“Organisations and individuals possessing surplus wealth over and above their legitimate and genuine needs should spend it on community welfare programmers as part of their social responsibilities.” Gandhi wrote in a 1932 issue of Young India