Loss-making firms to pay Rs 75,000 to managers

 THE GOVERNMENT said on Monday it has issued orders that companies with a capital of Rs 1 crore have to pay a minimum of Rs 75,000 monthly remuneration to a managerial personnel effective from March 2000, even if it is incurring losses.

The department of company affairs order intended to rationalise appointment of managerial personnel and payment of remuneration for companies earning inadequate or no profit, has fixed the minimum payment at Rs 1 lakh for companies with a capital ranging between Rs 1-5 crore.

Companies with a capital of more than Rs 5 crore and less than Rs 25 crore, have to pay a minimum package of rs 1.25 lakh while it is Rs 1.5 lakh for companies with capital ranging between Rs 25-100 crore.

Companies with capital base of more than Rs 100 crore have to pay Rs two lakh to their managers.

The move comes after requests by subsidiaries of public sector companies to appoint managers with a pay package more than the stipulated amount.

"Where a particular company intends to pay a remuneration higher than that prescribed in the Companies Act, an application may be made to the DCA giving details of the justification along with a copy of the resolution passed by the board," DCA said in a release

KUMARMANGALAM Birla, who headed the Securities and Exchange Board of India committee on corporate governance, on Friday indicated that companies not complying with the code were likely to witness fall in their share prices. All companies specified by the Sebi were required to comply with the corporate governance code, and if there was non-compliance it would become apparent in their share prices, Birla told reporters on the sidelines of the international conference on corporate governance here. Speaking at the conference, the chairman of Aditya Birla Group said corporate governance was a soft issue, but hard headed investors were putting their money more in companies which were implementing it. Foreign investors place high value on companies which had sound corporate governance, he said. Corporate governance has to be backed by good management and sound strategies, he said, adding that the initial strategy should be to increase transparency. Although there were difficulties in implementing the code, he said it would lead to a higher valuation of company's share and deter takeover attempts by providing a "wall of defence" and allows companies to focus more on long term growth strategies, he said. Former chief justice A M Ahmedi said a corporate would be known better for its social commitments and how it managed its business and not just in terms of the hefty profit it earns. Lack of corporate governance, he said, lead to syphoning of funds and sickness in some section of the industry. Ahmedi said the large backlog of cases in courts was affecting the country's gross domestic product as revenue was blocked during the period when the matter was on the court. World quality council chairman Madhav Mehra said the company's board of directors had a role beyond the financial responsibility of corporate governance. "The country's economy depends on the drive and efficiency of the boards of management of its companies. The effectiveness with which their boards discharge their responsibility would determine India's competitive position," he added

COMMERCE and industry minister Murasoli Maran on Friday cleared 49 foreign direct investment proposals worth Rs 769 crore, including those of Champagne Moet and Chandon of France to set up a 100 per cent subsidiary for bulk imports and exports of wines and spirits, fashion and leather goods, and other luxury items, and Caltex Lubricants India to acquire 100 per cent stake in Chennai-based Chemoleums Ltd. Modi Rubber’s proposal to transfer 40 per cent equity in the company to non resident Indians and overseas corporate bodies for Rs 10.02 crore has also been cleared. Taj Telephone and Cable Ltd of the UK has been permitted to rework its proposal to set up a 100 per cent owned holding company for further downstream ventures in telecom sector with investment of Rs 350 crore. The company proposes to lay dark fibre. It would also invest in other telecom services. Champagne Moet & Chandon will invest Rs 11.50 crore in the project while Caltex, the Indian subsidiary of the US gas and petro products major, is set to acquire Chemoleums for Rs 16.10 crore. Baker Norton International of Switzerland got nod to set up a 100 per cent unit for research and development of bulk drugs with an initial investment of Rs 4.65 crore. Gilat Satellite Networks (Holland) BV has been allowed to set up a 100 per cent subsidiary with initial investment of Rs 46 lakh to import, market, sell and licence hi-tech systems relating to satellite and VSAT technologies and auxiliary/ancillary equipment. Digicom Networks Business Solutions India as been allowed to be incorporated as a 100 per cent foreign-owned entity with investment of Rs 4.18 crore to operate internet services. Inprise Corporation of the US has been allowed to set up 100 per cent subsidiary with investment of Rs 46 crore to provide specialised after sales services, marketing and distribution of high technology software application and systems, software consultancy and solutions. Elbee Services has been allowed to convert outstanding interest into foreign equity. The proposal of Mail.Com BMS Holdings to set up a downstream subsidiary with investment of Rs 46.50 crore was also cleared. Customer Management Group Inc of the US has been permitted to set up to a fully- owned subsidiary with investment of Rs 92 crore to setting up call centres and data centres and undertake billing and billing information services. Taylor Nelson Sofres Asia Pacific has been allowed to convert the existing joint venture into a fully owned subsidiary while Publi Promotion Network Asia had been allowed to acquire 40 per cent stake in Mediascope Promotion Network (I) for Rs 3.60 crore.

The government is in the process of formulating a third set of amendments in the company law pertaining to insolvency of listed companies. Speaking at the launch of Jaago Investor’s Abhiyan organized by the by the Investors Grievances Forum at the Bombay Stock Exchange (BSE), the minister of law, Arun Jaithly said “ the government has appointed a committee to look into the issue and some of the suggestions of the panel like time limit for liquidations are being seriously considered.” The move is aimed at simplifying and speeding up winding up procedures in case of insolvency. Meanwhile, the government-controlled investor’s protection fund is shortly expected to start operation. The funds, which being set up out of the monies remaining in unclaimed dividends of listed companies, will have active participation of investors and consumer organizations. The entire administration and character of the fund is being designed in such a manner so as to enhance investor awareness through education programmes, seminars etc,” Mr. Jaithly added. Besides the protection fund, the Union government is also setting up a Center of Corporate Excellence (CCE) in order to encourage better corporate governance and will institute awards for companies for the best investor-friendly practices. Apart from initiatives of non-government organizations and investor associations, the finance ministry has asked stock exchanges and regulators to strictly monitor that nobody takes investors for a ride. “ The market should not be run by a handful of people to mislead investors. Only, then investor faith will be sustained in the stock markets,” said finance minister, Yashwant Sinha. Source: The Economic Times Dated: 19 January 2001

SEBI’s insistence on consolidated accounts by corporates has finally been accepted by the Institute of Chartered Accountants of India (ICAI). The onstitute has now come out with an exposure draft of the proposed accounting standards on consolidated financial statements. ICAI did not appear particularly keen on coming out with the draft of the standards. It is felt that certain members of ICAI were comfortable with the existing practices and Sebi’s insistence on consolidated statements would make things more complicated for them. On its part, Sebi didn’the seem impressed by ICAI’s alleged dilatory tactics. To show that it meant business, it threatened to adopt the international accounting standard on consolidated statements. It seems this threat worked and ICAI has now come out with own drafts standard. Sebi has prescribed that it will be compulsory for listed companies to present consolidated financial statements from April 1,2001. ICAI final draft is likely to be in palace by April or May this year, and as a result, would become applicable for companies closing their financial year in June’01 or later. The accounting standard for consolidated statements, to be made mandatory, proposes that an enterprise having one or more subsidiaries should present consolidated financial statements. The accounting standard will apply to all subsidiaries except in those cases where control of the parent on a subsidiary is intended to be temporary or where a subsidiary operates under severe long term restriction which significantly impairs it ability to transfer funds to the parent. The draft, while laying down the procedure to be followed for consolidating financial statements, states that the letter would be in addition to its separate financial statements. What would be of interest to the readers of balance sheet is that intra group[ balances and intra group transactions and resulting unrealized profits would need to be eliminated in full. Unrealised losses resulting from intra group transaction would also be need to be eliminated unless the cost can-not be recovered. The new standard, therefore, seeks to give the correct picture of financial statements of a group and eliminate several ill practices followed by Indian business houses. Source: The Economic Times Dated: 5th January 2001