The Confederation of Indian Industry on Friday opposed some provisions, especially on the proposed move to the new definition of a subsidiary, and that a subsidiary cannot have another subsidiary, in the Companies Bill, saying that it will stunt growth in the corporate sector.
"CII is seriously concerned over some of the provisions of the Companies (Amendment) Bill and provisions that stunt growth, place needless speed breakers in the path of corporate performance or hinder competitiveness," the chamber said in a submission to Prime Minister Atal Behari Vajpayee and Finance Minister Jaswant Singh.
On the new definition of subsidiary, which has 50 per cent or more paid-up capital, CII raised the objection that it was "conceptually wrong" because such capital could consist of preference shares, which had no voting rights.
"The current definition should be either control over the board of directors or 50 per cent or more of voting rights of a company or both -- which is the existing definition," the chamber said.
Objecting to the proposed clause that a subsidiary cannot have another subsidiary, CII pointed out that the Indian companies were competing with multinationals, which had no restrictions in having multi-layered subsidiaries and special purpose vehicles.
It said the experience of divestment showed that the multi-layered SPVs were often the preferred instruments and more significantly, there were hardly any investments in the infrastructure sector.