Companies act needs robust reform: analysts
With the expansion of the economy, the country's companies act needs a robust reform in order to cut the cost of doing business and attract foreign investment, said speakers yesterday.
The reforms of the act may ease the doing of business and could attract more foreign direct investment, said Arif Khan, chief executive officer of IDLC Limited.
He was echoed by a number of speakers at a discussion on “Companies Act: critical reforms for private sector development” organised by the Dhaka Chamber of Commerce and Industry (DCCI) in its office in the capital.
Masrur Reaz, senior economist of the International Finance Corporation, emphasised simplification of the companies law so that it could aid the ease of doing business.
“Bangladesh is ranked 177th in the ease of doing business index out of 180 countries. So, we need to go for corporate governance and corporate management system. The modernisation of the companies act is very essential for attracting FDI,” he said.
Naser Ezaz Bijoy, CEO of Standard Chartered Bangladesh, said the registration process of companies needs to be fully automated and the new law should focus on simplification of merger and acquisition.
He also said the new law should be formulated based on the country's need instead of being a copy and paste version of laws of other countries.
The initiative to amend the act has remained stalled since 2013 although the economy has witnessed a lot of changes over the years. There is only one bench dedicated to resolve company-related cases in the High Court. As a result, dispute settlement takes many years, businesspeople said.
“A robust company law regime is a must,” said Barrister Rashna Imam, an advocate of the Supreme Court, adding that the number of benches in the HC should either be increased or a specialised tribunal set up.
Adeeb H Khan, senior partner of KPMG Bangladesh, said although the office of the Registrar of Joint Stock Companies (RJSC) claims that it has drastically reduced the time needed to register new companies, it still takes more than a week compared to only two days in some other countries.
“The government needs to improve the RJSC as it has a scope to be a regulator of the private sector,” he said. Most of the time the official server of the RJSC remains down, said a number of discussants.
Shubhashish Bose, commerce secretary, said the companies act was formulated in 1930 and amended in 1994.
“For the sake of greater interest of the businesses and the economy we feel that it needs a further amendment.”
He said the government is focusing on ease of the share transfer process, taxation policy and reduction of fees to formulate the new companies act.
“By the next week, the compilation of new companies act will be finalised.”
MA Mannan, state minister for finance and planning, said he has discussed with the stakeholders while compiling the revision of the act. The revision will benefit the businesses, he said.
DCCI President Abul Kasem Khan said if the new companies act comes into effect, it would bring more companies under the tax net and increase government revenue.
Asif Ibrahim, a former DCCI president, said the country has many laws and regulations, but there was no proper implementation. “We need to customise our companies act according to our own interest.”
Arif Khan of IDLC Ltd said currently, Bangladesh gets only $2 billion in FDI which was very low compared to the amount attracted by Singapore and Vietnam as they have amended their laws to make them FDI-friendly.
“Our corporate governance is weak and most of the functions of registration process are paper-based. We need to go for automation,” said Khan.
He called for coordination among the RJSC, Bangladesh Bank, the Bangladesh Securities and Exchange Commission, the National Board of Revenue, Bangladesh Investment Development Authority, city corporations and other regulators.
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