Businesses and professionals have called for immediate reforms in the existing Companies Act to create a better climate for businesses in the country.
Terming the existing Companies Act ‘not suitable’ for the changing business context, they suggested that the government should update the act to ensure ease in doing business in the investment-starved country.
For ensuring a business-friendly atmosphere, they demanded inclusion of provisions, like – streamlining registration process of companies, and forming special tribunal or raising the number of benches to settle company disputes.
They also suggested effective merger and acquisition mechanisms, empowerment of RJSC (The Registrar of Joint Stock Companies), and removal of the provision of obtaining personal guarantees from directors and shareholders of the company.
Besides, they highlighted the importance of coordination among the regulatory bodies like RJSC, Bangladesh Bank, National Board of Revenue (NBR) and Bangladesh Securities and Exchange Commission (BSEC).
The demands and observations came at a roundtable on ‘Companies Act: Critical Reforms for Private Sector Development’, organised by Dhaka Chamber of Commerce and Industry (DCCI) at its auditorium in the capita on Thursday.
DCCI President Abul Kashem Khan moderated the discussion, where State Minister for Finance and Planning M A Mannan was present as the chief guest.
Senior Economist of IFC, World Bank Group Dr. M Masrur Reaz said the most critical rationale for modernising the companies act is to help induce formalisation of businesses.
He said Bangladesh has achieved significant progress on many social and economic aspects over the decade. But informality incidents in the economy are still higher, as 87 per cent jobs are informal while 64 per cent of the gross domestic product (GDP) comes from informal sectors.
“We’ll probably be moving ahead to get 8-9 per cent growth, but formalisation rate has to go up here (for that).”
He also said new types of business, like – single member company, are being formed globally that has prompted many developed countries to move towards such changes.
“The current (companies) act does not support new types of financing mechanism, like – private equity and employer stock scheme. Bangladesh now needs to move towards stronger corporate governance and management. An appropriate Companies Act can provide such a platform,” he added.
Former President of ICAB (Institute of Chartered Accountants of Bangladesh) Adeeb H Khan emphasised empowerment of RJSC to regulate private sector with the data it has.
He said the companies are burdened with multiple audits like statutory, commercial and tax.
“In the Act, there is a provision of secretarial audit. What is the need for that? I think, it is just creating an additional burden for the businesses.”
Chief Executive Officer (CEO) of Standard Chartered Bangladesh Naser Ezaz Bijoy highlighted the need for synchronisation of the multiple regulatory bodies, like – RJSC, NBR, BB and BSEC, that will help reduce the cost of doing business here.
“We may have acts and regulatory bodies, but the businesses will not get the benefits unless these are coordinated and enforced in a proper manner,” he opined.
Managing Partner of Akhtar Imam and Associates Barrister Rashna Imam termed colossal backlog of cases in the High Court (HC) division a serious concern for doing business in the country.
She said only one bench in the HC deals with the company matters. But the bench, simultaneously, has power to deal with a host of other matters.
“This is a problem, and disposal of company disputes in the HC has no connection with the speed (at which) the business is being done today. There has to be a connection.”
“The problem can be solved by increasing the number of benches or forming special tribunals like India, which can help reduce the load from the HC.”
About merger and acquisition, she said there is not enough legislative ground to deal with these matters.
“What is the benchmark against which merger should be adjudicated or sanctioned? This is not clear. We need to look at the issue very seriously,” she noted.
Commerce Secretary Shubhashish Bose was present in the programme as the special guest.
He said his ministry talked with all the stakeholders concerned about possible areas of changes in the act over the recent months as part of the government’s plan to make it an investment-friendly act.
“We hope we’ll be able to complete the draft within a week,” he opined.
The state minister for finance and planning said the government has been carrying out reforms in various areas to enable the country to cope with the challenges even in the post-LDC regime.
“We (the government) are giving enough space to the businesspeople in the policy-making level, and are working accordingly, so that the common people can benefit from such space,” he added.
Former DCCI presidents Matiur Rahman and Asif Ibrahim, and CEO of IDLC Arif Khan also spoke at the programme.