News and views on new Companies Act
The government wishes to get a grip on the unregulated business of the multi-level marketing and illegal banking of cooperative societies. So, it moved for a change in the relevant law but ended up with a wrong one that has every ominous potential to become a black law for the private sector.
If it comes into effect, the government can take over any private business it wants. That is precisely what the amendment to the Bangladesh Companies Act 1994 approved by the cabinet Monday would empower the government to do. Such is the extent of the authority vested in the amendment that the government will not even require permission from the court for any takeover.
More disturbingly, the government will not be held responsible for any financial loss the private enterprise may have incurred after the takeover. No wonder why it has sent a chill down the spine of the private sector. Businesspeople will be at the total mercy of the government, ruling politicians, to be precise. Keep the politicians happy or face doom!
All that the government should have wanted in safeguarding people’s interest is to go after the MLM swindlers and errant cooperatives. Small changes in parts of the relevant law or enforcing the law that fits the crime would have served the purpose very well.
But, intentionally or unintentionally, the government has gone to an extreme — that is by legalising its scope to take over private businesses. The government should have restricted its authority by ensuring good financial governance, punishing errant businesses and shutting out illegal ones. Instead, the government appeared keener on appointing its administrators. Taking over private businesses under any pretext just cannot be government business. It is downright criminal and tantamount to usurping private property.
The call for a reform to financial governance or a revisit to the existing laws grew louder against the backdrop of an alarming rise in swindling by multi-level marketing companies and illegal banking by cooperative societies, with Destiny Group in the forefront.
Now, do we really need a new law or a government takeover to fix these menacing irregularities? Could the illegal banking not be stopped or swindlers be punished by enforcing any of the existing laws?
For example, as per Cooperative Societies Act, no cooperative society can indulge in banking. Illegal banking by the cooperative wing of Destiny Group caught the relevant ministry and the central bank napping. Belatedly though, the central bank has acted on the irregularity by freezing its bank accounts. The National Board of Revenue is trying to find out tax anomalies and the Anti-Corruption Commission too weighed in to take care of graft issues. If there is any money-laundering issue, the government does have a specific law in hand to deal with it. If any criminal offence is committed, the Penal Code can come into play. That is exactly how a law should take its own course.
Destiny Group is accused of swindling people through its controversial MLM business. This pyramid business model, which makes a few people at the top richer and millions at the bottom losers, may not be illegal yet across the world. But it is highly controversial indeed. So, what our government should have done? Like other countries, we could have got the people aware of the controversy and swindling surrounding the business. A regulatory body should have been in place to watch its activities.
Then why is the need for a takeover? Why should the government be too keen to take this additional burden to run a business entity?
The law must put a leash on runaway businesses such as Destiny Group but it must not punish the private sector as a whole. Why didn’t the government care to sit with business leaders before altering the law? If it had done so, it could have taken into account the opinions of the business community.
With the change in law in place to regulate rogue companies by appointing administrators, we wonder how far the government can go. Is this the end of the private sector, successes of which keep the country afloat against the failure of the public sector? Who will make sure future governments do not lean on private businesses if they fall out with the governments?
There is none in this case.
The judiciary has been curiously kept out of the loop. The government has decided to call all the shots.
The government has reserved the absolute power to serve notice on the board of directors of a company seeking explanation why it should not be governed by an administrator. Again, it is the government that will decide whether the company’s explanation is satisfactory or not. It is the government that will finally decide whether to appoint an administrator to the company.
But what should be the mechanism of the government before coming to this observation? In reality, such observation or directive can only come from the court.
Our next-door neighbour, India, provides a good example. On August 31, India’s Supreme Court ruled that finance schemes run by two Sahara companies were illegal and ordered it to repay $4.5 billion to up to almost 30 million mostly small investors, plus interest.
Sahara employed agents to raise deposits from rural Indians. The sums are small, but important to the customers who trusted the company with their limited savings.
The case has thrown a rare light on the unlisted giant whose interests range across finance, housing, media and entertainment. But the Indian government did not appoint an administrator to discipline the dodgy company. Everything proceeded through the court system.
So, we ask the government to wake up to its senses. It must play the game by the rules. Powers should be entrusted with the court to decide on whether to appoint an administrator in any company. The court should only appoint an audit or chartered accounting firm. Not just anybody, certainly not a bureaucrat. So, go to court, if need be. But let businesspeople mind their own business.