Assocham against NSEL merger with parent firm FTIL
Opposing the proposed merger of crisis-hit National Spot Exchange Ltd (NSEL) with its parent FTIL, industry body Assocham has said that a company cannot be held liable for "any alleged liability" of a subsidiary.
To safeguard the interest of investors and creditors in the wake of a Rs 5,600-crore payment crisis at NSEL, the Corporate Affairs Ministry last year proposed a merger of the spot exchange with Financial Technologies India Ltd (FTIL).
The draft order for the merger has, however, been opposed by FTIL.
"...The proposed forced amalgamation of NSEL with FTIL through an administrative order... Would set a very dangerous precedent in the domestic corporate sector, as it ignores valuable rights granted under law to the various stakeholders of a company," Assocham said in a letter to Minister of Finance and Corporate Affairs Arun Jaitley.
The industry chamber said that a company cannot be held liable for alleged events at its subsidiary and/or for any alleged liability of its subsidiary, unless and until adjudicated by a court of law.
"It will destroy the concept of "limited liability" which is the fundamental principle of corporate jurisprudence," Assocham said, while claiming that the merger would adversely affect over 63000 shareholders and more than 1,000 employees at FTIL.
Asking the government to reconsider the draft merger order, Assocham said that the proposed amalgamation would have far-reaching ramification for all Indian companies and global investors.
Meanwhile, Corporate Affairs Ministry yesterday finalised the share swap ratio for the proposed merger of crisis-hit NSEL with its parent Financial Technologies, which itself will not get any share.
This assessment order would be "effective, if and only if, the central government finally decides to amalgamate NSEL with its holding company FTIL", the ministry had said.