Govt to enforce stricter norms for Corporate Governance

Speed Post News Network

New Delhi : In continuation of its resolve to strengthen the rules and procedures of Corporate Governance, the government on September 6, 2017, took some major decisions to further strengthen these norms. It has been decided that in case the Director or authorized signatory of any “struck off” company tries to unauthorizedly siphon-off money from its bank account, he/she may attract punishment of imprisonment of not less than six months extendible to 10 years.

If it is found that the fraud involves public interest, the punishment shall not be less than 3 years and fine may also be imposed which would be three times the amount involved, according to a PIB release.

Consequent to instructions issued by Department of Financial Services (DoFS) to all the Banks on  September 5, 2017, the Directors (ex-) or their authorized signatories had been restricted from operating the Bank accounts of such companies and they can’t siphon off money from the accounts of these “struck off” companies. However, even prior to such action, if they have siphoned off any money, strict action would still be taken against them.

At a Review Meeting chaired by the Minister of State for Corporate Affairs P P Chaudhary on September 6, it was also decided that the Directors of such shell companies which have not filed returns for three or more years, will be disqualified from being appointed in any other company as Director or from being reappointed as Director in any of the companies where they had been Directors, thereby compelling them to vacate office. It is expected that as a result of this exercise, at least two to three lakh of such disqualified Directors shall get debarred, according to the PIB release.

Apart from the action restricting the operation of bank accounts of these companies and consequential effect on the Directors, all efforts are also being made to identify the actual beneficiaries and persons behind such Shell Companies. Profiles of Directors such as their background, antecedents and their role in the operations/functioning of these companies are being compiled in collaboration with enforcement agencies. Identification of more Shell Companies is also in progress. The Professionals, Chartered Accountants/ Company Secretaries/ Cost Accountants associated with such Shell Companies and involved in illegal activities have been identified in certain cases and the action by Professional Institutes such as ICAI, ICSI and ICAoI are being monitored, according to the release.