Pavan Kumar Vijay
Managing Director, Corporate Professionals
Would the provisions, as contained in the new Act, pertaining to Audit Accountability help prevention of corporate frauds like Satyam?
The new Company Law certainly seems to be a good attempt towards prevention of corporate frauds.
With the introduction of new provisions related to audit such as rotation of auditor, restriction in availing non-audit services from the auditor, strengthening of internal financial reporting system, enhanced liability and responsibility of auditor, provisions of recasting and reopening of accounts by the company, on one hand it is attempted that the working of the statutory auditor is independent, on the other hand, with enhanced accountability, responsibility and liability on the auditor they are encouraged to play the role of whistle blower in the company.
Moreover, the enhanced role of independent directors in the company along with the drive initiated towards transparency and disclosure through this law; it is likely that if not completely prevented, at least a timely judgment with respect to corporate fraud may be smelled by stakeholders, and stop loss timely activated.
Besides, have all the Issues pertaining to an up-to-date Companies Law been answered by this Bill or there still remains the issues which have not been answered or been attempted but not been answered, especially facilitating raising of capital by companies
The legislation of new company law has by and large covered up the issues pertaining to the requirement of India Inc. and also lays down several forward looking provisions.
Quite a few provisions herein are inserted which seems to be an aftermath of various Corporate Frauds which India Inc has witnessed such as enhanced role and responsibility of Independent Directors, Rotation of Independent Directors and Auditors of the company, Non Interested shareholder voting in Related party transactions, provision regarding reopening or recasting of Annual Accounts, restriction of layers of investment subsidiary, restriction in availing deposits from general public, stringent norms towards Private Placement, rights granted to minority shareholders and so on.
While most of the important issues have been effectively answered in the law, however, no legislature being targeted to the masses can be perfect as it caters to different set of people and thus always has scope of further improvising towards the stakeholders targeted by it.
Moreover, as the major portion of this law would be governed by the rules, which are yet to be made open for public comments, not much may be commented in such respect.