COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES
SEARCH REDIFF

Govt moots action against directors of loss-making companies

The Department of Company Affairs is considering action against directors of a company that reports losses for five consecutive years.

DCA Secretary T S Krishna Murthy, while speaking at a symposium on emerging trends in company law, organised by the Merchants' Chamber of Commerce in Calcutta, said action is also being considered against directors of companies which have not not filed returns for five consecutive years.

He also favoured for active role of non-executive nominee directors of financial institutions in a company saying if directors and auditors are vigilant, corporate governance would automaticallly come in.

''All directors are equal once they are on the board. There cannot be any sectional views and all of them have to nurture the company,'' he said. "In the UK there is a concept of shadow director which plays an important role in the affairs of the company."

He said the country is passing through turbulent changes in the light of sweeping winds of liberalisation and it should be realised that corporate governance is the tool of survival and it should come voluntarily rather than through force.

Commenting on the issue of vanishing companies, the DCA secretary said it is a very confusing concept. The Securities and Exchange Board of India and the DCA at present were only talking about those companies which made public offers and then vanished. "But what about those companies which raised public funds by other means and then vanished?

"I strongly feel that entry norms should be tightened to prevent such things and thereby improve our image," Krishna Murthy said.

He, however, assured that the proposed ammendment in the Companies (Amendment) Bill, would try to meet some urgent demands of the industry.

The draft of the bill, submitted in Parliament, was aimed at ushering a new era on the subject of corporate governance, disclosure norms, provisions related to liability and responsibility of directors, he informed.

He felt that for better corporate governance auditors should be appointed on rotational basis and they should not be allowed to hold the shares of a company which they are auditing.

Murthy agreed with the suggestions that certain regulations be introduced for holding a board meeting which has nowadays become only a formality.

He also informed that the threshold limit of deemed public limited company has been recommended to be increased, but did not agree with the views that the three classifications of industry -- private limited company, public limited company and deemed public limited company -- be reduced to two only by taking out the last one, citing some practical differences.

UNI

Business news