| Hony.
Editor |
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Dr.
Bindi Mehta
(Director,
Research at ICSI - CCRT, Formerly, Chief economist, CRISIL |
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| National
News - Nov, 2002 |
| DCA's
new initiatives |
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Department of Company Affairs (DCA) is
planning to put in place a framework to
track corporate directors who are disqualified
from holding office in any company for
a period of five years under the provisions
of section 274 (1) (g) of the Companies
Act. The following are some of the proposals
under active consideration of the DCA:
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Information on the disqualified directors
to be made public - DCA is contemplating
asking the Registrar of Companies
(ROC) to compile such a list and put
it up on the DCA's web site.
- Full
time Company Secretaries to be made
non-mandatory for the companies in
working in or having registered offices
in small towns with population below
one lac and with paid-up capital under
Rs. 5 crore.
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Listed companies must appoint a selection
panel with majority of independent
directors and an external expert for
selection of relatives as candidates
for board membership - Their remuneration
to be in line with their qualifications
and to be made public.
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A Serious Frauds Office (SFO) to be
set up soon - Senior fraud examiners
to be appointed to the SFO and violations
pertaining to the other agencies like
the RBI, the Enforcement Directorate,
SEBI and Income tax to be referred
to the SFO .
- Fines
or penalties for non-compliance with
the provisions of the companies act
to be linked to the size of the company
- A substantial hike in the penalties
is also under consideration and present
levels and the penalty structure are
considered to be very mild and outdated
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Reserve Bank of India's code of conduct for part time directors
of both public and private sector banks is being circulated among
the banks. This is based on the recommendations of the consultative
group headed by Dr. Ashok Ganguli. The group has recommended raising
of sitting fees for part time directors, circulation of board
minutes within 48 hours, and barring members of Parliament, Assembly
and Councils from being appointed on bank boards. The group has
also recommended that part-time directors be held responsible
for (through a deed of covenant) for risk management of the banks,
monitoring the banks investments in the subsidiaries and overseeing
the setting up of and monitoring board level committees like the
Shareholders Grievance Redressal Committee, Risk Management Committee
etc. A number of boards and their directors are refusing to sign
the deed of covenant being circulated by the RBI.
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Nominee
Director's role under review |
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At a time when corporate frauds are rocking the world, the finance
ministry is reviewing the role of nominee directors in banks and
financial institutions. The government along with the banks and
institutions are devising ways of making the role of nominees
more effective and make them more accountable. Though the banks
and FIs have nominated directors on the companies, the level of
non-performing assets (NPAs) have been rising and these directors
have often been mere spectators.
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to top
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Another
Gujarat co-operative bank fails |
A Surat
based Suryapur Co-operative Bank closed four branches in the
1st week of September 2002. It is the seventh bank in Gujarat
in the last 18 months to plunge into liquidity crisis. Suryapur
Co-operative Bank was left with no money to pay the depositors
and asked for suspension from the local clearing house. It was
reported that the bank had given advances worth Rs. 65 crores
to different parties though it had deposits of only Rs. 70 crore.
This was in violation of the credit-deposit ratio norms laid
down by the Reserve Bank of India.
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Listed
Public Banks to come under Companies Act |
The
Indian Banks' Association has constituted a legal sub-committee
to recommend to the to the Government the modalities of bringing
listed public sector banks (PSBs) under the Companies Act, 1956.
This will enable minority shareholders, whose rights are now curtailed
enjoy the same rights as in the case of private sector bank member
and make general regulation governing PSBs contemporary.
Some
of the sections that are under the sub-committees lens include
the general regulations pertaining to dividend, director's responsibility
statement, voting rights, issue of employees stock option plans,
general meeting and their conduct, buy back etc.
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ICAI
directs companies to change auditors every few years |
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The Institute of Chartered Accountants of India (ICAI) would soon
finalise and stipulate the time period after which auditors of
companies would have to be mandatorily changed. The period of
rotation of the auditors would be decided at their coming Central
Council Meeting in October. Rotation of the auditors can be ensured
either by an amendment to the Companies Act or by a change in
the ICAI code of conduct for its members. Following corporate
scams in the US and more recently at home, it is heartening to
note that the ICAI has acted proactively. Following the passage
of Sarbanes - Oxley Act, the accounting profession in the US has
accepted a large number of restrictions for itself.
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©
2001 Academy of Corporate Governance |
