Govt proposes stricter norms for corporate governance

Raj Kamal Rao

Union government on Wednesday said that directors or authorized signatories of deregistered companies who try to siphon off money from the firms’ bank accounts can face up to 10 years imprisonment.

In a major move to strengthen the rules and procedures of Corporate Governance, the Government on Wednesday took major decisions to further strengthen these norms.

PP Chaudhary, Minister of State for .Corporate Affairs

PP Chaudhary, Minister of State for .Corporate Affairs

In a Review Meeting chaired by the Minister of State for Corporate Affairs, P.P. Chaudhary, government decided that the Directors of 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.

Efforts will be made to identify the actual beneficiaries and persons behind such Shell Companies.

“As a result of the exercise of weeding out shell companies, it would not only help in checking the menace of black money but also would promote an ecosystem of “Ease of Doing Business” and enhancing investors’ confidence to which the present Government is fully committed,” PP Chaudhary, MoS (Corporate Affairs)  said.

He said that the financial status of the companies would be reflected in a true and fair manner which would minimize the possibility of frauds and tax evasion. Further, the availability of funds for illegal purposes will also be choked.

The government has also identified chartered accountants, company secretaries and cost accountants associated with shell firms in certain cases.

The corporate affairs ministry has recently struck off the names of more than 2.09 lakh companies from the records as they have not been carrying out business activities for long and banks have been directed to freeze their bank accounts.

“In case the director or authorised signatory of any ‘struck off’ company tries to unauthorisedly siphon-off money from its bank account, he/she may attract punishment of imprisonment of not less than six months extendable to 10 years,” an official release said.