Key provisions: The Companies Act, 2013 (Act) contains adequate provisions to promote good corporate governance and protect interest of investors including minority shareholders, they are:
- Greater accountability on companies provided including through appointment of Key Managerial Personnel (KMPs), role of audit committee(s), independent audit, stricter regulation of related party transactions and restriction on layers of companies.
- Enhanced disclosures mandated including through board’s report, financial statements as well as filings with Registrar of Companies to ensure that all relevant information is available to investors and regulatory agencies; disclosures in respect of significant beneficial ownership also provided
- Deposits :Stricter regulation provided with regard to acceptance of deposits by companies.
- Disciplined financial regulation through audit and oversight mechanisms provided. More accountable role for auditors provided.
- Independence of auditors: Stringent provisions with regard to independence of auditors provided. Cost audit and secretariat audit provided for specified classes of companies.
- National Financial Reporting Authority established to oversee the quality of service of the Accounting and auditing profession and take action against misconduct in certain cases.
- More effective role for Board of Directors and Committees of Directors provided.
- The requirements of appointment of Independent directors and woman directors provided for prescribed classes of companies.
- Provisions for Vigil mechanism (whistle blowing) provided for prescribed classes of companies.
- Stringent enforcement action through inspection, inquiry and investigation provided so that non compliances are taken seriously and necessary action taken.
- Serious Fraud Investigation Office recognized in the Companies Act, 2013 with adequate powers including powers to arrest. Term “Fraud” defined and stringent punishment provided thereto.
- Auditors (including cost auditor and secretarial auditor) required to report fraud noticed by them to the Central Government/audit committee/Board.
Under what circumstances, investigation into the affairs of a company is assigned to SFIO by the Government?
As per Section 212 (1) of the Companies Act, 2013, the Central Govt. may assign the investigation into the affairs of a company to the Serious Fraud Investigation Office –
(a) on receipt of report of the Registrar or Inspector under section 208
(b) on intimation of a special resolution passed by a company requesting an investigation into its affairs
(c) in public interest
(d) on the request of any Department of Central Government or State Government