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DCA for Companies Act recast

BS Economy Bureau in New Delhi

The government today said that the Companies Act, 1956, needs to be relooked at as there were areas of control which resulted in interference in the day-to-day management of companies. It also said there was a need to enhance penalties on corporates who did not comply with the norms.

"Over the last few years, a number of amendments have been made to the Companies Act but there are still some areas of control and companies had to seek permission which need to be relooked at," V K Dhall, secretary department of company affairs, said at a seminar on corporate governance and accounting standards organised by FICA.

He, however, added that greater liberalisation does not necessarily imply a completely regulated environment. "Greater liberalisation imposes restrictions of more effective regulation," Dhall said, adding that effective and speedy enforcement should be provided for in the Companies Act and penalties should be enhanced so that it acts as a deterrent.

He made it clear that government was against any excessive interference in company affairs but favoured giving more teeth to regulators in the face of recent accounting scandals.

Regulatory mechanism should be able to restore confidence in the system, Dhall said adding they are necessary for speedy and effective enforcement of laws.

The secretary also spoke of a more effective role that audit committees need to play and said that DCA is working out the procedures and rules governing the audit committees along with the Institute of Chartered Accountants of India.

He also said that the high level committee set up under Naresh Chandra, former ambassador to the United States, has been asked to submit its report within 45 days.

The committee would look into whether the relationship between a company and its auditors was getting 'too cosy.' Dhall also said that the Serious Frauds Office, announced by Finance Minister Jaswant Singh in Parliament, would also be in place shortly.

Referring to the corporate governance lapses which have come to light in the US and in India, the DCA secretary said, "Even if the corporate governance norms have been largely followed in India, there is no room for complacency. We must ensure compliance."

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