In a recent communication by the government, the Union Minister of State for Corporate Affairs, Mr. PP Choudhary that the government is trying to further tighten its grip to ensure better governance in corporate arena by introducing a test for the aspirants of independent directorships in companies. The existing independent directors of the companies shall be subjected to various orientation programmes so as to equip them with enhanced governance tools to manage the affairs of the companies in a diligent and scam-free manner.
With the government’s objective to refrain itself from excessive governance, the role of independent directors assumes greater stake and responsibility to safeguard the interests of investors, employees, creditors, debtors, shareholders and society at large. In this direction, the government plans to bring out an amendment in Companies (Appointment and Qualification of Directors) Rules, 2014 to allow the Indian Institute of Corporate Affairs, Manesar as an agency to create and maintain a data bank of qualified independent directors. This will help the companies to find suitable candidatures for independent directorships and ensure compliance of Companies Act, 2013 in respect of appointment of independent directors.
However, this is not the first time that the government is coming up with something new to ensure better regulation of corporate sector. In 2003, on the recommendation of Naresh Chandra Committee, the government had set Serious Fraud Investigation Office to check scams and frauds in the corporate sphere. Afterwards, in the year 2009, when the Satyam Computers fiasco shook India, the government established entirely a new All India Service called Indian Corporate Law Service that will cater to the better regulation and functioning of corporate sector. Also, almost a decade after the constitution of Dr. J.J. Irani Committee, the government finally enacted the new Companies Act, 2013 repealing the old and obsolete Companies Act, 1956 which ensures, inter alia, greater compliances, detailed disclosures, rotation of auditors, appointment of independent directors and many more, just for the protection of interests of all stakeholders.
Interestingly, India is a home for more than 8 Lac registered companies consisting of both listed and unlisted companies. Hence, it is imperative on the part of government to ensure strict regulation and supervision of these companies so as not to have another blow like Satyam scam on the Indian economy which is already grappling with mounting Non-Performing Assets and Black Money. The measures like striking off of around 2 lac shell companies, disqualification of non-compliant directors, linking of Director Identification Numbers with Aadhaar in newly introduced temporary e-Form DIR-3 KYC and the latest, the plan to introduce examination of aspirants of independent directorships by Ministry of Corporate Affairs are the steps in a journey to weed out black-money, corruption, frauds, etc. in the corporate sector thereby enhancing the scope of good governance and boosting investor confidence in the corporate sector.
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