The Parliamentary standing committee on Finance, headed by BJP member of parliament Ananth Kumar, has convened a meeting on Wednesday to examine the crisis sparked by the fraud in Satyam Computer Services. This could lead to changes in company law to strengthen regulation and governance.
Several government officials, including the finance secretary, the chairman of the Central Board of Direct Taxes and the chairman of the Securities and Exchange Board of India have been called for the meeting.
The departmentally related standing committee is a system of parliamentary surveillance over government administration.
The committee, which is also examining the Companies Bill that was introduced in Parliament recently, is expected to suggest new amendments to the Bill.
“The Bill is pending before the standing committee and it would be open to improvement by the committee. In light of the latest developments they (the committee) would like to incorporate more stringent rules, regulations and compliances,” a senior finance ministry official, who did not wish to be identified, told Hindustan Times.
The role of independent directors has also come under scrutiny and the committee is expected to make major amendments to make the law more stringent.
As the law stands today, there is no separate recognition of the word “independent” and all the directors are equally accountable. The Companies Bill has proposed that at least one-third of directors on a company’s board should be independent, meaning they should be non-executive directors from outside the company who can act neutrally in the interest of shareholders.
Preliminary investigations carried out by the Registrar of Companies have held independent directors of Satyam Computers equally “responsible” for the fraud that involved misstatement of accounts, and likely siphoning away of company money to benefit the private accounts of its senior managers including deposed chairman B. Ramalinga Raju, who has confessed to wrongdoings.