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Wednesday, Sep 08, 2004

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Diligent auditors can prevent scams, says Minister

Our Bureau

Mumbai , Sept. 6

SOME stock market scams could have been perhaps avoided if company auditors were more diligent, according to Mr Prem Chand Gupta, Minister of State for Company Affairs.

"Personally I feel if our auditor friends were more careful, perhaps the past scams could have been avoided," Mr Gupta said. While discussing a Concept Paper on Company Law, the Minister told newspersons here on Monday that his Government would ensure that fly-by-night companies do not take gullible investors for a ride.

The Minister pointed out the number of companies that had lured ordinary people to invest in grandiose schemes such as growing teak, promising them fantastic returns. "Such companies should not even be allowed to issue prospectuses," he said.

Mr Gupta said that the United Progressive Alliance (UPA) Government was committed to overhauling the Companies Act, 1956. He said this is the first time that a Government has put out a Concept Paper on reworking an Act for public comments and involvement.

Replying to a question on amendment to the Companies Act, Mr Gupta said it should be left to companies and their stakeholders to decide how many members of the board should be independent directors. The previous Government had, in a draft Companies Act amendment, proposed that at least half the number of directors on company boards should be independent. The Concept Paper, however, does not envisage any mandatory number for independent directors on boards. "I personally feel that it (number of independent directors) should be left to the stakeholders of the company," the Minister said.

The Minister vowed that his Government would ensure safety of investors' money while also making compliance easier for companies. He said the Concept Paper proposes to reduce the Companies Act to a third of its current volume.

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