Business Daily from THE HINDU group of publications
Monday, Sep 01, 2008
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Business Daily from THE HINDU group of publications Monday, Sep 01, 2008 ePaper | Mobile/PDA Version | Audio |
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IPOs Markets - Investor Protection Web Extras - Company Law Mis-statement in prospectus will attract a maximum of three year imprisonment plus a maximum of Rs 25 lakh fine and it will be non-compoundable Fraudulently luring persons during the time of IPO would attract three year imprisonment plus a minimum fine of Rs 1 lakh or a maximum of Rs 50 lakh Our Bureau New Delhi, Aug. 31 Companies planning to tap the capital market may have to tread cautiously if the provisions of the proposed Companies Bill, 2008 find their way. The Bill that is to replace the existing Companies Act, 1956, while proposing a more effective regime for inspections and investigations, lays down the maximum as well as minimum quantum of penalty for offences like mis-statement of facts in the prospectus or fraudulently luring investors through false claims during the time of initial public offer (IPO). A Ministry for Corporate Affairs official said, “The Bill seeks to lay down the maximum as well as minimum quantum of penalty for each offence besides civil consequences in the form of damages. While in the existing Act the number of non-compoundable offences is limited to 3-4, in the proposed Bill, the number of non-compoundable offences has been increased.” For example, in the existing Act, mis-statement in prospectus attracts two year imprisonment or Rs 50,000 fine or both and is compoundable. In the Bill, it has been proposed that such an offence will attract a maximum of three year imprisonment plus a maximum of Rs 25 lakh fine and it will be non-compoundable. In case a company is found fraudulently luring persons during the time of IPO, such a company/official would attract three year imprisonment plus a minimum fine of Rs 1 lakh or a maximum of Rs 50 lakh. Besides, such an offence will be non-compoundable. Under the existing Act, the offence attracted a fine of Rs 1 lakh and the offence is compoundable. “Since the Bill prescribes for self-regulation it was important to ensure that there was no misuse of freedom by the corporates,” sources told Business Line. The Bill also seeks to provide for suitable deterrence in cases of repeat offences. “In case of repeated offence – that is second or subsequent offences – the amount of fine leviable will be twice the amount of the fine levied at the time of first offence. In case of fraudulent activities/actions, provisions for recovery and disgorgement have been included,” sources said. The Bill also provides for levy of additional fee in a non-discretionary manner for procedural offences, such as late filing of statutory documents. “This is being enabled through rules,” sources said. Besides, provisions have also been made that offences which are not serious in nature but require adjudication by courts are determined in a less time consuming manner.
When asked whether the Registrar of Companies (ROC) is being empowered under the Bill to adjudicate defaults of procedural nature, sources said, “yes, it has been proposed that wherever the non-compliance default is of a minor nature like procedural non-compliance or delay in filing of documents, in such cases instead of company being subjected to court proceedings, the ROC concerned may act as adjudicating authority to levy only monetary penalty on company/officer in default.” Promoter, public disconnect `New Company Law will protect small investors' More Stories on : IPOs | Investor Protection | Company Law
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