Bid for transparency: India's corporate affairs ministry calls for regular general meetings of companies
Nov 6, 2023
Synopsis
India's Ministry of Corporate Affairs has flagged the importance of regular general meetings amid a surge in company incorporations. These meetings provide a platform for shareholders to question management decisions and contribute to reducing corporate fraud and financial risks.
Amid a record incorporation of companies, the ministry of corporate affairs (MCA) has called for regular general meetings, stating that they offer shareholders a platform to question the management’s decisions and the shareholders' participation minimises corporate frauds and financial risks.
In an internal communication, the ministry said: “General meetings can help companies fulfil their responsibility of communicating true and accurate information about their performance to members”.
“They also provide a grievance redressal platform for the shareholders. Both transparency and accountability are ascertained through these meetings,” it said.
The communication comes at a time when India is adding a record number of companies and limited liability partnerships (LLPs). As many as 134,725 companies and LLPs got incorporated until October 18 this fiscal year, up 14.6% from a year before.
Last week, the ministry had asked companies to file their financial statements and annual returns on time to avoid additional fees.
In recent years, the MCA and regulators have tightened the scrutiny of corporate governance in India, especially after the scandal at Il&FS. Earlier this year, the National Financial Reporting Authority had said resignation does not absolve an auditor of his responsibility to report a fraud. Adequate enforcement of corporate governance processes, as stipulated in the Companies Act, remains high on the MCA agenda.
Under Section 96 of the Companies Act, 2013, companies are mandated to hold the annual general meeting (AGM) of members. A company must hold its AGM within six months from the end of a financial year and the gap between any two AGMs can't exceed 15 months.
To address urgent matters arising in between the AGMs, a company can hold an extra-ordinary general meeting, as and when required or on the request of its members.
According to the Deloitte Touche Tohmatsu India LLP Corporate Fraud Perception survey, 2020, as many as 43% of respondents felt their existing fraud risk management efforts would be inadequate to prevent future frauds. Analysts say the situation hasn’t since changed much, necessitating persistent regulatory oversight.
The Serious Fraud Investigation Office (SFIO) under the MCA completed 23 investigations in FY23, against 13 a year before.
[The Economic Times]
