Companies Act to protect independent directors

Friday, 13 February 2009, 17:47 IST   |    7 Comments
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New Delhi: The new Companies Act proposed by the government will provide greater levels of protection to independent directors, provided they are not accomplices to wrong-doings by promoter-directors or other executives of the company, Corporate Affairs Minister P.C. Gupta said here Thursday. "Independent directors will be responsible for the actions of the company only if the (illegal) act is done with their knowledge," he said. Gupta's statement, which came in the aftermath of the Satyam scam, pointed fingers at the role that the independent directors played in the fraud. Moreover, in the one month since the scam became public Jan 7, 115 independent directors from 100 listed firms are believed to have resigned. "Under the present Act, there is no definition of an independent director. The new Act recognises this. Once the Act is passed, there will be a clear definition of two sets of directors, independent directors who have no financial interest in the company and the others," said Gupta. The minister, who was interacting with industry captains at a meeting organised by Associated Chambers of Commerce and Industry (ASSOCHAM), also said the government was ready with the new Companies Act and hopefully would be able to place it before Parliament soon. Later, asked by reporters to comment on the large number of independent directors resigning in the past few days, Gutpa said: "This is a complex issue. There are cases where a 90-plus person on dialysis is acting as a director, and in one company, a total of 45 crore (450 million) was paid to directors." "The government is taking steps only to strengthen corporate governance. We have full faith in the corporate sector."
Source: IANS