Jail likely for fudging IPO facts
Top executives of companies found guilty of misrepresenting facts in their public offer documents may land up in jail.
By Souvik Sanyal, ET Bureau |
NEW DELHI: The government is set to take away the option of settling the issue by making companies pay a fine or compensation, a practice known as compounding. The proposal has been included in the Companies Bill, 2008 that was cleared by the Cabinet in August this year. The Bill, which would replace the Companies Act, 1956, is expected to be introduced in the winter session of Parliament next month.
If a company is found guilty of ���dressing up��� facts, directors, auditors, bankers and experts involved in the process can be held responsible. They could face an imprisonment up to three years, coupled with a fine that may be anywhere between Rs 1 lakh and Rs 25 lakh. While the present law also mandates a punishment that may extend up to 2 years as well as a fine up to Rs 50,000, this can be skipped by paying a fine.
Experts say the fear of going to jail would help in checking such offences. The new company law has placed high emphasis on the need to safeguard the interests of investors.
The proposal, which would apply to holding up facts to mislead people into buying its shares, is aimed at deterring executives who play with investors��� confidence. Officials indicate the proposal would discourage window-dressing or misrepresentation of facts to make the financial health of a company sound impressive.
If a company is found guilty of ���dressing up��� facts, directors, auditors, bankers and experts involved in the process can be held responsible. They could face an imprisonment up to three years, coupled with a fine that may be anywhere between Rs 1 lakh and Rs 25 lakh. While the present law also mandates a punishment that may extend up to 2 years as well as a fine up to Rs 50,000, this can be skipped by paying a fine.
Experts say the fear of going to jail would help in checking such offences. The new company law has placed high emphasis on the need to safeguard the interests of investors.
The proposal, which would apply to holding up facts to mislead people into buying its shares, is aimed at deterring executives who play with investors��� confidence. Officials indicate the proposal would discourage window-dressing or misrepresentation of facts to make the financial health of a company sound impressive.
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