COMPANIES BILL 2011: PRIVATE COMPANIES UNDER SEBI JURISDICTION & AUDIT FIRMS ACCOUNTABLE FOR FRAUD IN COMPANIES
Privately-held and unlisted companies will come under SEBI jurisdiction if they collect or propose to collect money through sale of shares from 50 and more individuals under Companies Bill 2011 , which is being formulated by Ministry of Corporate Affairs. The proposals are being incorporated on account of recent events like- Satyam Fraud and SEBI-Sahara Group fight over jurisdiction. There were also issues of tussle over jurisdiction between different regulators. For example RBI had complained that while the current law — the Companies Act, 1956 — applied to banking companies only if its provisions were inconsistent with the Banking Companies Act, 1949 (now the Banking Regulation Act, 1949), such a clause was missing in the Companies Bill, 2009.
Second important clause regarding proposal that if the audit partner or partners of an audit firm were proved to have acted in a fraudulent manner or abetted or colluded in any fraud by the company, its directors or officers, the audit firms would be equally liable for civil or criminal proceedings.
At present , the Institute of Chartered Accountants of India (ICAI) can bar the guilty auditors from doing auditing work for a specified period and also criminal proceeding can be initaited separately against auditors. However, no action could be taken against the firms, either under the ICAI Act or the Companies Act.
CAclubindia
