Dear Friends,
Today I want to share my experience in respect of private companies existing in India, mostly run by the family members of business community. Since the members of one or two hold substantial shares in the company, they become partners in the company rather than members. They run the business as a partnership firm that has no rules n regulations as prescribed in the companies act and whole of the objective of law becomes a mockery.
Here are the examples of defiance of law by private companies......
1. Share Capital is kept at minimum possible amount that fully unsecured in case of winding up and huge capital is invested in form of secured loans by the promoters that has priority over the capital.
2. Family members appoint themselves as directors n managers and syphon out handsome amount of salaries, commission and personal expenses from the company.
3. Directors/Owners enter into contracts in which they have personal interest at high prices and approve the contracts themselves as they are the majority members also, hence the law stands defied and even auditors have to work like accountants to retain business.
4. Statutory Compliance is only a faltu majboori for the management of private company. since they are themselves owner, director, manager of business, they keep professionals as their personal servants and expect them to find ways of escape from compliance, defy law and window wash in case of default.
Therefore in my opinion professionals must raise the issue before govt agencies so that suitable ammendments be made in law to ensure incorporation of only large scale companies in India that can comply with law. Auditors must be appointed by the State Authority Agency so that audit does not become an eye wash.
CAclubindia
