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Companies Act 2013

HomeCompanies Act 2013
The Companies Act, 2013 which replaced the Companies Act 1956 has several measures to deal with corporate frauds
1. Formation of a financial reporting body called the “National Financial Reporting Authority (NFRA)” for better monitoring of Corporate Financial Management
  • It has Quasi judicial powers to order investigation, levy penalty and bar professionals from practice in case of their
    indulgence in professional or other misconduct
  • Has mandate to ensure scrutiny and compliance of Accounting and Auditing Standards
  • It ascertains the quality of service of professionals associated with compliance
2. The new Act provides more fangs to Serious Frauds Investigation office (SFIO)
  • The SFIO is a multi-disciplinary organization under the Ministry of Corporate Affairs
  • By designating SFIO as the exclusive agency responsible for investigating corporate fraud, the Act has streamlined enforcement, ensuring more efficient and focused legal proceedings. This centralized approach strengthens the regulatory framework and enhances the effectiveness of fraud detection and prosecution in corporate India
  • Clause 49 of the Listing Agreement by Securities and Exchange Board of India (SEBI), requires the CEO and CFO of a company, in their certification, to confirm that there are, to the best of their knowledge and belief, no fraudulent / illegal transactions entered into by the company during the year
  • As per Companies (Auditor’s Report) Order (CARO) 2003, the auditor has to report whether any fraud by or on the company was noticed or reported along with its nature and amount

Some important provisions for combatting fraud under the Companies Act are as follows: 

Sec 34Criminal liability for misstatement in prospectus
Sec 36Punishment for fraudulently inducing a person to invest money
Sec 76APunishment for contravention of provisions relating to acceptance of deposits
Sec 86Punishment for contravention of provisions relating to registration of charges
Sec 182Contribution to political parties in contravention of provisions
Sec 184Failure to disclose interest by directors in contracts
Sec 185Loans to directors in relation to contravention of provisions
Sec 186Loans & investments by companies in contravention of provisions
Sec 188Contravention of provisions relating to related party transactions
Sec 209 & 211Deviation of accounting standards and financial statements
Sec 269 & 309Contravention of provisions governing remuneration to directors
Sec 628Penalty for false statements
Sec 447Punishment for corporate frauds (Companies Act, 2013)