'Provisions in rules to make cos raise money transparently'

To protect investors from fraudulent schemes, the government today said provisions in rules have been made to ensure that companies raise money from the public in a "transparent" manner.

Corporate Affairs Minister Sachin Pilot said "provisions in the Act and Rules have been made to ensure that companies function/raise money in a manner which is transparent, accountable".

These activities should be in accordance with the Companies Act and other enactments like Sebi Act and the Prize Chits & Money Circulation (Banning) Act etc., Pilot said in a written reply in the Lok Sabha.

He was responding to a query on whether the government is considering to enact stringent provision in the new company law against fake companies vanishing overnight, which are cheating investors and running away with crores of rupees.

Recently, Kolkata-based Saradha Group defrauded investors by running fraudulent money raising scheme.

Meanwhile, Pilot said the government has also been taking action against companies and their directors, which disappear after raising money from public.

"A Central Coordination and Monitoring Committee, Securities and Exchange Board of India (Sebi) monitors efforts to identify vanishing companies and take stock of action taken against them," he added.

The Minister noted that action has been initiated against firms which are in violation of the Companies Act besides filing prosecutions and seeking assistance of police authorities.

"The Committee also receives feedback from all the stakeholders and makes suitable procedural adjustments on a continuing basis and carries out," he added.

According to Pilot, the new companies bill ensures safety of the investors through enhanced disclosures and higher accountability on companies and its managerial personnel.

The bill also provides for investor's protection through class actions and wider institutional role of "Investors Education and Protection Fund", he added.

To a separate query on steps initiated by the government to improve the country's business climate, Pilot said the new companies bill incorporates important provisions for the same.

These include faster registration of companies through fully electronic MCA-21 Registry, allowing companies to maintain records and hold meetings through e-governance mode, faster mergers and acquisitions including short form of merger and cross border mergers, among others.

Pilot also said the Damodaran Committee which was constituted by the government last year to examine financial reforms, governance reforms, liberalised policy framework and suggest roadmap to improve the business climate in India "is likely to submit its report shortly".