Mumbai: The strengthening of corporate governance standards and other stringent provisions in the new Companies Act pertaining to related party transactions, class action suits, role of directors and rotation of auditors according to experts are likely to discourage Satyam-like episodes from happening in the Indian corporate world.
While the white-collar crimes can’t be completely wished away, experts opined that the conviction of former chairman of erstwhile Satyam Computer Services would send a strong signal and have a psychological impact on fraudsters.
“In India, white collar crimes were never taken seriously. However, the conviction of the accused in Satyam scam would now send a strong signal,” said Sandip Parikh, former executive director of Sebi and founder of Finsec Law Advisors.
According to him, there were a lot of actions that the government and the regulators have taken to prevent such frauds from happening in the Indian market. For instance, Mr Parikh pointed about the provisions in the new Companies Act regarding related party transactions.
“If the related party transactions are not at the arms length price, the proposal has to be mandatorily approved by minority shareholders,” he said.
Others pointed out that white-collar crimes are occurring even in countries like the US where there are stringent punishments.
“If there were 100 people who thought that they could commit a crime and get away easily, the conviction in Satyam case would now bring it down to 75,” said Amit Tandon, founder of Institutional Investor Advisory Services.
After the Satyam case, Mr Tandon said that the government and the regulators have managed to build a lot of checks and balances by strengthening the corporate governance standards and various provisions in the Companies Act.
“For instance, there is a provision for class action suit, which is yet to be notified. There should be rotation of auditors. Further the role and responsibilities of directors both executive as well as independent have been expanded,” he said.
Dhananjay Sinha, head institutional research, Emkay Global Financial Services, is not sure that the judgment in the Satyam case will prevent future frauds.
He said, “the nature of frauds can be different.” There can be bank frauds by wilful defaulters who divert the loans taken or money collected by promoters through IPOs being siphoned out for purposes other than stated in the prospectus, he said.
