ABSCONDING DIRECTORS/NON COOPERATION OF DIRECTORS

[csarengarajan]

Dear All

 

Here are few suggestions which may be considered and if any corrections or modifications are also invited.. The Steps are as follows if implemented by MCA for 100%  DIN for all Directors.Out of 9 lakh companies,  2% to 5% (approx) fall in this categories.Members may face some more problems which may be discussed and once we all agree, we can request our institute to take up the matter with MCA .

 

                          SUGGESTED ACTIONS  TO BE TAKEN BY MCA

 

1)  MCA has to constitute a separate cell to deal with  non filing of accounts and annual return due to either directors absconding or non cooperations.

 

2)  A separate form to be introduced wherein corporates are asked to fill up the form about exisiting directors whose DIN details not known or not obtained. They should be removed based on non obtaining din or non cooperation and also fact that if a director not  attended consecutive three meeting, he should be removed from the board as per Section 283 (1) (g) vacation of directors,On filing the form, it should be approved by MCA. The names should be deleted from MCA list. If the company falls below required no of directors , they should be asked to file form 32  to induct additional persons.   The board  has to be reconstituted based on the existing directors.  If they are not in a position to conduct the meeting due to the fact JV constraint or quorum for board meeting less than the required by the act  then MCA has to give a  special permission to reconstitute the board 

 

3)  The corporates also asked to file balance sheet and annual return and they should be levied a small sum for compounding of  an offence as a one time fee and regulariize all filing of returns. All pending balance sheet where required quorum was there then they are allowed to file balance sheet certified by the auditors. In case only two directors, one director is not cooperating or details are not known then the corporates to file approved balance sheet of earlier years in current date and the agm also to be conducted in current date.

 

4)  MCA has to send an email or a letter to the directors whose directorship was removed for not obtaining  DIN or details are not known that your name has been removed from MCA list and giving him an opportunity to respond within 30 days.

 

5)  MCA to allow corporates to file all pending returns on or before 31st March 2010.

 

Contrary views are solicited.

 

Regards

--
csarengarajan
Company Secretary, Chennai
email csaren...@gmail.com
mobile 093810 11200
SHARING KNOWLEDGE SKY IS THE LIMIT

[venkata ramana]

I am a bit surprised at the 'much ado about nothing' being the topic of 'absconding directors' to be brought under the scanner of a Government Depart ment.

I am sure the memory is fresh of the [in]famous case-study of a large corporate giant's top-brass having been caught cooking up figures through artificial entries cooked up in connivance with the statutory auditors enjoined to monitor the figures,accounting standards' compliance,corporate governance as such .However, despite Spl. Frauds Investigation Agency being entrusted with the duty of a thorough probe under the Cos.Act,there was an independent CBI-probe ordered into the matter.Now,the Government has withdrawn the Spl.Frauds Investigation Probe since they do not wish a duplicity in terms of reference of a serious probe.Most experienced practitioners are aware of the fate of such CBI-probes ,oftener than not the accused take refuge under the cover of the legal evidence being insufficient for prosecution/punishment under prevailing Laws or the file is buried or case deemed ' infructuous' with a successor Government setting aside executive orders of the predecessor.

I am sure many would hasten to clarify that the case of 'ABSCONDING DIRECTORS' is different from the above example but practical exposure to the vagaries of real day life [as distinct from vociferous lobbying or print in legal texts ]and realities of a harsh world outside would show that any such move to bring in the MCA would be self-defeating to the exercise and purpose of 'nabbing' the absconding directors [ in a bid to save the skin of the scape-goat directors' as it would seem].

I therefore think it would be best and appropriate to let the normal Procedural laws of Criminal and Civil liability to 5be resorted to for an efficacious and desired result of both saving the liability of remaining directors & pinning down liability of 'absconding' directors under the Law.

on a lighter note, you know that most absconding 'directors' of a company organization in India would be easily traceable in Bangkok,Canada,Portugal,Nepal,Singapore,Dubai,Las vegas ,Iran or in our friendly neighbourhood town of Karachi...if the police do not trace them to their home-towns or an ashram or a politician's official quarter.

Law-makers are wise folk unlike those inexperienced or biased ones who are entrusted with the task of implementing or enforcing these Laws.There is no lacunae in the Act's provisions since even the Cos.Act,1956 is not to be read or applied in isolation but in tandem with all other applicable laws of the land [incl.the IPC,CR.P.C.,C.P.C.].

Warm regards,

V.

[Jayashree Chandrasekaran]

Dear Mr.Venkataramanna,

Form 20B-Annual Return cannot be uploaded without the DIN nos of Directors and hence in the companies where there are absconding directors the Director Identification numbers cannot be obtained which will lead to non-filing of 20B and consequential default by the Company.Hence this problem is being discussed in the forum and how best to overcome this problem is the issue.

I hope now the matter is clarified

Thanks

Jayashree

--
C.JAYASHREE
S GANESH & ASSOCIATES
Company Secretaries
IB OAKLAND (REAR BLDG)
17 MALONY ROAD TNAGAR
CHENNAI 600017
PH: 044 2431 1974  4212 2694
FAX: 044 4212 7034
MOBILE; 98840 17120

[Vivek Hegde]

Dear Mr Rengarajan

 

Really a good effort to address the issue. 2% or 3% is a considerable no which will support opening a seperate cell to resolve this issue. But if MCA allows the corporates to file the returns for so called 'absconding directors' without DIN the user community may misuse the facility available and file the returns for existing directors (who are not absconding but could not get the DIN for any reasons). So a lot of thought may have to be put to resolve the problem.

 

Thanks and Regards

 

Vivek Hegde

 

Koramangala, Bangalore-560034
Mob: 9019756940

[raja karthik]

Dear All,

 

It is a good suggestion that a separate cell be opened up to address the issue. Now the question is in what way the same can be addressed ? Apart from the problem involved in filing of form 32,  the real concern is the filing of annual documents.

 

The suggestion of a separate form for filing details of directors who has not taken DIN is also a good one, but as rightly pointed out by Mr. Vivek it can lead to misuse too unless sufficient checks are in place as to the genuineness of the situation. We all know about the misuse of  283 (1)(g) by lot of Boards across the country, which was highlighted in lot of oppression mismanagement cases. 

 

I personally feel that the level of service of MCA DIN cell has improved a lot over the years which makes it easy for obtaining the DIN, which was not the case previously.

 

Among the cases discussed above there can be two categories one due to sudden death of a director and the other due to non-cooperation or whatever it is. I think the kind of facility which is there for the death case now is fine, the only thing is we need to expedite the whole process. Or even the seperate form can address the issue. We sometimes hear in newspapers or movies that somebody was trying to sell TAJMAHAL, so making a fake death certificate is also not a problem, so checks should be there.

 

Regarding other category non-cooperation or due to some other reasons directors not giving details, I think instead of company taking initiatives with persons who are directors for obtaining DIN it is more the persons responsibility to do it. I think its almost three years since the concept of din was introduced, which is really a long period.

 

I would like to know the response of members on amending 283 to include a clause whereby a person who was a director at the coming into force of Cos Amnd Act, 2006 and not obtained/ filed till such date shall be ceased to be directors. May be a seperate form which being talked about can address this issue.

 

And also for bringing transparency to the whole process professionals to be made more responsible like certifications etc.. and also such forms or cases shall be diverted to the seperate cell we been talking about and on a random basis to check the whole process and strict action to be taken against professionals departing from there duty.

 

 Regards,

Karthik

[venkata ramana]

Ms.Jayashree,

Thx for the response but do appreciate the fact that inavariably the form must be filed on behalf of those who are 'not absconding'[as different from those'absconding']- in so fare as they are concerned.

As concerns the absconding ones, a letter form of representation alongwith the Statement of action proposed to trace them is the norm of submission of info.to the Govt[ROC].

Remedies under criminal ,civil and administrative liabilities are available recourses under the Law to deal with such an untoward/peculiar situation.

MCA is in no way going to amend the form to provide a separate/distinct column of 'absconding' -status in any given Form since it would be contavening the rule of law granting & conferring legal status upon a Company by issuing the 'iCertification of Incorporation'.

Hope my submission stands clarified Mam.

Regards,

V.

[venkata ramana]

It would be absurd to make certifying professional[s] accountable for an 'absconding' director.Therefore,it is inadvisable.

[csarengarajan]

We can make corporates to fully responsible if there is any misuse for filing the forms. They are accountable and should be responsible for wrong declarations. I fully agree with the views of Mr.Raja and Mr.vivek.

 

We are talking about directors who have either absconding or din details are not known. Majority of them represented from unlisted and closely held companies. There may be misunderstanding with the promoter group,away from the scene. No question comparing them with vanishing listed company directors. They are fully deserved to be prosecuted as per prevailing laws..

 

Members view solicited.

[venkata ramana]

Certainly all defaulters are punishable and can be brought to book under the laws of the land . Officers in default is the concept which envisages this aspect of criminal and corporate jurisprudence .Members in the forum can come up with any specific , definite suggestion which could be considered by the legislators ahead in the next session.Professionals ought not to be made 'scapegoats'by errant directors or unsuspecting promoters .

[not all certifying professionals landing in such anamoulous and sad situations can be as lucky as PWC in the recent oddysey].

regards,

V.