Satyam requires government intervention

The fraud that has been disclosed in Satyam Computer Services Limited comes at a time when the Satyam board has lost all credibility. This requires extraordinary action. Only a new board can investigate the fraud and run the company until a general body meeting is held to elect a new board.

The company needs a new governance regime. One option is that the existing board meets for the sole purpose of co-opting a new set of directors and then the old board withdraws from the scene. The second option is for the government to step in. This is a fit case for section 398 and 401 of the Companies Act which give broad powers to the Company Law Board acting on an application by the government to make orders for “the regulation of the conduct of the company”s affairs in future ”.

I think this is also a fit case for an investigation under section 234(7) and 235 of the Companies Act.

Posted at 12:58 pm IST on Wed, 7 Jan 2009         permanent link

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