Robber in disguise: how promoters siphon off funds

Directors and executives of a company have a fiduciary duty towards the company, shareholders and employees. They must act in good faith to promote their interests. However, in corporate India, there have been many instances when the promoters/ managements forgot about their fiduciary duty and used fraudulent means to line their own pockets. The Companies Act, 2013, did try to restrain this practice by mandating several committees. Such committees are to have a majority of independent directors so as to keep a check on the management and the promoters. Auditors too are supposed to raise red flags on any inappropriate accounting. But despite such measures, there have been many corporate-governance crises lately. One of the recent cases where the promoters tried to rob their company is that of CG Power.

This article was originally published on November 04, 2019.