Those organising sport events and other carnivals such as the Indian Premier League (IPL) may find themselves fully answerable to the authorities when the Companies Bill, 2009, becomes a reality.
“The Standing Committee on Finance examining the Bill has proposed stringent checks and balances to ensure greater accountability for such entities.
“Based on the suggestions of the Ministerial Panel, multiple provisions are being introduced in the Bill to take care of the ambiguities, including the source of funding,” a senior Corporate Affairs Ministry official said.
To ensure that unaccounted money does not flow into IPL or any such businesses, the Bill may incorporate stringent requirements, plugging loopholes.
The official said, “During IPL it was seen that companies with a low paid-up share capital of Rs 1-2 lakh were making bids as high as Rs 50 crore. To ensure greater transparency, the Bill will propose that the promoters disclose the route of funding and the source of contribution.”
These disclosures will have to be made in the prospectus itself.
“If there is a change in promoters’ stake beyond the limit prescribed under the law, the company will have to file returns with the Registrar of Companies (RoCs).
“This will help create an audit trail of ownership,” the official said.
At present, share application money does not carry any interest whereas unsecured loans do, the official said. “In order to escape this interest, some companies take unsecured loans under the garb of share application money. The new Bill hopes to stop this practice,” the official added.
Further, specific time limit will be set for share allotment once the Bill comes into existence.
Some IPL franchises had come under the scanner of authorities following allegations about their shareholding pattern, the equity structure, and the source of funding of the franchise owners.
The Ministry for Corporate Affairs had initiated a probe and asked its field officers, RoCs, to look into the books of accounts of such entities.
The RoC reports included details on the bidding process, sweat equity, memorandum of association and franchisee agreements.
