New Company Bill to give more power to RoC for IPO fund usage

The new Companies Bill is likely to give more powers to the Registrar of Companies (RoC) to monitor the end use of initial public offer (IPO) funds, a move that would require a 10-fold increase in the strength of the RoC.

"The RoC would need around 15,000 people, if it were to monitor the end-use of public issues as is being talked about," a finance ministry source said.

The RoC, which is responsible for incorporation and keeping the record of over eight lakh companies, have a strength of about 1,500.

In a meeting with the Parliamentary Standing Committee on Finance, which scanned the provisions of the Companies Bill 2009, the RoC officials have said that the manpower strength of all regions need to be increased by at least 10-fold, sources said.

"The discussion arose after the Committee questioned the RoC if verification of balance sheets were carried out on a regular basis and if the RoC could strictly monitor end-use of IPO money as prescribed," a Committee member said.

The RoC say that the issue of staff crunch has been brought before the corporate affairs ministry, the administrative ministry for RoCs and Regional Directors many a times, but is yet to see the problem solved, another source said.

The Companies Bill 2009, which seeks to replace the half-a-century-old Act, was introduced in the Lok Sabha in August last year. The Parliamentary panel submitted its report in the Lok Sabha after nearly eight months of deliberation.

Prepared in the backdrop of the Rs 14,000-crore Satyam fraud, the Bill seeks to man the RoC offices with more responsibilities and power, mostly in terms of inspections and scrutinies.

It also proposes to treat RoC reports at par with police investigation reports.

Besides other things, the Bill also proposes to tighten the laws for raising money from the public and keep a stricter check to control the menace of vanishing companies.

The Standing Committee on Finance has also suggested that the end use of IPO funds be monitored by the Registrar of Companies (RoCs), along with the Securities and Exchanges Board of India (Sebi).

Currently, the MCA, through technical scrutiny of balance sheets, keeps a check if companies are using IPO proceedings as promised in the prospectus.

However, the MCA has for long been asking Sebi to devise ways of monitoring the end use of money collected through IPOs to keep a check on vanishing companies.