Government offers to Protect the Interest of Investors

in Company


Transparency and faith is very important to attract many investors to invest in a company. This formula will result into long term success for the company and investors would enjoy good returns on their investment. Various regulatory bodies appointed by the government like members of Chartered Accountants of India, Company secretary of India, Registrar of companies, Stock Exchange Board of India, and others who monitor the day to day activities of the company.

The company’s act of India which was formed in the year 1956 is regularly reviewed and amended by the government. This act ensures that private and public limited companies comply with all the rules and regulations drafted for the security of investors, creditors, employees, Directors, and many others.

It is essential for the members of the board to declare the nature of work the company intends to carry out, and the same should be mentioned on the Memorandum of Articles. The copy of MOA needs to be submitted to the ROC. If the company intends to deviate from the main business, then an approval from the ROC and the government is required.

SEBI has drafted rules and regulations for safeguarding the interest of small investors. The shareholders are not permitted to interfere in day to day activities carried out by a company. However they can exercise their voting rights in deciding some of the major managerial decision.

It is necessary to send a notice to all the shareholders of the company to attend the Annual General Meeting of the company. All the major decision which attributes towards the profit needs a special resolution, which means three-forth of the members should approve the same. The boards of directors have to submit a copy of certified profit and loss account along with the Balance Sheet to all the members of the company.

The shareholders enjoy the rights to appoint or terminate a full time or part time director of the company. They also can appoint the managers and 1st statutory auditor of the company. Reserve bank of India plays a crucial role in securing the investments received from the foreign capitalists. All the money remitted from the foreign bank is closely evaluated and proper measures are taken to ensure the money is invested for the right reason.

Appointment of full or part time directors, managers, auditors, company secretary, and others are defined in the Companies act of India. The directors can draw salary or commission and the maximum amount that the company can pay them is clearly defined beforehand. At any point in time they shouldn’t be paid more than that unless they are rendering special technical services and the same in mentioned in the MOA.

SEBI has formulates guidelines for disclosing the terms and conditions for all of its Initial Public offerings. It encourages the company to appoint a few independent directors on board who can also supervise the activities carried by the company.

One of the other important tasks performed by SEBI is to find out the pricing of shares and debentures issued by the company to the shareholders. Moreover the government has been working on taking steps towards increasing the liquidity of the Indian companies.

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Sowmya Somaiah has 57 articles online

Ms. Sowmya Somaiah is a Company Secretary and Founder of “Sunshine Corporate Solutions Pvt Ltd” at Bangalore, India. For more information visit

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Government offers to Protect the Interest of Investors

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This article was published on 2012/05/13