Company Law. The Changes Made After The Sahara Scam.

List of Changes made in SEBI after the Sahara Scam-:
-The word "private placement" was not defined in the Companies Act prior to the Sahara
Scam. Only those situations in which an invitation would not constitute as a "public
offer" were described. Section42 was added to the Companies (Amendment) Act, 2013,
based on SEBI's recommendation. It categorized a private placement as any issue of
securities to 49 or fewer people by a listed or unlisted public firm when individual
invitations to buy are addressed to the investors. When the number of shareholders
reaches 50 or more, the distribution of shares is termed a public offer and must be
validated and authorized by the SEBI.
- The government empowered SEBI to govern any money-pooling scheme involving
Rs.100 crores or higher.
- The government has empowered SEBI the right to freeze the assets of persons who do
not comply with the "seize and search" order by SEBI Chairman.
- The government has directed SEBI to draft a new law to regulate illegal investment
programs. SEBI is in the process of developing this law and submitting it for approval to
the appropriate authorities.
- SEBI now has the authority to obtain and investigate telephone records, among other
things, in connection with any securities inquiry.
- As part of the primary market reforms, SEBI has developed a Standard Operating
Procedure for the prohibition and termination of trading in listed businesses for non-
compliance with listing requirements.
- SEBI took numerous measures to tighten the structure for resolving investor grievances
"For example, before, grievance redressal between a broker and a client was handled at
four different locations across the country. This has been expanded to 16 locations."
Previously, the grievance redressal panel was mostly made up of brokers, and in many
cases, it was entirely made up of brokers. SEBI has now ensured that the panel is neutral.
Rather than a broker-driven panel, SEBI has made it a neutral panel.
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- Chit funds, Nidhi schemes, and housing schemes (collective investment schemes) that are
not governed by a specific authority and have a corpus of more than Rs.100 crores must
be controlled by SEBI and must adhere to all restrictions considered appropriate by SEBI.
- "The SCORES computerized grievance redressal system has also witnessed significant
advances." SEBI released an advice on SCORES. The SEBI therefore established its own
phone center, where any complaint can be filed at any time. This call center operates in
14 different languages.
- SEBI issued an interim order prohibiting such businesses from raising funds, paying
dividends, or issuing bonus shares, as well as from engaging in transactions.
- Under the new guidelines, public employees and individuals in statutory positions are
forbidden from dealing in listed stocks of corporations whose concerns they manage
because it gives them access to non-public price sensitive information.
RECENT CHANGES IN THE MONEY LAUNDERING ACT IN 2019.
 Money laundering will be prosecuted as a separate offense.

 The deletion of provisions in sections 17 [search and seizure] and 18 [person search] that
are required for the existence of a FIR or charge sheet by other entities authorized to
approve the offenses mentioned in the PMLA schedule.
 Section 44, which states that a schedule offense trial will not be regarded as a joint trial
with a PMLA crime.
 Section 45 states unequivocally that all PMLA offenses would be cognizable and non-
bailable.
 Section 72 now adds a provision granting the center the authority to establish an inter-
ministerial coordination committee for interdepartmental collaboration.
2. FIU (Financial Intelligence Unit)
 Analyzes information received under the PMLA and disseminates it to other relevant
entities.
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 Section 12 compels financial sector organizations to verify the identity and substantial
transactions of clients and report the results to the FIU.
 We required the Foreign Exchange Management Act of 1999 [FEMA].
 It establishes a legal framework for the administration of foreign currency transactions.
 Cases involving currency fraud can be adjudicated under it.
 International efforts—Vienna Convention—for corporate, extradition, and
criminalization of drug-trafficking money.
2. The Financial Action Task Force (FATF)- a G7 or G20 project to develop measures to
combat money laundering and terrorist financing.
3. Basil Committee Principles Statement- aims to restrict banking to anyone implicated in

money laundering.
4.Treaty on Mutual Legal Assistance
Investors are the backbone of the securities market, and they play an important part in stock
market activity as well as increasing the amount of activity in the economy. Previously, the
Companies Act of 1956 was inadequate to protect investors' interests and combat corporate
criminality. The impact from the Satyam and Sahara scams was one of the most significant
failures of the Companies Act 1956 in terms of investor protection. As a result, the occurrence
fuels debates about reforming the corporate structure, namely that the corporate system and
processes must be trustworthy and transparent in order for investors' interests to be safeguarded
in order for them to make an independent or prudent decision. As a result, this particular fallout
of corporate governance heavily relies on the Companies Act 2013 in terms of creating proper
investor protection mechanisms. This act included or was integrated with new provisions and
regulations to ensure openness and accountability in company management and to protect
investors' interests. The Companies Act of 2013 was enacted with the primary goal of attracting
or increasing penalties for violations and noncompliance.
REGULATIONS REGARDING INVESTORS PROTECTION UNDER COMPANIES

ACT, 2013
3
- Acceptance of deposits- Under the ACT, accepting deposits from the general public is
prohibited, and any breach of any of the provisions is a serious infraction. Section 73 of
the act states that no company shall accept or examine a deposit from the public under
this act unless the matter is recognized under chapter five of the act and the companies
[acceptance of deposit] regulation 2014.
- Misstatement in prospectus- A prospectus is a written statement provided by a firm to the
general public that contains concise information about the company's profile in their
investment offers. Section 34 of the act addresses criminal culpability for falsification in
a company's prospectus. The prospectus issued, disseminated, or distributed shall be
liable for action under section 447 if it contains any statement that is false or misleading
in context in order to entice persons to make an investment.
Fraudulently enticing a person to invest money- Section 36 of the act deals with the
punishment of a person who intentionally or negligently encourages an investor to make
an investment through any arrangement for the aim of securing a profit. This type of
willful suppression of fact is punishable under Section 447.
- Non-payment of dividends- The declaration of dividends is often one of the items on the
agenda of every Annual General Meeting. The dividend is nothing but the company's
profits split among shareholders in accordance to the number of paid-up shares held by
them; it is a return on the investment made by shareholders. Section 125 of the legislation
mandates the creation of investor education and fund protection by the federal
government. This fund receives any unpaid or abandoned application money, matured
money, or matured deposits. Such fund accumulations are to be used for the promotion of
investor awareness and the preservation of investor interests. According to Section 123 of
the ACT, the dividend must be credited to the investor's account within five days
following the declaration.
- Right to demand financial statements- Section 136 of the act establishes a member's right
to seek copies of the balance sheet and auditor's report. In the event of a failure to comply
with this condition, the corporation will be fined 25,000, and the authorized officer who
is in default will be fined 5000. Furthermore, this investor has the right to sue the
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corporation or its officials in a court of law following the parameters established by
Section 436 of the ACT.

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List of Changes made in SEBI after the Sahara Scam-:

RECENT CHANGES IN THE MONEY LAUNDERING ACT IN 2019.

 Money laundering will be prosecuted as a separate offense.

2. FIU (Financial Intelligence Unit)

3. Basil Committee Principles Statement- aims to restrict banking to anyone implicated in

4.Treaty on Mutual Legal Assistance

REGULATIONS REGARDING INVESTORS PROTECTION UNDER COMPANIES

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