What is Corporate Fraud under Companies Act 2013?
Corporate fraud means undertaking any illegal activities or any dishonest act by an individual or company, to deceive rules and regulations and earn profits in an unethical manner. Corporate fraud is the illegal acts done by the companies or office bearers of the company to earn profit or to suppress profits to deceive tax liabilities. Corporate frauds majorly include insider trading, false financial data, bribery, etc. These actions are performed to deceive stakeholders. The effects of corporate fraud are serious, including capital loss to shareholders, hampers company image, impacts the market overall, and legal trouble for the company and shareholders. Corporate fraud is a serious widespread issue in business not only in India but around the globe. Even international organizations like the EU, G20, SAARC, QUAD, etc. have corporate fraud as an agenda.
Corporate Frauds under Companies Act, 2013
India being a fast-growing economy, has seen huge ups and downs in the economy along with the huge influx of money flowing in and out of the economy. Growing GDP has surely paved the way for economic growth in the country, but it has also allowed some people and groups to enter the loopholes in the system to take unfair advantages. Frauds of any kind not only leave a huge impact on the economy but also pressure the government to come up with strict laws to tackle such fraud in the future.
In India, the Companies Act, 2013 is the umbrella act regulating companies and all related compliances. The purpose of forming the Companies Act is to provide a legal framework for the formation of companies, covering the strata of incorporation, compliance, accountability, management, administration, etc. A company is an artificial person created by law and has a separate legal entity, perpetual succession, a common seal, and limited liability.
Section 2(20) of the Companies Act, 2013 defines a company as a “Company incorporated under this act or any previous company law.”
Geeky Takeaways:
- As the economy is increasing, the chances of companies getting into dishonest acts are also increasing day by day. Frauds have a significant impact on the economy as well.
- When corporations get into unfair, illegal, and dishonest acts, such acts are referred to as corporate fraud.
- Corporate fraud may be done via creating falsified accounting, illegally transferring funds proceed, or shell companies to suppress profits.
- Major corporate frauds were the Satyam scam, the Kingfisher scam, and the Harshad Mehta scam.
Table of Content
- What is Corporate Fraud under Companies Act 2013?
- Types of Corporate Fraud
- Examples of Corporate Fraud
- Important Sections under Companies Act, 2013
- Conclusion
- Corporate Frauds under Companies Act, 2013- FAQs