NEW DELHI: Taking a cautious approach in view of the recent surge in stock markets, the government has decided to increase the vigil over companies
by enhancing corporate disclosures and making their decision-making more transparent, while keeping a watch on whether funds raised are used for stated purposes.

Corporate affairs minister Salman Khursheed said government wants to ensure that small retail investors are fully aware of the financial and other crucial details of companies so that they can make informed decisions. "Yes, we are not only keeping a watch, but all these things will be institutionally reflected in the disclosures that will be the basis of our vigilance. More extensive disclosures and more transparent decision-making will be there in order to protect the investors," Khursheed said.

He said a majority of such proposals would be incorporated in the new Companies Bill that the government plans to take to the Cabinet soon, before introducing it in Parliament. "Disclosure in the main theme of the new Companies bill. We plan to retain a majority of the proposals that were there in the previous Bill that lapsed after the end of the last government. However, we also plan to make a few new additions to make it more friendly for investors," the minister said.

Khursheed said a major part of the government's vigil would be to ensure that companies use the money for purposes stated in the prospectus. "If you raise money from the market for a stated objective, the disclosure must show the same stated objective and not some misguided objective," he said.

The minister also raised concern over vanishing companies and said the focus should not only be on tracing companies who had already duped investors but also on how to prevent recurrence. "The idea is to have early warning systems. Apart from higher disclosures, the government has a series of programmes for early detection like e-governance program MCA 21 and director identification number (DIN). Also, we will be strengthening the offices of the registrar of companies (RoCs) while getting in the second-generation MCA 21 program," he said, adding that plans were also there to have major investor education programs.

Equity mutual funds dole out dividends

After a disappointing performance in 2008 due to the stock market downturn, around 100 equity funds have gained over 50% in the last six months helping asset management companies to share profits with investors.

By declaring dividend, fund houses hope to reward patient investors as well as attract new investors as the sentiment surrounding the stock market improves, say experts. Down in the dumps at around 8,000-point level in March, the benchmark sensex has now risen to 15,000-point level in a matter of 3 months helping equity funds to gain from their investments.

Principal MF has recently approved the declaration of dividend under Principal Emerging Bluechip Fund - Dividend Option for which June 19 is the record date. The quantum of dividend is 40% or Rs 4 per unit. SBI Magnum Tax Gain, one of the oldest schemes in the country, has declared 28% dividend i.e. Rs 2.80 per unit on the face value of Rs 10 for the open-ended equity linked savings scheme.

UTI Mutual Fund has also announced dividends in its three open-end equity schemes - UTI Master Value, UTI Mid Cap and UTI Transportation and Logistics. The quantum of the declaration under all the schemes is 20% or Rs 2 per unit. Others such as Sundaram BNP Paribas CAPEX Opportunity Fund - Dividend Option, FT India Balanced Fund - Dividend Option, DSPBR India T.I.G.E.R. Fund - Regular Plan have all declared 20% dividends.

While equity mutual fund schemes do pay dividends, fund-houses for the last few months had to wait for sometime before rewarding investors. "If we look at the market performance even five months ago, it was not great. But after this remarkable recovery in markets, it became easier for fund-houses to pay out dividends.

Business Standard