May 06, 2025
Non-executive directors needn’t get caught up in cases
of corporate fraud
This article was first published
in www.livemint.com (May, 01, 2025).
The Gensol-BluSmart crisis has drawn corporate fraud in India’s startup ecosystem into thespotlight. It has sparked a debate over a ‘fake it till you make it’ culture and whether it’s driven bysheer greed, naive optimism or intense pressure to keep the company’s stock on an ever-risingcurve.
While the causes remain debatable, the consequences of corporate fraud follow a predictablepath. Once discovered, law enforcement agencies and regulatory bodies spring into action. Probesare launched, notices are dispatched and litigation ensues.
One may expect these proceedings to target executive directors, who are responsible for runningthe business and its affairs. But that is not the case. They invariably implicate all board members,including those who serve in non-executive roles, such as nominee directors appointed by privateequity fi rms.
This occurs despite the stark difference between the roles of executive and non-executivedirectors. The latter play a limited role on the board. They represent the shareholders thatnominate them. As their involvement is usually restricted to attending board meetings, they oftenhave no clue, let alone knowledge, of any fraud. Nonetheless, they fi nd themselves arrayed withthose accused of carrying out the
fraud.
Please click
here for our detailed article.
Authors:
–
Anurag Shah and
Viral Mehta
You can
direct your queries or comments to the relevant member.
Disclaimer
The contents of this hotline should
not be construed as legal opinion. View detailed disclaimer.
This hotline does not constitute a
legal opinion and may contain information generated
using various artificial intelligence (AI) tools or
assistants, including but not limited to our in-house
tool,
NaiDA. We strive to ensure the highest quality and
accuracy of our content and services. Nishith Desai
Associates is committed to the responsible use of AI
tools, maintaining client confidentiality, and adhering
to strict data protection policies to safeguard your
information.
This hotline provides general information
existing at the time of preparation. The Hotline is
intended as a news update and Nishith Desai Associates
neither assumes nor accepts any responsibility for any
loss arising to any person acting or refraining from
acting as a result of any material contained in this
Hotline. It is recommended that professional advice
be taken based on the specific facts and circumstances.
This hotline does not substitute the need to refer to
the original pronouncements.
This is not a spam email. You have
received this email because you have either requested
for it or someone must have suggested your name. Since
India has no anti-spamming law, we refer to the US directive,
which states that a email cannot be considered spam
if it contains the sender's contact information, which
this email does. In case this email doesn't concern
you, please
unsubscribe from mailing list.
 |
|
We aspire
to build the next generation
of socially-conscious lawyers
who strive to make the world
a better place.
At NDA, there
is always room for the right
people! A platform for self-driven
intrapreneurs solving complex
problems through research, academics,
thought leadership and innovation,
we are a community of non-hierarchical,
non-siloed professionals doing
extraordinary work for the world’s
best clients.
We welcome
the industry’s best talent -
inspired, competent, proactive
and research minded- with credentials
in Corporate Law (in particular
M&A/PE Fund Formation),
International Tax , TMT and
cross-border dispute resolution.
Write to
happiness@nishithdesai.com
To learn more
about us
Click here.
|
|
Top Tier
Law Firm:
Chambers & Partners,
Legal 500, Benchmark
Litigation, Asialaw,
IFLR1000, ITR World
Tax, Who’s
Who Legal, Asian
Legal Business (Thomson
Reuters), India
Business Law Journal,
Mergermarket
Recognised
Practices:
International Tax,
Private Equity,
Corporate/M&A,
Venture Capital,
Investment Funds,
International Dispute
Resolution: Arbitration
and Litigation,
White-Collar Crime &
Corporate Investigations,
Data Compliance &
Cybersecurity, Internet &
e-Commerce, HR and
Employment Law,
Intellectual Property,
Cross-Border Capabilities,
High Net Worth and
Private Wealth Law,
Insolvency
Recognised
Sectors:
Technology and Telecommunications,
Media and Entertainment,
Life Sciences and
Healthcare, Investment
Funds, FinTech,
Financial Services,
Sports & Gaming,
Transport, Government
and Regulatory
Innovation
Leadership:
RSG Financial Times –
India’s Most
Innovative Law Firm
(2019, 2017, 2016,
2015, 2014), Legal500
Innovative Law Firm
of the Year 2025
|
|
|
|
