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Govt recasts Satyam board
Parekh, Karnik, Achuthan to instil customer confidence
Girja Shankar Kaura
Tribune News Service

New Delhi, January 11
Faced with one of the worst financial frauds to hit the country’s IT industry, the government today appointed Deepak Parekh, chairman of Housing Development Finance Corporation Ltd, NASSCOM's former president Kiran Karnik and former SEBI member C Achuthan as the “three musketeers” of its choice to steer the software exporter Satyam out from the crisis.

As a first move from the new directors, the three would meet in Hyderabad tomorrow to decide on the future course of action for the once “iconic” company. The government said it had given the board a free hand in deciding the company's future.

The government, however, made it clear that the mandate of the new board would clearly be “to restore the company's credibility, customer confidence and employee moral as also to safeguard the interest of investors and other stakeholders”.

Minister for Corporate Affairs Prem Chand Gupta, who announced the new directors on the board of the scam-hit software maker, said the three had been a free hand in deciding the future of the company.

Satyam employs about 53,000 people and has a number of Fortune 500 companies as clients, including Nestle, General Electric and Ford Motors. Company’s promoters and other leaders were arrested last week for fabricating financial statements for years.

The minister also said the new board would meet in the next 24 hours. Adding to the minister’s statement, HDFC chairman Deepak Parekh said the board would meet at Hyderabad tomorrow pointing out that the new board would first have to assess the magnitude of the issue.

“Then we have to work on the re-statement of accounts,” Parekh said.

“The board would provide the necessary vision, along with responsible and accountable leadership to the company, in this hour of crisis. This would be an independent board with full authority to act in the interest of the company, the shareholders and all other stake holders,” Gupta said, adding that the board would make its own assessment and take appropriate decisions.

The minister also clarified that the board had not been mandated to find a buyer for Satyam.

“The board needs some time to bring the state of the affairs of the company back to normal, considering the extent of damage done to the company,” he said.

As per the Companies Act, the government nominee directors have to meet within seven days after superseding the existing board. The three-member board will have powers to appoint new auditors of the company and also can name a new management, just like a normal board elected by the shareholders of a company.

The appointment of three nominee directors comes within 48 hours after the government obtained a favourable order from the Company Law Board (CLB) tribunal to supersede the existing board and have its own nominees.

CLB had allowed the Ministry of Corporate Affairs (MCA) to appoint a maximum of 10 directors in the board and the government is open to nominating more members, Gupta said. Institutional investors like Life Insurance Corporation of India (LIC) and Lazard have sought representation on the board.

Lazard, which had written a letter to the MCA seeking board representation, held 2.15 per cent stake in Satyam Computer Services at the end of September 2008. Other large shareholders are LIC and Larsen & Toubro (L&T), which brought nearly 4 per cent equity stake in Satyam earlier in the month.

The board, he added, would have eminent personalities from finance, law, IT and administration, Gupta said. “Further appointments to the board may be made subsequently as required,” he added.

Meanwhile, Satyam Computer Services today welcomed the reconstitution of the board saying: “This is a vital stabilising development for Satyam”.

The minister also said the new board would run the company “till further decision” before handing over control to a shareholder decided leadership.

When asked about the time frame for restating Satyam’s financial statements, Gupta said that had also been left to the new board.

Incidentally, reports suggested that the government had not yet sought the CLB’s permission to replace Price Waterhouse as Satyam’s statutory auditor.

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