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Corporate Governance in India

Corporate governance is a system of best management practice which helps a business entity to excel by promoting the interest of stakeholders. It is the formulation of policies that are created for the direction of the companies on the principles of accountability, transparency and ethical practices.

Those times have gone when the company has to think or used to think only about itself or its shareholders. Now in the present scenario, when a corporate is in constantly interaction with all the stakeholders. So, there it has the duty to think about the growth of stakeholders.

Definitely profit maximization is there when you are thinking about your shareholders. However we have different objectives also. A corporate should not be only concerned about its economic factors but it should also focus on social factors either its customers, lenders, Government agencies etc. then only a corporate can achieve success. Without the ethical conduct such objectives cannot be achieved.

What is Good Corporate Governance & How to achieve?
Good corporate governance means that the processes of disclosure and transparency are followed so as to provide regulators and shareholders as well as the general public with precise and accurate information about the financial, operational and other aspects of the company.

We can ensure good corporate governance by putting some laws unless it is mandated the companies are not going to follow it.

It is basic Human psychology that, we do not follow anything until it is mandated, we have our own wish likewise the corporate has their own wishes. We are not going to follow anything unless it is mandated and the law actually mandates it.

Legal Framework of Corporate Governance
The evolution of Corporate Governance in India has been divided into two phases
  • Pre-Liberalization
  • Post-Liberalisation
Liberalisation means opening of the economy to the the global level i.e. integrating the economy with the other countries and letting foreign investors to come in India and Indian investors to go in foreign countries by removing trade barriers.

Pre-Liberalisation Period

It is before 1990, there was no existence of Corporate Governance in Indian laws although there is Arthshastra, which is of the times when we did not have the concept of managers, directors, shareholders etc. We had the kings and there was concept of developing them by increasing their wealth, particular standards to be followed by the administration of the state, financial management, decision making process etc. So we can say there was corporate governance in our mind but not in our law.

Corporate Governance is not new to India we have the ideology of accountability, transparency and ethical practices of trade within from ancient times.

However, due to absence of law there was unethical conduct & mismanaged organization.

In the Colonial Period, anything desired by the Britishers was the law which was nothing fair but completely unfair and against the rule of law.

However, we had legislation at pre independence era also:
The English Common Law is the source of origin of the Company legislations in India. Various companies' acts that were passed in India from time to time were based on the English Companies Act. In 1850, the first law on ˜registration of joint stock companies' was enacted in India.

which was based on the English Companies Act of 1844 known as the Joint Stock Companies Act, 1844. This Act of 1850 recognized the company as a distinct legal entity but the privilege of limited liability was not granted to the company under the Act. The principle of limited liability was recognized in India by virtue of the Joint Stock Companies Act, 1857 which was passed following the English law, the Joint Stock Companies Act, 1856.

The next law relating to Company in India was the Companies Act of 1866 legislated (based on English Companies Act of 1862):
for consolidating and amending the law relating to the incorporation, regulation and winding up of trading companies and other associations.' This Act was amended and remodelled in 1882 and it remained effective till 1913. In 1913, the Indian Companies Act of 1913 was legislated following the English Companies (Consolidation) Act, 1908. This act for the first time recognized Private Limited Companies. This Act of 1913 was found to be highly inadequate in the course of its operation and thus it went through numerous amendments till the enactment of the Companies Act, 1956.

After Independence Period, The need was felt to economy to grow that certain essential commodities to grow and there has to be a maximum price that can be charged on these commodities for the poor section to grow because if manufacturer is producing a commodity which is over-priced the poor people will not be able to buy that. That was the time when Indian Government came with Fair prices & Tariff Commission.
  • Companies Act, 1956

Post-Liberalisation Period

After the Liberalisation Period, a high need was felt of Corporate Governance because the foreign investors were looking to invest their money. To attract foreign investors, our market has to be a fair and transparent market to create Goodwill of trustworthiness and ethical practices.

To promote that it was important that we adopt a progressive thought process for our companies. We could not work only on the principle of profit maximization.
Then, there was Cadbury Committee from the UK that actually inspired the talks of Corporate Governance in our country.
  1. In 1998, Confederation of Indian Industry (CII) gave Desirable Code of Corporate Governance.

    In 1996,CII took a special initiative on Corporate Governance “ the first institutional initiative in Indian industry. The objective was to develop and promote a code for Corporate Governance to be adopted and followed by Indian companies, be these in the Private Sector, the Public Sector, Banks or Financial Institutions, all of which are corporate entities. This initiative by CII flowed from public concerns regarding the protection of investor interest, especially the small investor; the promotion of transparency within business and industry; the need to move towards international standards in terms of disclosure of information by the corporate sector and, through all of this, to develop a high level of public confidence in business and industry.

    Recommendation -1
    There is no compelling reason to receive the German arrangement of two-tier boards to guarantee attractive corporate governance. A solitary board, on the off chance that it performs well, can expand long haul shareholder value similarly just as a two-or multi-tiered board. Similarly, there isn't anything to propose that a two-tier board, essentially, is the panacea to every single corporate issue.

    Recommendation - 2
    Any recorded companies with a turnover of Rs.100 crores or more ought to have expertly capable, independent, non-executive directors, who ought to comprise
    •  in any event 30% of the board if the Chairman of the company is a non-executive chief, or
    • in any event 50% of the board if the Chairman and Managing Director is a similar individual.
    Recommendation - 3
    No single individual should hold directorships in excess of 10 recorded companies.

    Recommendation - 4
    For non-executive directors to assume a material function in corporate decision making and boosting long haul shareholder value, they have to:
    • Become dynamic members in boards, not detached advisors;
    • include plainly characterized obligations inside the board, for example, the Audit Committee; and
    • realize how to peruse a balance sheet, profit and misfortune account, cash flow statements, and financial proportions and have some information on different company laws.
      This, obviously, rejects the individuals who are welcome to join boards as specialists in different fields, for example, science and innovation.

    Recommendation - 5
    To make sure about better exertion from non-executive directors, companies should:
    • Pay a commission far beyond the sitting charges for the utilization of the expert data sources. The current commission of 1% of net profits (if the company has a managing chief), or 3% (if there is no managing chief) is adequate.
    • Consider offering investment opportunities, to relate prizes to execution. Commissions are compensations on current profits. Investment opportunities are rewarding contingent upon future energy about corporate value. A fitting blend of the two can adjust a non-executive chief towards watching out for momentary profits just as longer-term shareholder value.
    Recommendation - 6
    While re-naming individuals from the board, companies should give the attendance record of the concerned directors. On the off chance that a chief has not been available (missing with or without leave) for 50% or more meetings, at that point, this ought to be expressly expressed in the goal that is put to cast a ballot. As an overall practice, one ought not to re-delegate any chief who has not had the opportunity to go to even one portion of the meetings.

    Recommendation - 7
    Key data that must be reported to, and set previously, the board must contain:
    • Annual working plans and spending plans, along with up-dated long-haul plans.
    • Capital spending plans, labor, and overhead spending plans.
    • Quarterly outcomes for the company overall and it's working divisions or business fragments. Interior audit reports, including instances of robbery and untruthfulness of a material sort.
    • Show cause, request, and arraignment sees got from revenue specialists which are viewed as tangibly significant. (Material nature is any introduction that surpasses 1 percent of the company's net worth).
    • Fatal or genuine mishaps, hazardous events, and any emanating or contamination issues.
    • Default in an installment of interest or delinquency of the head on any open store, as well as to any made sure about the lender or financial establishment.
    • Defaults, for example, non-installment of intercorporate stores by or to the company, or tangibly considerable non-installment for products sold by the company.
    • Any issue which includes conceivable public or item liability cases of a considerable sort, including any judgment or request which may have either passed injuries on the lead of the company or taken an unfriendly view with respect to another venture that can have negative ramifications for the company.
    • Details of any joint venture or collaboration understanding.
    • Transactions that include significant installment towards altruism, brand value, or protected innovation.
    • Recruitment and compensation of senior officers just beneath the board level, including arrangement or expulsion of the Chief Financial Officer and the Company Secretary.
    • Labor issues and their proposed arrangements.
    • Quarterly subtleties of unfamiliar trade presentation and the means were taken by management to restrict the dangers of antagonistic conversion scale development, if material.

    Recommendation - 8
    1. Recorded companies with either a turnover of over Rs.100 crores or a settled up capital of Rs.20 crores should set up Audit Committees inside two years.
    2. Audit Committees should comprise of at any rate three individuals, all drawn from a company's non-executive directors, who ought to have satisfactory information on money, records, and essential components of company law.
    3. To be powerful, the Audit Committees ought to have obviously characterized Terms of Reference and its individuals must be eager to invest more energy in the company's work versus other non-executive directors.
    4. Audit Committees should help the board in satisfying its capacities identifying with corporate bookkeeping and reporting rehearses, financial and bookkeeping controls, and financial statements and recommendations that accompany the public issue of any security”and in this manner give viable oversight of the financial reporting measure.
    5. Audit Committees ought to occasionally communicate with the legal auditors and the interior auditors to find out the quality and veracity of the company's records just as the ability of the auditors themselves.
    6. For Audit Committees to release their trustee duties with due determination, it must be occupant upon management to guarantee that individuals from the committee have full admittance to financial information of the company, its auxiliary and related companies, remembering information for contingent liabilities, obligation introduction, current liabilities, advances, and speculations.
    Recommendation - 9
    Under "Extra Shareholder's Information", recorded companies should give information on:
    1. High and low month to month midpoints of share costs in a significant Stock Exchange where the company is recorded for the reporting year.
    2. More prominent detail on business portions up to 10% of turnover, giving a share in deals revenue, an audit of activities, the examination of business sectors, and future possibilities.
    Recommendation - 10
    1. Consolidation of Group Accounts should be discretionary and dependent upon:
      • the FIs permitting companies to use based on the gathering's assets, and
      • the Income Tax Department utilizing the gathering idea in evaluating corporate annual expense.
    2. If a company decides to intentionally unite, it ought not to be important to add-on the records of its auxiliary companies under segment 212 of the Companies Act.
    3. However, on the off chance that a company combines, at that point the meaning of "gathering" ought to incorporate the parent company and its auxiliaries (where the reporting company possesses over half of the democratic stake).
    Recommendation - 11
    Significant Indian stock trades ought to continuously demand a consistent testament, endorsed by the CEO and the CFO, which obviously expresses that:
    • The management is answerable for the planning, trustworthiness, and reasonable introduction of the financial statements and other data in the Annual Report, and which likewise recommends that the company will proceed in business throughout the next year.
    • The bookkeeping arrangements and standards adjust to standard practice, and where they don't, total honesty has been made of any material takeoffs.
    • The board has supervised the company's arrangement of inside bookkeeping and authoritative controls frameworks either the chief or through its Audit Committee (for companies with a turnover of Rs.100 crores or settled up capital of Rs.20 crores)

    Recommendation - 12
    For all companies with settled up capital of Rs.20 crores or more, the quality and amount of exposure that accompanies a GDR issue should be the standard for any homegrown issue.

    Recommendation - 13
    The government must permit far more prominent financing to the corporate area against the security of shares and other papers.

    Recommendation - 14
    It would be alluring for FIs as unadulterated banks to re-compose their agreements to wipe out having chosen one director aside from:
    1. in case of genuine and efficient obligation default; and
    2. if there should be an occurrence of the indebted person company not giving six-month to month or quarterly operational information to the concerned FI(s).
    Recommendation - 15
    1. On the off chance that any company goes to more than one FICO assessment office, at that point, it must unveil in the outline and issue record the rating of the apparent multitude of organizations that did such an activity.
    2. It isn't sufficient to express the evaluations. These must be given in an even configuration that shows where the company stands compared with higher and lower positioning. It has an impressive effect on an investor to know whether the rating organization or offices set the company in the top openings, or in the center, or in the base.
    3. It is fundamental that we take a gander at the amount and nature of revelations that accompany the issue of company securities, debentures, and fixed stores in the USA and Britain”if just to realize what more should be possible to move certainty and establish a climate of straightforwardness.
    4. At last, companies which are making unfamiliar obligation issues can't have two arrangements of exposure standards: a thorough one for the outsiders, and a moderately minute one for Indian investors.
    Recommendation - 16
    Companies that default on fixed stores ought not to be allowed to:
    • acknowledge further stores and make intercorporate credits or speculations until the default is made acceptable; and
    • announce profits until the default is made acceptable. Both have been recommended by the Working Group on the Companies Act, and are embraced by CII.
    Recommendation - 17
    The decrease in the number of companies where there are candidate directors. It has been contended by FIs that there are such a large number of companies where they are on the board, and too scarcely any able officers to take care of the work appropriately. Along these lines, in the principal occasion, FIs should take a strategic decision to pull out from boards of companies where their individual shareholding is 5 percent or less, or absolute FI holding is under 10%.
       
  2. In 1999, SEBI came with Kumar Mangalam Birla Committee

    Kumar Mangalam Birla Committee:
    • Kumar Mangalam Birla appointed as Chairman of the Committe
    • He addressed the issues by giving voluntary & mandatory recommendations for listed companies.
    Recommendations
    Appointment of Directors

    • Resume (Qualification, Past Experience, Career Record) should be given to shareholders.
    • If Chairman is Executive Director, Atleast 50% directors should be Independent.
    • If Chairman is Non: Executive Director, Atleast1/3rd directors should be Independent.
    Chairman
    • Directors shall not be members of more than 10 committees.
    • Or Chairman of more than 5 committees across all companies.
    Managerial Remuneration
    • If there's only 1 Managerial Personnel, it shall not exceed 5% of its net profit.
    • In case of more than one Managerial Personnel it shall not exceed 10% of its net profit.
    • Disclosure of Annual Reports.
    Other Imp. Recommendations:
    • Recommendations on Insider trading
    • A report on Corporate Governance delineating the steps thay have taken to comply with the recommendations of the committee.
    • Clause 49 in the Listing Agreement was inserted in the year, 2000 after the recommendation of this committee.

     
  3. In 2000, Ministry of Corporate Affairs (MCA) [That time called as Department of Corporate Affairs] setup a Task Force for Corporate Governance

    Task Force
    • Department of Corporate Affairs, prepared a report on acheiving corporate excellence through governance
    Important Recommendations
    • Depending upon the size and capabilities of the companies as well the requirements of the market place, the task force recommended plased implementations of the essential measures.

     
  4. In 2000, Insertion of Clause 49 in Listing Agreement

    Clause 49 Listing Agreement
    • Came on the recommendation of the Kumar Managalma Birla Committee of 1999.
    • To promote & raise the standard of Corporate Governance for listed companies primarily focusing on 2 fundamental goals imrpving the function & structure of company boards and increasing disclosure to shareholders.
    Recommendations
    • The importance of audit committees.
    • Function and constitution of board audit committees.
    • w.r.t disclosure and transparency issues.
    • Company's Annual Report to shareholders should contain a Management Discussion and Analysis.

     
  5. In 2001, Reserve Bank of India, compared Indian Corporate Governance with International Standard and given recommendations on

    Recommendations of RBI
    • The Basis of an effective Corporate Governance Framework, that promotes transparent and efficient markets, be consistent with the rule of law and clearly artivulate the division of responsibilities among different supervisory, regulatory and enforcement authorities
    • Rights of Shareholders & Ownership functions.
    • Equitable Treatment of Shaeholders.
    • Role of Stakeholders in Corporate Governance.
    • Disclosure & Transparency
    • Responsibilities of the Board
       
  6. In 2002, Naresh Chandra Committee on Corporate Audit & Governance Committee

    Naresh Chandra Committee
    • Department of Corporate Affairs appointed Naresh Chandra as Chairman of this Committee to examine:
    • Certifcation of Accounts & Financial Affairs of the Compnay by Management & Directors.
    • The Audit System
    Recommended Changes:
    • The statutory Auditor
    • Company Relationship
    • Procedure fro Appointment of Auditors
    • Determination of Audit Fee
    • Restrictions, if required on non-audiory fee
    • Measures to ensure that management & companies put forth a "true and fair" statment of financial affairs of company.
    • After the recommendation of this committee SFIO (Serious Fraud Investigation Office) got approval.

       
  7. In 2003, Narayan Murthy Committee was formed

    NMC
    • Security Exchange Board of India constitutes this committee under the Chirmanship of Narayan Murthy
    • To improve the governance standards
    To Study:
    • The role of Independent Directors
    • Related Parties
    • Risk Management
    • Directorship & Director Compensation
    • Code of Condust
    • Financial Disclosures
    • Clause 49 Amendement of Listing Agreement
       
  8. In 2003, 2nd Report of Naresh Chandra Committee

    Need
    • The Companies Act, 1956 has undergone many amendments keeping in view the changes in business environment.
    • As a large no. of private players entering into the market there was need to look the law again.
    Changes in:
    • The Companies Act, 1956
    • The Partnership Act, 1932
       
  9. In 2005, J.J. Irani Committee

    Changes in:
    • Issues arising frm the revision of the Companies Act, 1956.
    • Responses received from various stakeholders on the Concept Paper
    • Bringing about compactness by reducing the size of the act.
    • Related Party Transactions
    • Demand for Poll
    • Vacation of offices/ Resignation by Directors
    • Meeting/ Quorum of Meetings
    • Options for buy-back of shares of de-listed companies.
    • Corporate Structure.
    • Enabling easy and unambiguous interpretation by recasting the provisions of the Law.
    • Proving greater flexibility in rule making to enable timely response to ever-evolving business models.
    • Protecting the interest of shareholders and investors, including small investors.
       
  10. In 2017 Uday Kotak Committee, Recommendations:

    • Chairman of the board cannot be the MD or the CEO of a company
    • Board of directors to have at least one woman independent director
    • Board of directors to have a minimum of six directors
    • Independent directors to make up 50 per cent of the board
    • Audit committee to review use of loans or investment of more than ` 100 crore by a holding company in a subsidiary
    • SEBI to penalize auditors if any lapses are found
    • Directorship in listed entities to be limited to 8 per person:
    • Minimum remuneration:
    • Risk management and IT committee
    • Companies should disclose and update all ratings.
    • Public sector companies to be governed by listing requirements.
    • Creation of a formal channel for sharing information with promoters
    • Mandate minimum qualification to independent directors and disclose theirrelevant skills.
    • Disclose medium and long term strategies in annual reports.
       
  11. OECD Principles

    • Openness, transparency and inclusiveness
    • Engagement and participation in policymaking and policy making and service delivery
    • Creation of a data-driven culture in the public sector
    • Protecting privacy and ensuring security
    • Leadership and political commitment
    • Coherent use of digital technology across policy areas
    • Effective organisation and governance frameworks to coordinate
    • Strengthen international cooperation with governments
    • Development of clear business cases
    • Reinforce ICT project management capabilities
    • Procurement of digital technologies
    • Legal and regulatory framework
       
  12. Companies Act, 2013

    The Companies Act of 2013 has various provisions which are design for transparency, accountability in dealings of the companies.

    For Example: The concept of e voting was introduced that a shareholder can participate in the decision making of a company which delivers the presence of transparency and fairness in the dealings of the company.

    This small example doesn't tell us about profit maximization but it is related to the operations of the company which tell us that the companies have to be fair transparent in their dealings.

    Some of the main highlights of Corporate Governance in Companies Act, 2013:
    • Participation of Shareholders
    • Ordinary Resolution for Ordinary Business like Dividend, Appointment of Directors and Auditors etc.
    • Special Resolution in many cases like starting a new business.
    • Oppression & Mismanagement
      (Minority Shareholders are protected under the Act, 10% of them may make application for appointment of their representative.)
       
  13. Listing Agreement

    Listing Agreement is the basic document which is executed between companies and the Stock Exchange when companies are listed on the stock exchange. The main purposes of the listing agreement are to ensure that companies are following good corporate governance. The Stock Exchange on behalf of the Security Exchange Board of India ensures that companies follow good corporate governance. The Listing Agreement comprises of 54 clauses stating corporate governance, which listed companies have to follow, failing which companies have to face disciplinary actions, suspension, and delisting of securities. The companies also have to make certain disclosures and act by the clauses of the agreement.
     
  14. Accounting Standards

    The Institute of Chartered Accountant of India is the concerned authority to issue Accounting Standards, which are mandatory in most of the cases to promote transparency. These standards provide guidelines for disclosures of financial information to ensure uniformity between companies.
     
  15. SEBI (Securities And Exchange Board Of India)

    SEBI Act came into force in 1992 but the Securities and Exchange Board of India was established even before this particular act came into force but this board got more power when this act came. It brought that recognition to the board and give its power to formulate more policies and regulations.

    Securities and Exchange board is mainly concerned with the listed companies any company which is listed on the recognised stock exchange comes under its purview.

    SEBI Listing Obligations and Disclosure Requirements (LODR)

    The Kotak Committee constituted under the chairmanship of Mr. Uday Kotak which aims at making compliances and disclosures even more transparent accepted by the SEBI & following obligations came for listing of the companies:

    With immediate effect:
    • Accounts to be disclosed in XBRL format to stock exchanges
    • Additional disclosures on board evaluation
    • Additional disclosure in the management, discussion and analysis section of the annual report
Oct 1, 2018
  • Appointment of alternate director for independent director is not permitted
  • Annual report to be submitted to stock exchange and published on website before dispatching annual report to shareholders along AGM notice
  • Publish credit ratings for all its instruments on website and immediately update any revision in such credit ratings
April 2019
  • Listed companies having subsidiaries will have to submit quarterly / year to date consolidated financial results. Earlier it was optional.
  • Mandatory discloure of half yearly cashflows.
  • Aggregate number of Directorships to be limited to 8 companies.
  • Shareholders approval for royalty and brand payments related parties exceeding two percent of the consolidated turnover.
  • Related party transaction to be disclosed on company website and to be intimated to stock exchanges within 30 days of publishing of half yearly statement.
  • Related parties now permitted to cast negative vote.
  • Secretarial Audit report of material unlisted companies to be annexed to the annual report.
  • Limited review/ audit of atleast 80% of the consolidated revenue, assets and profits.
  • List of core skills, competencies to be identified and disclosed by board of directors.
  • Disclosure of reasons to be communicated to stock exchange for resignation of: Auditor within 24 hours & of an Independent Director within 7 days of resignation including confirmation that there are no other.
  • Enhanced role of audit committee, stakeholders relationship committee, nomination and remuneration committee.
  • Independent Director to provide annual declaration that he/she is not aware of any circumstances that could impact his/her ability to discharge his/her duties,
  • Disclose by way of note aggregate effect of material adjustments made in the results of last quarter pertaining to earlier period.
  • Recommendations of any committee of the board mandatorily required in a financial year not accepted by the board along with reasons.

April 2020
  • Aggregate number of Directorships to be limited to 7 companies
  • Identify names of directors who have core competencies identified by the company
For TOP 100 Companies
On April 2019
  • Hold Annual General meeting within 5 months from end of financial year
  • One way live webcast of the proceeding of the AGM
For Top 500 Companies
On Oct 1, 2018
  • Mandatory Directors insurance for Independent Director

On April 2019
  • Atleast one woman independent director mandatory
  • Enhanced role of risk management committee
On April 2020
  • Chairperson to be a non-executive director and not related to MD or CEO
     
For Top 1000 Companies
On April 2019
  • Minimum 6 directors to be on board
  • Quorum for board meeting to be 1/3rd of total strength or three which ever is higher including atleast one independent director
On April 2020
  • Atleast one woman independent director mandatory

For Top 2000 Companies
On April 2020
  • Minimum 6 directors to be on board
  • Quorum for board meeting to be 1/3rd of total strength or three which ever is higher including atleast one independent director
     
The Kotak Committee constituted under the chairmanship of Mr. Uday Kotak which aims at making compliances and disclosures even more transparent accepted by the SEBI & following obligations came for listing of the companies:
With immediate effect
  • Accounts to be disclosed in XBRL format to stock exchanges
  • Additional disclosures on board evaluation
  • Additional disclosure in the management, discussion and analysis section of the annual report
Oct 1, 2018
  • Appointment of alternate director for independent director is not permitted
  • Annual report to be submitted to stock exchange and published on website before dispatching annual report to shareholders along AGM notice
  • Publish credit ratings for all its instruments on website and immediately update any revision in such credit ratings
April 2019
  • Listed companies having subsidiaries will have to submit quarterly / year to date consolidated financial results. Earlier it was optional.
  • Mandatory discloure of half yearly cashflows.
  • Aggregate number of Directorships to be limited to 8 companies.
  • Shareholders approval for royalty and brand payments related parties exceeding two percent of the consolidated turnover.
  • Related party transaction to be disclosed on company website and to be intimated to stock exchanges within 30 days of publishing of half yearly statement.
  • Related parties now permitted to cast negative vote.
  • Secretarial Audit report of material unlisted companies to be annexed to the annual report.
  • Limited review/ audit of atleast 80% of the consolidated revenue, assets and profits.
  • List of core skills, competencies to be identified and disclosed by board of directors.
  • Disclosure of reasons to be communicated to stock exchange for resignation of “ Auditor within 24 hours & of an Independent Director within 7 days of resignation including confirmation that there are no other.
  • Enhanced role of audit committee, stakeholders relationship committee, nomination and remuneration committee.
  • Independent Director to provide annual declaration that he/she is not aware of any circumstances that could impact his/her ability to discharge his/her duties,
  • Disclose by way of note aggregate effect of material adjustments made in the results of last quarter pertaining to earlier period.
  • Recommendations of any committee of the board mandatorily required in a financial year not accepted by the board along with reasons.

April 2020
  • Aggregate number of Directorships to be limited to 7 companies
  • Identify names of directors who have core competencies identified by the company

For TOP 100 Companies
On April 2019
  • Hold Annual General meeting within 5 months from end of financial year
  • One way live webcast of the proceeding of the AGM
For Top 500 Companies
On Oct 1, 2018
  • Mandatory Directors insurance for Independent Director
On April 2019
  • Atleast one woman independent director mandatory
  • Enhanced role of risk management committee
On April 2020
  • Chairperson to be a non-executive director and not related to MD or CEO
For Top 1000 Companies
On April 2019
  • Minimum 6 directors to be on board
  • Quorum for board meeting to be 1/3rd of total strength or three which ever is higher including atleast one independent director
On April 2020
  • Atleast one woman independent director mandatory

For Top 2000 Companies
On April 2020
  • Minimum 6 directors to be on board
  • Quorum for board meeting to be 1/3rd of total strength or three which ever is higher including atleast one independent director

Conclusion
The foregoing analysis of the emergence of corporate governance traces the chequered history through which governance issues have been highlighted, shaped and refined, and the long road it has to traverse to acquire some degree of perfection. The harbinger of the initiatives in this direction was the oft-quoted Cadbury Committee Report in the United Kingdom in 1992. Such initiatives being few and far between, most companies knew little of what the phrase corporate governance meant and cared even less for its implications. Although India has been fortunate in not having to go through the massive corporate failures, it has not been wanting in its resolve to incorporate better governance practices in the country's corporates emulating stringent international standards.

Surprisingly, the initial drive for better corporate governance and disclosure”perhaps as a result of the 1992 stock market scam and the fast emerging international competition consequent on the liberalisation of the economy that began in 1991”came from the Confederation of Indian Industry and the Department of Corporate Affairs. Various committees were constituted that recommended stringent guidelines for corporate governance, most of which have been accepted by the government and the market regulator.

However, as the Naresh Chandra Committee on corporate audit and governance pointed out:
There is scope for improvement. For one, while India may have excellent rules and regulations, regulatory authorities are inadequately staffed and lack sufficient number of skilled people. This has led to less than credible enforcement. Delays in courts compound the problem. For another, India has had its fair share of corporate scams and stock market scandals that has shaken investor confidence. Much can be done to improve the situation.


Written By: Adv.Vishal Kumar - Corporate Lawyer, New Delhi
Ph. No. : +91 8826-466-744, E-mail: [email protected]

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