Corporate governance is an increasingly important issue in the Indian economy. The past decade has seen a number of scandals2 and shareholder disputes,3 all of which indicate lacunae, if not lapses, in governance.
Regulators have responded to these challenges by amending and, in some cases, introducing new legislation, and shareholders are resorting to activist intervention in companies to secure their rights. This, coupled with the closely held shareholding of Indian companies,4 as well as the several factors that contribute to India's ranking on the Transparency Index, keep corporate governance on the radar.
The Indian corporate governance framework focuses on:
- protection of minority shareholders;
- accountability of the board of directors and management of the company;
- timely reporting and adequate disclosures to shareholders; and
- corporate social responsibility.
The regime emphasises transparency through disclosures and a mandatory minimum proportion of independent directors on the board of each company.5
However, as is common in India, the corporate governance regulatory framework is composed of statutes and regulations that require supervision by multiple regulators:
- the Securities and Exchange Board of India (SEBI) is the principal regulator for listed companies;
- the Ministry of Corporate Affairs (MCA) and the registrar of companies (Registrar) administer the Companies Act 2013 and the relevant rules that apply to all companies, including listed companies; and
- additionally, sector-specific regulation also applies, and this can have a significant impact on the governance regime.6
Perhaps the most significant issue that Indian regulators must address is ensuring that independent directors can fulfil their obligations in the closely held and controlled world of Indian corporates.
More detailed information regarding corporate governance rules applicable to listed companies in India is available at https://thelawreviews.co.uk/edition/the-corporate-governance-review-edition-9/1189450/india
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