Corporate Governance In India

What is corporate governance? It is a process set up for the firms based on certain systems and principles by which a company is governed. The guidelines provided ensure that the company is directed and controlled in a way so as to achieve the goals and objectives to add value to the company and also benefit the stakeholders in the long term.

To understand the scope of the legal framework and study the amendments proxy advisory firms analyze the role of directors and study the changes in the amendments. These proxy firms offer analytical data for the shareholders and some corporate advisory services as well to companies.

The Objectives Of Corporate Governance

Transparency in corporate governance is essential for the growth, profitability and stability of any business. With the growing competition in the corporate world, the need for corporate governance has intensified due to rivalry amongst businesses in all economic sectors at the national as well as the international level.

The Indian Companies Act of 2013 introduced some progressive and transparent processes which benefit the stakeholders, the directors as well as the management of companies. Investment advisory services and proxy firms provide concise information to the shareholders about these newly introduced processes and regulations which aims to improve the corporate governance in India.

Corporate advisory services are offered by advisory firms to efficiently manage the activities of companies to ensure stability and growth of the business, maintain the reputation and reliability for the customers and clients. The top management that consists of the board of directors is responsible for the governance. They must have effective control over the affairs of the company in the interest of the company and the minority shareholders. Corporate governance ensures strict and efficient application of the management practices along with legal compliance in the continually changing business scenario in India.

The corporate governance was guided by Clause 49 of the Listing Agreement before the introduction of the Companies Act of 2013. As per the new provision, SEBI has also approved certain amendments in the Listing Agreement so as to improve the transparency in transactions of the listed companies and giving a bigger say to minority stakeholders in influencing the decisions of the management. These amendments have become effective from 1st October 2014.

Few New Provision for Directors and Shareholders

One or more lady director in board is recommended in certain classes of companies
Every company in India must have a resident directory
The maximum permissible directors cannot exceed 15 in a public limited company. If more directors have to be appointed, it can be done only with approval of the shareholders after passing a Special Resolution
The Independent Directors are a newly introduced concept under the Act. A code of conduct is prescribed and so are other functions and duties
The Independent directors must attend at least one meeting a year
Every company must appoint an individual or firm as an auditor. The responsibility of the Audit committee has increased
Filing and disclosures with the Registrar of Companies has increased
The top management recognizes the rights of the shareholders and ensures strong co-operation between the company and the stakeholders
Every company has to make accurate disclosure of financial situations, performance, material matter, ownership and governance