{"id":4742,"date":"2022-07-29T13:11:23","date_gmt":"2022-07-29T13:11:23","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=4742"},"modified":"2022-07-29T13:32:05","modified_gmt":"2022-07-29T13:32:05","slug":"legal-framework-for-corporate-governance-in-india","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/","title":{"rendered":"Key legal framework for corporate governance in India"},"content":{"rendered":"<h2><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-4743\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/good-corporate-governance-in-India.jpg\" alt=\"good corporate governance in India\" width=\"1024\" height=\"680\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/good-corporate-governance-in-India.jpg 1024w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/good-corporate-governance-in-India-300x199.jpg 300w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/good-corporate-governance-in-India-768x510.jpg 768w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/good-corporate-governance-in-India-800x531.jpg 800w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/h2>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69dee0bb783ee\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69dee0bb783ee\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#Key_legal_framework_for_corporate_governance_in_India\" title=\"Key legal framework for corporate governance in India\">Key legal framework for corporate governance in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#_The_Companies_Act_2013\" title=\"\u00a0The Companies Act 2013\">\u00a0The Companies Act 2013<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#Listing_agreement_%E2%80%93_Applicable_to_the_listed_companies\" title=\"Listing agreement \u2013 Applicable to the listed companies\">Listing agreement \u2013 Applicable to the listed companies<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#1_Board_of_Directors\" title=\"1. Board of Directors\">1. Board of Directors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#Audit_Committee\" title=\" Audit Committee\"> Audit Committee<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#Disclosure_Requirements\" title=\" Disclosure Requirements\"> Disclosure Requirements<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#CEO_CFO_Certification\" title=\" CEO\/ CFO Certification\"> CEO\/ CFO Certification<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#Risk_Management\" title=\" Risk Management\"> Risk Management<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#Code_of_Conduct\" title=\" Code of Conduct\"> Code of Conduct<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#Report_and_Compliance\" title=\" Report and Compliance\"> Report and Compliance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#Executive_Remuneration\" title=\" Executive Remuneration\"> Executive Remuneration<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#Landmark_Cases_of_failure_of_Corporate_Governance\" title=\"Landmark Cases of failure of Corporate Governance\">Landmark Cases of failure of Corporate Governance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.caindelhiindia.com\/blog\/legal-framework-for-corporate-governance-in-india\/#Satyam_Case\" title=\"Satyam Case\">Satyam Case<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Key_legal_framework_for_corporate_governance_in_India\"><\/span><span style=\"color: #ff0000;\"><strong>Key legal framework for corporate governance in India<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The Companies\/ firm framework for corporate governance initiatives in India consists of <b>MCA and SEBI<\/b>. SEBI monitors and regulates corporate governance of listed companies in India through Clause 49.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"_The_Companies_Act_2013\"><\/span>\u00a0<span style=\"color: #000080;\"><strong>The Companies Act 2013<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>The Companies Act has placed greater emphasis on corporate governance through the board and board processes. The Act covers corporate governance through its following provisions:<\/li>\n<li>Every company is required to appoint 1 (one) resident director on its board.<\/li>\n<li>Nominee directors shall not be treated as independent directors.<\/li>\n<li>Listed companies and specified classes of public companies are required to appoint independent directors and women directors on their boards.<\/li>\n<li>Companies Act for the first time codifies the duties of directors.<\/li>\n<li>Listed companies and certain other public companies shall be required to appoint at least 1 (one) woman director on its board.<\/li>\n<li>Companies Act mandates following committees to be constituted by the board for prescribed class of companies:\n<ul>\n<li>Audit committee<\/li>\n<li>Nomination and remuneration committee<\/li>\n<li>Stakeholders relationship committee<\/li>\n<li>Corporate social responsibility committee<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-4744\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/Corporate-Governance.png\" alt=\"Corporate-Governance\" width=\"857\" height=\"435\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/Corporate-Governance.png 601w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/Corporate-Governance-300x152.png 300w\" sizes=\"(max-width: 857px) 100vw, 857px\" \/><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Listing_agreement_%E2%80%93_Applicable_to_the_listed_companies\"><\/span><span style=\"color: #000080;\"><strong>Listing agreement \u2013 Applicable to the listed companies<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>SEBI has amended the Listing Agreement to align it with Companies Act.<\/li>\n<li>Clause 49 of the Listing Agreement can be said to be a bold initiative towards strengthening corporate governance amongst the listed companies. This Clause intends to put a check over the activities of companies in order to save the interest of the shareholders. Broadly, cl 49 provides for the following:Clause 49 of the Listing Agreement can be said to be a bold initiative towards strengthening corporate governance amongst the listed companies. This Clause intends to put a check over the activities of companies in order to save the interest of the shareholders. Broadly, cl 49 provides for the following:<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-4746\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/Applicable-to-the-listed-companies.jpg\" alt=\"Applicable to the listed companies\" width=\"835\" height=\"423\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/Applicable-to-the-listed-companies.jpg 316w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/Applicable-to-the-listed-companies-300x152.jpg 300w\" sizes=\"(max-width: 835px) 100vw, 835px\" \/><\/p>\n<ol>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"1_Board_of_Directors\"><\/span><span style=\"color: #000080;\"><strong>1<\/strong><strong>. <\/strong><strong>Board of Directors<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ol>\n<p>The Board of Directors shall comprise of such number of minimum independent directors, as prescribed. In case where the Chairman of the Board is a non-executive director, at least one-third of the Board shall comprise of independent directors and where the Chairman of the Board is an executive director, at least half of the Board shall comprise of independent directors. A relative of a promoter or an executive director shall not be regarded as an independent director.<\/p>\n<ol start=\"2\">\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Audit_Committee\"><\/span><span style=\"color: #000080;\"><strong> Audit Committee<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ol>\n<p>The Audit Committee to be set up shall comprise of minimum three directors as members, two-thirds of which shall be independent.<\/p>\n<ol start=\"3\">\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Disclosure_Requirements\"><\/span><span style=\"color: #000080;\"><strong> Disclosure Requirements<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ol>\n<p>Periodical disclosures relating to the financial and commercial transactions, remuneration of directors, etc, to ensure transparency.<\/p>\n<ol start=\"4\">\n<li>\n<h4><span class=\"ez-toc-section\" id=\"CEO_CFO_Certification\"><\/span><span style=\"color: #000080;\"><strong> CEO\/ CFO Certification<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ol>\n<p>To certify to the Board that they have reviewed the financial statements and the same are fair and in compliance with the laws\/ regulations and accept responsibility for internal control systems.<\/p>\n<ol start=\"5\">\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Risk_Management\"><\/span><span style=\"color: #000080;\"><strong> Risk Management<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ol>\n<p>The 2013 Act and Revised Clause 49 specify requirements related to risk management. Audit Committee and the independent directors of the company are entrusted with the responsibility of evaluating the robustness of the risk management systems and policy laid down by the Board.<\/p>\n<ol start=\"6\">\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Code_of_Conduct\"><\/span><span style=\"color: #000080;\"><strong> Code of Conduct<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ol>\n<p>Clause 49 mandates directors of every listed company to lay down a Code of Conduct and post the code on their company\u2019s website. The Board members and all senior management personnel are required to affirm compliance with the code annually and include a declaration to this effect by the CEO in the Annual Report.<\/p>\n<ol start=\"7\">\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Report_and_Compliance\"><\/span><span style=\"color: #000080;\"><strong> Report and Compliance<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ol>\n<p>The Company shall obtain a certificate from either the auditors or practicing CS of-compliance with the conditions of Corporate Governance and annex the same with the Directors\u2019 Report.<\/p>\n<ol start=\"8\">\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Executive_Remuneration\"><\/span><span style=\"color: #000080;\"><strong> Executive Remuneration<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ol>\n<p>The 2013 Act and Revised Clause 49 mandate the formation of a Nomination &amp; Remuneration Committee comprising of at least three directors, all of whom shall be non-executive directors and at least half shall be independent. The NRC is to ensure that the level and composition of remuneration is reasonable and sufficient; the relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and the remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Landmark_Cases_of_failure_of_Corporate_Governance\"><\/span><span style=\"color: #000080;\"><strong>Landmark Cases of failure of Corporate Governance<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-4745\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/CG-faileures.jpg\" alt=\"MAJOR CORPORATE GOVERNANCE FAILURE\" width=\"960\" height=\"540\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/CG-faileures.jpg 960w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/CG-faileures-300x169.jpg 300w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/CG-faileures-768x432.jpg 768w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/07\/CG-faileures-800x450.jpg 800w\" sizes=\"(max-width: 960px) 100vw, 960px\" \/><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Satyam_Case\"><\/span><span style=\"color: #000080;\"><strong>Satyam Case<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>\n<ul>\n<li>Satyam Computer Services scandal was a corporate scandal affecting India-based company Satyam Computer Services in 2009, in which Chairman Ramalinga Raju admitted that the company\u2019s accounts had been manipulated. The Satyam scandal was a Rs 7000 crore corporate scandal in which accounts had been manipulated.<\/li>\n<li>On 7-1-2009, Ramalinga Raju sent an e-mail to SEBI, wherein he confessed to falsify the cash and bank balances of the company. Weeks before the scam began to unravel with his popular statement that he was riding a tiger and did not know how to get down without being killed. Raju had said in an interview that Satyam, the fourth largest IT company, had a cash balance of Rs 4000 crore and could leverage it further to raise another Rs 15,000-20,000 crore.<\/li>\n<li>Ramalinga Raju was convicted with 10 other members on 9-4-2015. Ramalinga Raju and three others were given six months jail term by Serious Fraud Investigation Office (SFIO) on 8-12-2014. Even auditors Price Waterhouse Coopers (PWC) had to face a hard time.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Key legal framework for corporate governance in India The Companies\/ firm framework for corporate governance initiatives in India consists of MCA and SEBI. SEBI monitors and regulates corporate governance of listed companies in India through Clause 49. \u00a0The Companies Act 2013 The Companies Act has placed greater emphasis on corporate governance through the board and &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[647],"tags":[928],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/4742"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=4742"}],"version-history":[{"count":2,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/4742\/revisions"}],"predecessor-version":[{"id":4748,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/4742\/revisions\/4748"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=4742"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=4742"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=4742"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}