09 Apr 2023






“Corporate Governance is the acceptance by management of the in alienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal and corporate funds in the management of a company.”


Report of  N. R. Narayana Murthy Committee on Corporate Governance constituted by SEBI (2003)



The initiatives taken by Government of India in 1991, aimed at economic liberalization, privatization and globalisation of the domestic economy, led India to initiate reform process in order to suitably respond to the developments taking place world over. On account of the interest generated by Cadbury Committee Report, the Confederation of Indian Industry (CII), the Associated Chambers of Commerce and Industry (ASSOCHAM) and, the Securities and Exchange Board of India (SEBI) constituted Committees to recommend initiatives in Corporate Governance.





Desirable Corporate Governance: A Code

CII took a special initiative on Corporate Governance, the first institution initiative in Indian Industry.

The objective was to develop and promote a code for Corporate Governance to be adopted and followed by Indian companies, whether in the Private Sector, the Public Sector, Banks or Financial Institutions, all of which are corporate entities.

The final draft of the said Code was widely circulated in 1997. In April 1998, the Code was released. It was called Desirable Corporate Governance: A Code




Kumar Mangalam Birla Committee

The Securities and Exchange Board of India (SEBI) had set up a Committee on May 7, 1999 under the Chairmanship of Kumar Mangalam Birla to promote and raise standards of corporate governance.

The Report of the committee was the first formal and comprehensive attempt to evolve a Code of Corporate Governance, in the context of prevailing conditions of governance in Indian companies, as well as the state of capital markets at that time.

The recommendations of the Report, led to inclusion of Clause 49 in the Listing Agreement in the year 2000




Task Force on Corporate Excellence through Governance

In May 2000, the Department of Company Affairs [now Ministry of Corporate Affairs (MCA)] formed a broad-based study group under the chairmanship of Dr. P.L. Sanjeev Reddy.

The group was given the ambitious task of examining ways to “operationalise the concept of corporate excellence on a sustained basis”, so as to “sharpen India’s global competitive edge and to further develop corporate culture in the country”.

In November 2000, a Task Force on Corporate Excellence set up by the group produced a report containing a range of recommendations for raising governance standards among all companies in India. It also suggested the setting up of a Centre for Corporate Excellence.




Naresh Chandra Committee

The Enron debacle of 2001 involving the hand-in-glove relationship between the auditor and the corporate client, the scams involving the fall of the corporate giants in the U.S. like the World Com, Qwest, Global Crossing, Xerox and the consequent enactment of the stringent Sarbanes Oxley Act in the U.S. were some important factors which led the Indian Government to wake up

In the year 2002, Naresh Chandra Committee was appointed to examine and recommend inter alia amendments to the law involving the auditor-client relationships and the role of independent directors.




N. R. Narayana Murthy Committee

In the year 2002, SEBI analyzed the statistics of compliance with the clause 49 by listed companies and felt that there was a need to look beyond the mere systems and procedures if corporate governance was to be made effective in protecting the interest of investors.

 SEBI therefore constituted a Committee under the Chairmanship of Shri N. R. Narayana Murthy, for reviewing implementation of the corporate governance code by listed companies and for issue of revised clause 49 based on its recommendations.




Dr. J. J. Irani Committee on Company Law

The Government constituted a committee under the Chairmanship of Dr. J. J. Irani, Director, Tata Sons, with the task of advising the Government on the proposed revisions to the Companies Act, 1956 with the objective to have a simplified compact law that would be able to address the changes taking place in the national and international scenario, enable adoption of internationally accepted best practices as well as provide adequate flexibility for timely evolution of new arrangements in response to the requirements of ever- changing business models

The Committee recommended that effective measures be initiated for protecting the interests of stakeholders and investors, including small investors, through legal basis for sound corporate governance practices. With a view to protect the interest of various stakeholders, the Committee also recommended the constitution of a “Stakeholders’ Relationship Committee” and provision of duties of directors in the Act with civil consequences for nonperformance




CII’s Task Force on Corporate Governance


In 2009, CII’s Task Force on Corporate Governance gave its report and suggested certain voluntary recommendations for industry to adopt.




Corporate Governance Voluntary Guidelines

Inspired by the industry recommendations, the MCA, in late 2009, released a set of voluntary guidelines on corporate governance. The Guidelines were derived out of the unique challenges of the Indian economy, and took cognizance of the fact that all agencies need to collaborate together, to ensure that businesses flourish, even as they contribute to the wholesome and inclusive development of the country. The Guidelines urged businesses to embrace the “triple bottom-line” approach whereby their financial performance could be harmonized with the expectations of society, the environment and the many stakeholders in a sustainable manner




NASSCOM Recommendations


Corporate Governance and Ethics Committee of the National Association of Software and Services Companies (NASSCOM) issued recommendations in mid-2010, focusing on the stakeholders of the company




Policy Document on Corporate Governance


The Ministry of Corporate Affairs constituted a Committee to formulate a Policy Document on Corporate Governance under the chairmanship of Mr. Adi Godrej with the President ICSI as Member Secretary/ Convenor.

The Policy Document sought to synthesize the disparate elements in the diverse guidelines, draw on innovative best practices adopted by specific companies, incorporate current international trends and anticipate emerging demands on corporate governance in enterprises in various classes and scale of operations.

The Adi Godrej Committee submitted its report which was articulated in the form of 17 Guiding Principles of Corporate Governance.




Companies Act

The Companies Act, 2013 brought with it radical changes in the sphere of Corporate Governance in India. It provided a major overhaul in Corporate Governance norms and sought to have far-reaching implications on the manner in which corporate operates in India. The Act has since been amended thrice – in 2015, 2017 and 2019. The Amendments impacts different aspects of business management in India, including key structuring, disclosure, and compliance requirements.




SEBI (Listing Obligations and Disclosure Requirements) Regulations

With a view to consolidate and streamline the provisions of the erstwhile listing agreements for different segments of the capital market and the provisions pertaining to listed entities with the Companies Act, 2013, the SEBI notified SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for the listed entities having listed designated securities on recognized stock exchanges. The provisions of Corporate Governance in SEBI (LODR) Regulations, 2015 are discussed at relevant places in this study material.



Uday Kotak Committee

The SEBI Committee on corporate governance was formed in June 2017 under the Chairmanship of Mr.Uday Kotak with the aim of improving standards of corporate governance of listed companies in India

With the aim of improving standards of Corporate Governance of listed companies in India, the Committee was requested to make recommendations to SEBI on the following issues:

- Ensuring independence in spirit of Independent Directors and their active participation in functioning of the company;

- Improving safeguards and disclosures pertaining to Related Party Transactions;

- Issues in accounting and auditing practices by listed companies;

- Improving effectiveness of Board Evaluation practices;

- Addressing issues faced by investors on voting and participation in general meetings;

- Disclosure and transparency related issues, if any;

- Any other matter, as the Committee deems fit pertaining to corporate governance in India.

The Committee submitted its report to SEBI in October 2017. The recommendations of the Committee were given in 11 Chapters as follows:

- Composition and Role of the Board of Directors

- The Institution of Independent Directors

- Board Committees

- Enhanced Monitoring of Group Companies

- Promoters/Controlling Shareholders and Related Party Transactions

- Disclosures and Transparency

- Accounting and Audited related Issues

- Investors participation in Meetings of Listed Entities

- Governance aspects of Public Sector Enterprises

- Leniency Mechanism

- Capacity building in SEBI for enhancing Corporate Governance in Listed Entities

In its board meeting on March 27, 2018, SEBI, after detailed consideration and due deliberation, accepted several recommendations of the Kotak Committee without any modificationsand accepted a few other recommendations with certain modifications as to timelines for implementation, applicability thresholds among others. Some of the major changes accepted relate to:

- Increasing Transparency

-Enhanced Disclosure Requirements

- Disclosure of Utilization of Funds from Qualified Institutional Placement (QIP) /Preferential Issues

- Disclosures of Auditor Credentials, Audit Fee, Reasons for Resignation of Auditors

- Disclosure of Expertise/Skills of Directors

- Enhanced Disclosure of Related Party Transactions (RPT)

- Mandatory Disclosure of Consolidated Quarterly Results with effect from Financial Year 2019-2020-

- Reshaping the Institution of the Board of Directors and Enhancing the Role of Committees of the Board

- Separation of the office of the chairperson (i.e. the leader of the board) and CEO/MD (i.e. the leader of the management)

- Augmenting board strength and diversity

- Enhanced Quorum

- Capping the Maximum Number of Directorships

- Expanded Eligibility Criteria for Independent Directors

- Enhanced Role of committees

- Down-streaming Corporate Governance

- Enhanced Obligations on Listed Entities with Respect to Subsidiaries

- Secretarial Audit to be Mandatory for Listed Entities and their Material Unlisted Subsidiaries



Article Compiled by:-

Mayank Garg

+91 9582627751


Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including newspapers, Journals, Bare Acts, Case Material. Charted Secretary etc.