Corporate Governance and Business Ethics in India

Dr. Iti Bose

Research Associate
Shailesh Jha Mehta School of Management
Indian Institute of Technology,
Mumbai, India
itibose@iitb.ac.in

Abstract
With the growing strength of consumer movements and rising levels of awareness among
stakeholders, corporations are realizing that stakeholders and consumers are no longer
indifferent to unethical practices like financial irregularities, tax-evasion, poor quality
products and services, kick-backs, non-compliance with environmental issues, and
hazardous working conditions.

Many Indian companies too have recognized the importance of integrity, transparency,
and open communications. They believe that the goodwill resulting from adopting and
successfully implementing a code of business ethics will, in the long run, translate into
economic gains.

Today, investors want to ensure that the companies they invest in are not only managed
properly, but also have proper corporate governance. They regard corporate governance

as a control mechanism that ensures the optimum use of the human, physical and
financial resources of an enterprise.

Companies have now begun to integrate ethics into their corporate cultures and
concentrate on putting appropriate corporate governance mechanisms in place.

Key Words: Corporate Governance, Corporate Law, Business Ethics, Governance

Systems, Cross-cultural management, Asian business, Stakeholder theory, Agency
theory, Corporate social responsibility

1. Introduction

Corporate governance is a matter of conviction in the dogma of sharing of wealth with

various participants in corporate enterprises. Strong Corporate Governance is
indispensable to a resilient and vibrant corporate market and is an important instrument
of investor protection. It is the blood that fills the veins of transparent corporate
disclosure and high quality accounting practices. The essence of corporate governance
involves the development of a constructive relationship between different constituents of
a corporate enterprise based on the principles of fairness, transparency and
accountability. Such a mechanism enables corporations to attract monetary and human
resources, enables Board to monitor the performance of the management, crucial for the
assigned role of running the enterprise for the common benefit of all constituents.
Economic resources would flow only to corporations having impeccable corporate
governance credentials. For the developing economies seeking to integrate with the
global economy, corporate governance is of critical importance, as it is the key parameter
used for evaluation by global investors or strategic partner.

The fall of many US corporations in the early years of the 21st century brought one clear
message to the fore: ethics matters in business. The public s perception of corporate
ethics changed dramatically with the revelation of the unethical decision-making at
WorldCom and Enron. The scandals took a toll on consumers confidence and portfolios,
and undermined their faith in the accounting profession. Corporate stakeholders have
called for more transparent financial reporting and evidence of better ethical conduct.

SEC Chairman William H. Donaldson has said that restoring the public s confidence in
the accounting profession was the Sarbanes-Oxley Act s (SOA) primary goal. Part of
restoring the public s confidence entails auditors and audited adopting best practices,
including transparency.

Fairness, transparency, responsibility, and accountability are the core values of corporate
Governance they are also core principles of democracy. Originally defined as a concept
that deals with issues of separation of ownership and control, corporate governance
evolved into a concept that deals with a variety of crucial issues such as the enforcement
of property rights, the protection of minority shareholders rights, the enforcement of
contracts, the creation of a functioning banking system, and the prevention of assets
tripping and self-dealing in the privatization process.

Effective governance means competent management of a country's resources in a way

that is fair, open, accountable and responsive to people's needs. Good governance is the
basic building block for development and is the largest of the aid program's sectors
Support for good governance is not restricted to central governments, but must be
adopted by service delivery areas of partner governments, local administrations, civil
society and the private sector.

Good governance-sound policies, mature institutions and accountable systems- are a

basic condition for stability and prosperity in all countries. Open, accountable and
transparent institutions and sustainable policies help deliver security, respect for human

rights and economic development. In an increasingly globalised world economy, those

nations able to sustain high standards of governance will succeed, while others will
struggle.

(The concept of corporate governance is entering a phase of global convergence. The

driver behind this is the recognition that companies need to attract and protect all
stakeholders, especially investors both domestic and foreign. Global capital seeks its own
equilibrium and naturally flows to where it is best protected and bypasses where
protection is limited or non-existent. Companies stand to gain by adopting systems that
bolster investor trust through transparency, accountability and fairness).

1.1 Why Corporate Governance?

In the process of implementing corporate governance practices, the private sector begins
practicing the fundamentals of democracy and builds safeguards against corrupt practices
on the part of both the business community and the government. At its core, corporate
governance deals with issues that result from the separation of ownership and control
Frequently, the decision to invest in a particular profit-making firm is made from a
distance by investors who are removed from the day- to- day operations of the company
But corporate governance goes beyond simply establishing a transparent and responsible
relationship between managers and owners. The presence of strong corporate governance
standards provides increased access to capital and thus aids economic development. For
the past several decades, hardly any development efforts were successful without foreign

investment. Good corporate governance attracts investors by assuring them that the
business environment is fair and transparent; that companies can be held accountable for
their actions or inactions; and that investments can be protected and contracts enforced.

It is obvious that corporate governance is important for investors because it creates

better-managed companies. Yet corporate governance is equally important for society,
because the day-to-day practice of corporate governance standards requires that
companies support the rule of law and efficient courts that uphold property rights. It
requires that financial records be independently audited and that avenues of corruption be
exposed. It requires that shareholders be given information so that they can make
informed decisions. As corporate failures inevitably have negative effects on the society
and governments, good corporate governance is in the best interest of all parties.

1.2 What is business ethics?

A Business ethics is the application of ethical values to business behaviour. It applies to

any and all aspects of business conduct, from boardroom strategies and how companies
treat their suppliers to sales techniques and accounting practices. Ethics goes beyond the
legal requirements for a company and is, therefore, discretionary. Business ethics applies
to the conduct of individuals and to the conduct of the organisation as a whole. It is about
how a company does its business, how it behaves intrinsically.

1.3 What is the difference between business ethics and an ethical business?

Business ethics relates to how any company conducts its business in order to make profit.
Any company can seek to do business ethically. An ethical business, on the other hand,
has a much broader agenda and focuses on making a positive contribution to the
community. A mainstream bank, for example, may take ethics seriously by taking
responsibility for its negative impacts on society and the environment and seeking to
minimise those impacts. An ethical bank, such as The Co-operative Bank, states that it
seeks to make the world a better place by taking a different approach to banking. In the
case of this type of business, ethics becomes at least as high a priority as profitability.

2. India- A Case Study

In its constant endeavour to improve the standards of corporate governance in India in

line "with the needs of a dynamic market," the Securities and Exchange Board of India
(SEBI)[1] recently approved certain amendments in the Listing Agreement[2] concerning
corporate governance. The capital market regulator, from time to time, came out with
several regulations on corporate governance. Now the SEBI has come out with a new set
of regulations for corporate governance.

The regulator is trying to ensure that the interest of all shareholders is taken into account
and also the management does not violate any of the laws of the land. That is why the
SEBI has increased the number of independent directors on the board and made them
accountable. For instance, the audit committee of a company, with the implementation of
SEBI's new norms, comprised only independent directors and these independent directors

were expected to check all details of accounts, see that proper systems were followed and
they were supposed to quarry the auditors on various issues without having the
management around.

Corporate governance is meant to run companies ethically in a manner such that all
stakeholders - creditors, distributors customers, employees, society at large and
Governments are dealt in a fair manner. There was a belief at one time that the job of the
management is to look after its shareholders alone. Now the whole concept of capitalism
has changed and it has started adopting a much broader view for its own survival that is
why it has now become important that governance should look at all stakeholders and not
just shareholders.

Corporate governance is not something, which regulators have to impose on a

management but it should come from within. There is no point in making statutory
provisions for enforcing ethical conduct. It is not that there is no broad regulatory
framework in position now. There are lot of provisions in the Companies Act[3]. For
example, disclosing the interest of directors in contracts in which they are interested and
abstaining from exercising voting rights in matters they are interested, statutory
protection to statutory auditors who is supposed to go into the details of the financial
management of the company and report the same to the shareholders of the company.

One important point here to note that these are in fact not guiding principles but out and
out regulations. The SEBI has jurisdiction only in limited companies and they are
concerned about protecting the interest of the shareholders. But the benefit of good

corporate governance should reach not only the shareholders of the listed companies but
also the shareholders of other public limited companies and further the interest of the
creditors, labourers, and consumers are also to be protected through proper governance.
In view of this, instead of making a segmented approach in SEBI regulation it would be
more appropriate to have a centralised approach which would take care of the interest of
all those interested in the good governance of companies, shareholders, creditors,
employees, and consumers.

India, with its 20 million shareholders, is one of the largest emerging markets in terms of
the market capitalization. In order to protect the large investor base, the Securities and
Exchange Board of India (SEBI) has enforced a regulation effective from April 2001,
requiring mandatory disclosure of information and a change in the corporate governance
mechanisms of the listed companies. This study empirically examines the economic
impact of the Regulation on the stock market variables. The experimental group exhibits
significant reduction in their beta consistent to the notion that increased information and
better corporate governance mechanism reduces the risk of these companies.

Good governance goes beyond disclosures

In 1996,Confederation of Indian Industry (CII)[4] 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.

A National Task Force set up with Mr. Rahul Bajaj, Past President, CII. This Task Force
presented the draft guidelines and the code of Corporate Governance in April 1997 at the
National Conference and Annual Session of CII. This draft was then publicly debated in
workshops and Seminars and a number of suggestions were received for the
consideration of the Task Force. Reviewing, these suggestions, and the development,
which have taken, place in India and abroad over the past year, the Task Force has
finalised the Desirable Corporate Governance Code. CII has the pleasure in presenting
this Code in this document for information, for understanding and for implementation of
Indian business and industry.

Since 1974, CII has tried to chart new path in terms of the role of an Industry Association
such as itself. It has gone beyond dealing with the traditional work of interacting with
Government of policies & procedures, which impact on industry. CII has taken initiatives
in Quality, Environment, Energy, Trade Fairs, Social Development, International

Partnership Building, etc. as part of its process of development and expanding

contribution to issues of relevance and concern to industry.

This Code of Corporate Governance continues this process and takes it one step further.
Fortunately there is very little difference between the draft Code released in April 1997
and the final Code. It reflects the comprehensiveness of the Task Force s work and the
thought, which has gone into preparing this Code. Its is pioneering work, it is path
breaking initiative and we are delighted to release the Code in the hope that the corporate
sector will implement it seriously and sincerely.

India s corporate governance framework

India is now implementing important corporate governance reforms that position the
country s corporate governance framework as above average compared to other emerging
market economies. However, as is the case with many other countries weaknesses remain
in enforcement of rules and regulations.

Edward Baker, Chief Investment Officer of Global Emerging Markets, Alliance Capital
Management, and Chairman of the Equity Advisory Group (EAG) of the IIF, said: Our
report is being published as new Indian regulations are coming into effect with the aim of
significantly strengthening the system of corporate governance. The Securities and
Exchange Board of India (SEBI), the independent capital markets regulator, has made
significant efforts to keep up with changing corporate governance practices in leading

equity markets around the world, namely the United Kingdom and the United States. We
welcome the actions that the Indian authorities are pursuing.

IIF Managing Director Charles Dallara said, It is important that Indian corporate
governance standards continue to improve as the country becomes an increasingly
important participant in global trade and finance. It is encouraging that, as our new report
points out, companies such as Infosys Technologies, the Tata Group, ICICI Bank and the
Housing Development Finance Corporation Ltd. (HDFC), are developing sound
corporate governance approaches. These can serve as models for the thousands of listed
Indian companies that have yet to put in place governance systems that meet the
requirements set by the Indian authorities and that can enhance international investor
confidence.

The IIF is the global association of financial institutions comprising more than 340
member institutions headquartered in over 60 countries operating across the world. In
preparing the report the Task Force held meetings in Mumbai and New Delhi with senior
officials from the government, the Reserve Bank of India, the Securities and Exchange
Board of India (SEBI), the Bombay Stock Exchange (BSE), the National Stock Exchange
of India (NSE), private companies, rating agencies, law firms and consultancies involved
in corporate governance.

India has 22 stock exchanges and approximately 6,000 publicly listed companies with a
total market capitalization of India s stock markets of around US$546bn, as of December
30, 2005. Over 40 million people invest in shares and mutual funds in the country. The
ten largest companies account for more than one-third of total market capitalization
Indian companies have been increasingly attracting foreign capital either through listing
on international stock exchanges or through private equity placements and foreign
institutional investments. Companies that wish to access markets for capital or that wish
to become leading global suppliers to corporations in developed markets are becoming
increasingly transparent and are more willing to adopt higher corporate governance
standards.

The EAG India Task Force found that in such key areas as minority shareholder
protection and accounting/auditing, India s corporate governance framework is consistent
with most of the IIF s guidelines. In October 2004, SEBI revised existing corporate
governance requirements to incorporate selected features of the Sarbanes-Oxley Act
Indian companies are required to be in compliance with these new provisions, introduced
in Clause 49 of SEBI s listing agreement, by December 31, 2005. Clause 49 requires
companies to file a quarterly compliance report with the stock exchange.

The stock exchange in turn is required to file an annual compliance report with SEBI for
each listed company. Quarterly reports due on March 31, 2006 will begin carrying
compliance information with the new governance listing requirements.

A report pointed out that, neither the stock exchanges nor SEBI have increased staff as
needed to effectively scrutinize compliance with Clause 49 and other rules and
regulations. The EAG Task Force said, SEBI personnel need adequate training to develop
skills required to build strong cases against errant companies. Moreover, the report stated
that the cost of non-compliance to companies in the form of fines, legal action and delisting is low and has proved to be an ineffective mechanism to deal with errant
companies.

The report noted that an overhaul of the Indian Companies Act of 1956 (amended in
2002) is likely in the near future, which is designed to simplify procedures and introduce
a system based on rules to be prescribed by authorities. However, it is uncertain at this

time which authority will prescribe the rules. Nevertheless, if the bill passes, the
voluminous provisions in the current act would be reduced by two-thirds from the present
roughly 780 provisions.

The report noted a lack of shareholder activism. It added that pension reforms are
required to create a class of Indian institutional investors who will further the cause of
minority shareholders and help strengthen corporate governance in Indian companies. To
some degree, the Indian press is seen as substituting for shareholder activism.

On balance, India s corporate governance policy framework is above average and moving
in the right direction, though weak surveillance and enforcement practices slow down the
pace of improvements. The Task Force believes that further improvements in Indian
corporate governance practices require the following actions:

Encourage better compliance with listing requirements by increasing the cost of

non-compliance
Strengthen surveillance mechanisms
Introduce sector-specific corporate governance best practices
Increase shareholder activism in the country by undertaking pension reforms
Pursue legal reforms to provide investors with a mechanism by which they can
redress grievances in a timely and cost-effective manner

Securities And Exchange Board Of India

SEBI

SEBI established in 1988 and became a fully autonomous body by the year 1992 with
defined responsibilities to cover both development & regulation of the market. The
regulatory body for the investment market in India. The purpose of this board is to
maintain stable and efficient markets by creating and enforcing regulations in the market
place The Securities and Exchange Board of India is similar to the U.S. SEC. The SEBI is
relatively new (1992) but is a vital component in improving the quality of the financial
markets in India both to attract foreign investors and to protect Indian investors

With a view to encouraging wider participation of all classes of investors, including

retail, across the country in government securities, the Government, the Reserve Bank of
India (RBI), and the Securities and Exchange Board of India (SEBI) propose to introduce
trading in government securities through a nation wide, anonymous, order driven, screen
based trading system of the stock exchanges, in the same manner in which trading takes
place in equities. This facility will be in addition to the present system of dealing in
government securities through the Negotiated Dealing System of the RBI.

Besides expanding the investor base and providing country wide access to the
government securities market, this measure will also help in reducing time and cost in
trade execution by matching orders on a strict price time priority. It is also expected to
enhance the operational and informational efficiency of the market as well as its

transparency, depth and liquidity. This paper develops an implementable market design
for trading of government securities on exchanges.

2.1 Company Law and Accounting

The principal forms of business organization in India are: Companies -- both public and
private.

Partnerships
Sole proprietorships

Apart from statutory government-owned concerns, the most prevalent form of large
business enterprise is a company incorporated with limited liability. Although companies
limited by guarantee and unlimited companies are permitted by law, they are relatively
uncommon.

Companies incorporated in India and branches of foreign corporations are regulated by

the Companies Act, 1956 ("the Act"). The Act, which has been enacted to oversee the
functioning of companies in India, draws heavily from the United Kingdom's Companies
Act..

Indian Company Acts

Indian Companies
Act of 1866
Indian
Companies
Act of
1956

Indian Companies
Act of 1882
Indian Companies
Act of 1913

The Securities
Contracts
(Regulation)
Act, 1956

Banking
Regulation
Act of 1949

Reserve bank
of India Act
of 1934

Industries
(Development & Regulations)
Act, 1951, (IDRA)

The Monopolies and Restrictive Trade Practices

Act, 1969, (MRTP)

The Act requires every Indian company to keep books of accounts and statutory registers
and other books, which give a true and fair view of the state of the company's affairs. The
Board of Directors of every company is required to present the company's financial
statements to the shareholders at every Annual General Meeting. Every company has to
appoint a recognized auditor to audit its accounts and statutory registers.

The Act defines a "company" as a company incorporated under the Act. Indian law
however, makes a distinction between a Corporate Body and a Company. A "Corporate
Body" is defined to include a foreign company, i.e., a company incorporated outside
India. A company can be a public or a private company and could have limited or
unlimited liability. A company can be limited by shares or by guarantee. In the former,
the personal liability of members is limited to the amount unpaid on their shares, while,
in the latter, the personal liability is limited by a pre-decided nominated amount. For a
company with unlimited liability, the liability of its members is unlimited.

The following are the basic kinds of companies, which come under the purview of the
Act:

- Private companies
- Public companies
- Foreign companies
- Holding and subsidiary companies (could be a private or a public limited company)

Private Companies

A private company incorporated under the Act has the following characteristics:

- the right to transfer shares is restricted.

- the maximum number of its shareholders is limited to 50 (excluding employees).

- no offer can be made to the public to subscribe to its shares and debentures.

Private companies are relatively less regulated than public companies. A private company
is deemed to be a public company in the following situations:

When 25 per cent or more of the private company's paid-up capital is held by one or
more public company.

The private company holds 25 per cent or more of the paid-up share capital of a public
company.

The private company accepts or renews deposits from the public.

The private company's average annual turnover exceeds Rs.100 million.

Public Companies
The Act defines a "public company" as one, which is not a private company. In other
words, a public company is one on which the above restrictions do not apply.

Foreign Companies

Foreign companies are those, which have been incorporated outside India and conduct
business in India. These companies are required to comply with certain rules under the
Act. As a result, liaison and project offices and branches of foreign companies in India
are regulated by the Act. Such companies have to register themselves with the RoC[5],
New Delhi within 30 days of setting up a place of business in India.

Holding and Subsidiary Companies

Under the Act, a holding company is merely supposed to publish certain information on
its subsidiaries, and is not required to prepare group financial statements. However, the
concept of a holding and subsidiary company is of importance in certain situations.

A private company that is a subsidiary of a public company loses most of its privileges
and exemptions. A company is said to be a subsidiary of its holding company if any of
the following conditions exist:

The composition of its Board of Directors is controlled by the holding company.

More than half of its voting power is controlled by the holding company.

It is a subsidiary of another subsidiary of the holding company.

2.2 CII Code on Corporate Governance (April 1998)

In April 1998, India produced the first substantial code of best practice on corporate
governance after the start of the Asian financial crisis in mid-1997. Titled "Desirable
Corporate Governance: A Code", this document was written not by the government, but
by the Confederation of Indian Industries (CII).

CII began working on this document prior to the financial crisis. It is one of the few
codes in Asia that explicitly discusses domestic corporate governance problems and seeks
to apply best-practice ideas to their solution. Most codes are abstract statements of
principle with equally general recommendations, and say little about local conditions.

2.3 National Code on Corporate Governance (1999)

In late 1999, a government-appointed committee under the leadership of Shri Kumar

Mangalam Birla, Chairman, Aditya Birla Group, released a draft of India s first national
code on corporate governance for listed companies. The committee s recommendations,
many of which were mandatory, were closely aligned to international best practices on
corporate governance and set higher standards than most other parts of the region at that
time. The code was approved by the Securities and Exchange Board of India (SEBI) in
early 2000 and was implemented in stages over the following two years (applying first to
newly listed and large companies). It also led to changes in the stock exchange listing
rules.

2.4 Clause 49[6] (February 2000)

In February 2000, the Securities and Exchange Board of India (SEBI) revised its Listing
Agreement to incorporate the recommendations of the country s new code on corporate
governance, produced in late 1999 by the Birla Committee. These rules contained in a
new section, Clause 49, of the Listing Agreement took effect in phases over 2000-2003.

Clause 49 (2004) (SEBI):

Listed companies in India (with paid-up capital of Rs.3 crore and more) have to comply
with the corporate governance related provisions of Clause 49 of the Listing Agreement

of Stock Exchanges. Clause 49 has been prepared by the Securities and Exchange Board
of India (SEBI)

2.5 Task Force on Corporate Excellence (November 2000)

In May 2000, the Department of Company Affairs (DCA) formed a broad-based study
group under the chairmanship of Dr. P.L. Sanjeev Reddy, Chairman, DCA. 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 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. A copy of the report is attached.

2.6 Amending the company law (ongoing)

The Department of Company Affairs (DCA) has amended the Companies Act, 1956
several times in recent years to improve corporate governance and modernise India s
company law. In 1999, it introduced provisions relating to nomination facilities for
shareholders , share buy-backs and the formation of an Investor Education and Protection
Fund, among other things. Further amendments in 2000 covered postal ballots, audit
committees, director responsibility statements, and an option for the election of a director
by small shareholders.

Then in April 2002, DCA constituted a committee to take a fresh look at the Companies
Bill, 1997 a comprehensive revision of the 1956 Act that had been pending in parliament
for several years and suggest further changes. The committee, released its report in
September 2002.

2.7 Chandra Committee on Auditing and Governance (2002)[7]

Following the collapse of Enron in 2001 and the passing of the Sarbanes-Oxley Act in
July 2002, the Department of Company Affairs (DCA) formed a high-level committee in
August 2002 to undertake a wide-ranging examination of corporate auditing and
independent directors. Chaired by Shri Naresh Chandra, a former Cabinet secretary, the
committee produced a report in late 2002 that made a series of strong recommendations
regarding such things as the grounds for disqualifying auditors from assignments, the
type of non-audit services that auditors should be prohibited from performing, the need
for compulsory rotation of audit partners (but not firms), a stricter definition of
"independent director" and the need for independent directors to make up no less than
50% of boards. While the committee was clearly influenced by Sarbanes-Oxley, it did not
follow its dictates slavishly. An executive summary of the Chandra report is attached. For
the full report, go to the DCA website and look under "Archive".

3. Conclusion
The set of processes, customs, policies, laws and institutions affecting the way a
corporation is directed, administered or controlled. Corporate governance also includes
the relationships among the many players involved (the stakeholders) and the goals for
which the corporation is governed.

Corporate Governance is relatively new in India. Security Exchange Board of India is

trying to implement Corporate Governance norms through governance norms. Today,
more and more listed companies have begun to realise the need for transparency and
good governance to attract foreign as well as domestic capital.

The Companies Act, 1956, has been in force now for nearly five decades. The present
Companies Act, 1956, has been amended in the past, for more than 20 times. Ministry of
Company Affairs (MCA) and the Confederation of Indian Industry (CII) in partnership
with the Institute of Company Secretaries of India (ICSI) and the Institute of Chartered
Accountants of India (ICAI) has set up the National Foundation for Corporate
Governance (NFCG).

Following the corporate scandals of the US, the Department of Company Affairs (DCA),
Government of India set up the Naresh Chandra Committee to examine various corporate
governance issues. Many recommendations of the report were incorporated in the
Companies (Amendment) Bill 2003, which is currently being reviewed.

End Notes

[1]

SEBI, established in 1988 and became a fully autonomous body by the year 1992 with defined

responsibilities to cover both development & regulation of the market.

[2]

It has been decided to harmonise the level of public shareholding for continuous listing as contained in

Clause 40A of the Listing Agreement and vis--vis other regulation / guideline such as the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and SEBI (Delisting of Securities)
Guidelines, 2003.

[3]

PROVISIONS OF COMPANIES ACT

1956 (herein referred to as Act )

WITH RESPECT TO CORPORATE

GOVERNANCE

[4]

The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the

growth of industry in India, partnering industry and government alike through advisory and consultative
processes.

[5]

registrar of companies

[6]

In India specifically, the revised Clause 49 has proposed far reaching changes across the entire spectrum

of governance activities including; Board composition and procedure / Audit committee responsibilities /
Subsidiary companies oversight / Risk management / CEO/CFO certification of financial statements and /
internal controls / Legal compliance monitoring; and /Other disclosures

[7]

The Department of Company Affairs (DCA)* has amended the Companies Act, 1956 several times in

recent years to improve corporate governance and modernise India s company law. In 1999, it introduced
provisions relating to nomination facilities for shareholders while further amendments in 2000 covered

postal ballots and audit committees. A committee was set up in 2002 to take a fresh look at the Companies
Bill, 1997 -- a comprehensive revision of the 1956 Act that had been pending in parliament for several
years -- and suggest further changes. A report was submitted by the committee in September 2002.

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