Corporate Governance in India and Companies Act 2013

Good corporate governance standards are vital for the integrity of corporations, financial institutions and financial markets. Also, they have an important bearing on the growth and stability of the economy. Over the past few years, significant reforms have been introduced in the area of corporate governance in India, which have improved public trust in the market. These reforms have been welcomed by the investors, including the foreign institutional investors (FIIs). The enactment of the long awaited Companies Act in 2013 is probably the most important development in India's history of corporate legislation. Among the key provisions of the Act are those of restraining voting rights of interested shareholders on related party transactions, recognition of board accountability to stakeholders besides shareholders, and extension of several good governance requirements to relatively large unlisted companies. The Act also covers relevant issues like internal control, investor protection, fraud mitigation, corporate social responsibility and efficient corporate restructuring. The Act in several areas attempts to harmonize Indian governance standards and practices with international requirements. Indian corporations need to closely examine the provisions of the act to ensure compliance to the new requirements. The present paper examines the corporate governance reforms brought in by the new Companies Act,2013 and their implications to Indian corporations.