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The New Year has begun with an optimistic note on the corporate governance (CG) front. In December 2012, the Lok Sabha passed the long awaited Companies Bill, and on 4th January 2013, Sebi issued a consultative paper on revising CG norms.
By Shriram Subramanian, Founder and Managing Director, InGovern Research Services, a corporate governance research and proxy advisory company
The New Year has begun with an optimistic note on the corporate governance (CG) front. In December 2012, the Lok Sabha passed the long awaited Companies Bill, and on 4th January 2013, Sebi issued a consultative paper on revising CG norms. The proposals, if implemented, will surely make Indian CG norms amongst the highest global standards and push Indian companies to be more transparent and accountable.
The present CG norms in India are governed by provisions in the Companies Act 1956, Clause 49 of the Listing Agreement and Voluntary Guidelines by the MCA. Although Clause 49 was a breakthrough in Indian CG scenario, its implementation was not as effective as it was meant to be. The reason was classification of provisions into mandatory and non-mandatory requirements. Provisions in the non-mandatory segment would have been very effective had all the companies adhered to it, but companies view them as optional practices and often don't adhere to them. The consultative paper proposes making some of the important non-mandatory provisions as mandatory while introducing many other essential provisions.
Some of the proposals which are sought to be made mandatory are:
The proposals by Sebi are a welcome step and, if enforced properly, will sure go a long way in an effective CG regime in the country.
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