Trending: Call for Papers Volume 4 | Issue 4: International Journal of Advanced Legal Research [ISSN: 2582-7340]



The Companies Act 2013 is a seminal piece of legislation that has fundamentally changed corporate governance in India by promoting responsibility, sustainability, and openness in the business environment. This paper explores the tremendous effects that the Companies Act 2013 had on corporate governance in the modern business environment.

The government’s determination to modify corporate governance systems in response to new issues is reflected in these changes. The changes in disclosure standards, board composition, and directorial duties are particularly noteworthy. To promote a fair and impartial decision-making process and protect minority shareholders, the focus on the responsibilities and obligations of independent directors has been heightened. Provisions to prevent corporate fraud and improve financial transparency have also been added by the Companies Act of 2013. Investor trust has increased, and financial malpractices have decreased due to stricter audit procedures, obligatory auditor rotation, and improved disclosure standards.

The Companies Act of 2013 and its ensuing amendments have been essential in moulding corporate governance practices in India regarding transparency, accountability, and sustainability. However, difficulties remain in adequately implementing and enforcing these articles due to the complexity of compliance, the lack of resources, and the requirement for ongoing adaptation to global governance norms.

Keywords- Corporate Governance, Companies Act, 2013, Governance Reforms, Sustainability, Shareholder Empowerment


The word “governance” in English comes from the Latin verb “gubernare,” whose meaning is “to steer. “[1] Likewise, corporate governance refers to implementing governance in corporate houses. Coordination of solid administrative procedures inside the corporate system is the main focus of corporate administration. This is done to maximise the firm’s profits while also ensuring the welfare of investors and shareholders.[2] Corporate governance encompasses ethical company management, ethical commitment, and sufficient and optimal disclosure on all relevant matters to establish partner confidence. This, in turn, will drive capital allocation and sustain financial trends. While managing the association is a part of governance, excellent governance ensures it is conducted sensibly and clearly. The Confederation of Indian Industry (CII) pioneeredthe proposal of corporate governance as a voluntary practice for adoption by Indian enterprises, marking it as a pivotal term in the corporate sector. This initiative was launched in the late 1990s and introduced optional recommendations focusing on fairness, transparency, accountability, and responsibility – the four key pillars of corporate governance standards in listed companies. Subsequently, one of the significant initiatives by the Securities and Exchange Board of India (SEBI) was incorporating Clause 49 into the Listing Agreement.

Modernising India’s business legislation and aligning it with global standards is made possible by the recently enacted Indian Companies Act.[3] It has provided the organisation with more dynamic forces and proposed plans that grant insurance and additional rights to minority shareholders. More diminutive and individual organisations should relieve some of the authoritative burdens that independent ventures bear. However, larger organisations should prepare for increased managerial responsibilities due to changes in the appointment process for directors and auditors.

A significant shift has occurred with the Companies Act of 2013, moving away from corporate governance guidelines and towards a new, more substantial change in the sector. By presenting arrangements in the Organisations Exhibition 2013, the Companies Act 2013 has advanced the corporate governorship code so that it is not limited to registered public organisations but also unlisted public organisations, building on SEBI’s Clause 49 of posting understanding. The Companies Act of 2013 provides the rules and principles to the equivalent, emphasising corporate administration more.

The new legislation aims to provide all the more uncomplicated enforcement and operation in corporate organisations and establish the primary conditions for upgrading the present general structure. It may be a startling viewpoint, as it seeks to increase corporate governance, deconstruct hierarchies, enhance the costs incurred by minority financial specialists, and suddenly convey the piece of whistleblowers. The Act upholds strong governance practices by assigning free executives to gain command of board activities and win over minority investors. The recent legislation is a significant advancement in Indian business ethics and is anticipated to impact the country’s corporate governance practices significantly. As businesses in India navigate the complexities of the Companies Act of 2013, it is clear that this legislation marks a significant leap forward in corporate governance practices. Its holistic approach, encompassing many entities and emphasising ethical conduct and responsibility, positions India towards a more robust and accountable corporate ecosystem. The Companies Act of 2013 is not merely a legal framework; it is a transformative force shaping the future of corporate governance in the country. The firm is instilled with ethical standards by corporate governance. Integrating fairness and openness into the business management’s strategic activities makes room for candid communication. Corporate management choices affect various individuals and organisations connected to the business, called stakeholders. These stakeholders include government organisations, workers, suppliers, shareholders, directors, creditors, and the general public. Significant stakeholders, including directors, executives, and shareholders, primarily attend to the corporate governing mechanism.

Why do Companies need good Corporate Governance?

In corporate governance, boards oversee managers, and board members are answerable to the corporation and its shareholders. This affects how the business acts regarding its workers, investors, clients, and banks. Solid corporate governance fundamentally underpins the integrity and efficacy of financial markets. Substandard corporate governance not only diminishes a company’s potential but can also, in extreme cases, culminate in fraudulent activities and economic crises. Companies with sound governance practices typically outperform their competitors and draw in investors who can assist in funding future expansion[4].

The increasing disregard for accounting records and responsibility by the corporation’s board of directors and administration, leading to significant harm for the business’s shareholders, highlighted the importance of corporate governance. Corporate governance became necessary for enterprises in India due to corporations failing to adhere to financial reporting rules in India and worldwide. Notable examples of these companies include Satyam in India and Enron in the US.  According to what has been reported, these corporations’ boards of directors, management, and financial consultancy firms engage in corrupt acts, contributing to the companies’ poor corporate governance rules and structure. The failure of such massive organisations was enough to emphasise the need and value of corporate governance, which essentially aims to define the duties and obligations of management and the board of directors. This will allow the company to operate under sound governance principles. Having suitable and sufficient governance processes and procedures was also considered necessary for corporate governance. These protocols of the good governance framework stipulate that the board of directors should have the liberty to oversee and provide guidance. In contrast, management should be free to manage the company’s business.

The need for corporate governance is also felt because it keeps a company’s competitive environment strong, allowing for financial growth and increased accountability system improvement, significantly reducing risk. Corporate governance policies strongly focus on disclosure and transparency within the organisation. They also state that if a company adopts an appropriate corporate governance framework and is transparent, the likelihood of scams similar to those that corporations have witnessed will be reduced.

The Companies Act 2013 has required corporations to establish the following committees to oversee the operation and management of the company to promote strong corporate governance in India:

Committee for audits,

Committee on Nomination and Remuneration,

Committee for Stakeholder Relations and

Committee on Corporate Social Responsibility.

Since corporate governance has many advantages, the Securities and Exchange Board of India (SEBI) recognisedits need in India and established several committees, including the Kumar.

Mangalam Birla Committee[5], the Naresh Chandra Committee[6], and the Narayana Murthy Committee.

Investor-Shareholder Relation: This is one advantage of corporate governance. When a business seeks investment from investors, it must adhere to corporate governance procedures and principles. It has been observed that Indian businesses solicit investments at a premium for their shares by deceiving investors about the profitability and performance of the company.  Investors suffered greatly due to the firms’ poor governance since they used to raise cash at a languid pace. These days, investors are also aware of this and choose to fund businesses with sound corporate governance practices and a suitable corporate governance structure. As a result, corporate governance is crucial for luring investors and preserving positive investor relations.

Investor complaints: One benefit of corporate governance is contented investors. In India, handling investor concerns requires adherence to corporate governance standards. Indian companies were found to be delaying giving investors the information they needed. The Kumar Mangalam Committee identified this. Businesses must address investor complaints directly and safeguard their investments by implementing sound corporate governance policies, structures, or frameworks, even if the Reserve Bank of India (RBI) and SEBI have offered specific solutions to address the issue.

Performance Efficiency: Maintaining corporate governance standards is essential to performance efficiency. A company’s ability to get money and operate effectively is the primary indicator of the significance of corporate governance and its necessity. Effective performance will increase investors’ trust in the firm and encourage them to invest. Better corporate governance practices have a track record of luring investors than poor corporate governance practices. In addition to promoting efficiency and performance, corporate governance guarantees an organisation’s openness.

Global-View: Currently, one of the critical criteria for drawing in foreign investment is how closely corporate entities adhere to the fundamentals of corporate governance. The relationship between corporate governance and foreign investment inflows has become increasingly important in the era of globalisation, marked by the removal of trade barriers and quantitative constraints.

Healthy Stock Market: In India, corporate governance practices have a significant role in a company’s ability to maintain a healthy stock market. A thriving and healthy stock market is essential for investor protection. Because insider trading is a terrible practice for any company’s stock market, the organisation must have a robust corporate governance structure that prevents its workers from partaking in it.

Specific provisions included in the Companies Act of 2013

The Companies Act 2013 offer a strong foundation for corporate governance and the Companies Rules. The Companies Act of 2013 seeks to alter corporate governance in India fundamentally. It is anticipated to have a substantial influence on how Indian firms operate and to change corporate governance requirements drastically.

Nominee Directors are not included in the definition of independent directors.

According to Section 149 (7) of the Companies Act 2013[7], A nominee director is an individual designated to represent the interests of a financial institution byany agreements, rules, and government or other entities. A nominee director is a person who serves on a company’s board of directors following their nomination by banks, investors, or other financial institutions. Furthermore, a company’s nominee director is not eligible to serve as an independent director. As per the provisions of Section 161(3)[8], the Board has the authority to designate as a Director any individual who has been nominated by any institution in compliance with extant laws or agreements or by the Central or State Governments due to their ownership of shares in government companies, subject to the Company’s Articles. Nominee directors are not included in the Companies Act’s definition of independent directors since it is acknowledged that they are usually nominated by certain shareholders or shareholder groups that have a stake in the firm. The rationale behind this exclusion is rooted in the understanding that the allegiance of nominee directors may lie with their appointing entities, potentially compromising their independence.

A minimum of one female director on the company’s board

Directors now have a more critical role and are trustees of good governance, which has resulted from the latest changes in corporate governance regulatory environments. MCA and SEBI acknowledge the relevance of having women on the board of directorsto advance credibility, accountability, and good corporate governance. They have made it necessary for certain classifications of enterprises to have at least one female director to guarantee gender equity in senior management positions. This raises economic productivity, strengthens institutional representation, and enhances business credibility and governance standards.

According to Section 149(1) of the Companies Act, listed businesses must appoint at least one woman director. The non-compliant firm faces a fine of ₹10,000. A further penalty of ₹10,000 per day would be imposed if no changes are made. In compliance with the guidelines outlined in Section 149(1) of the Companies Act of 2013, the designated firms must have a minimum of one female director. If the following conditions are satisfied, both private and public companies are under the compulsion to choose at least one female board of directors:

– Whether the company’s securities are listed on any stock exchange.

-If the business generates at least ₹300 crores in revenue and has paid-up capital of ₹100 crores or higher.

Enforcing a minimum of one female director on a company’s board is essential to sound corporate governance. This criterion promotes a board culture that appreciates a range of viewpoints, experiences, and backgrounds in line with the ideals of diversity and inclusiveness. There exists a correlation between gender diversity and good board performance. Specifically, diverse boards are frequently connected to higher financial outcomes and more robust governance practices. In addition to economic gains, advancing gender diversity demonstrates the company’s social responsibility and fosters stakeholder confidence. Gender diversity promotes healthy debate and reduces the dangers of groupthink, which helps boards make better decisions. Eventually, these rules guarantee compliance and improve the company’s standing, drawing in top personnel and reaffirming its commitment to moral and responsible corporate governance.

Mandatory whistleblower mechanism

The term “whistle-blowing” can be traced back to the tradition of British policemen using their whistles to signal the occurrence of a crime whenever they observed one. Alerting upper management about wrongdoing inside an organisation is known as whistle-blowing. A whistleblower is someone willing to expose wrongdoing and might be a current or past worker of a company or government agency.

Initially, the firm’s personnel usually become aware of any illegal activity or illicit behaviour inside the firm. Still, they are rarely the first to speak up about it for fear of being suspended or terminated from their positions. This is a common observation in incidents of corporate whistleblowing. This highlights how crucial every business or organisation is to establish a whistleblower policy that safeguards the informant’s identity. Additionally, there should be legal legislation protecting these workers. In addition, by implementing a solid whistleblower programme, a business or organisation may guarantee that staff members will be discouraged from engaging in illegal activity and can identify any misconduct early on. A well-functioning whistleblowing process could grant the freedom to expose wrongdoing without worry.

The Companies Act 2013’s provisions are essential for encouraging efficient whistleblowing procedures supporting sound corporate governance. The Act incorporates clauses that highlight corporate responsibility, openness, and moral behaviour. In particular, Section 177[9] requires the creation of an Audit Committee, whose duties include monitoring financial reporting procedures and guaranteeing the effectiveness of internal control frameworks. In addition, Section 177(9) mandates that the Audit Committee set up a channel via which staff members can report suspicions of unethical actions, financial misdeeds, or any transgression of the company’s code of conduct. This clause encourages workers to report misconduct without fear of reprisal, which is consistent with the goals of whistleblower programmes. Good corporate governance standards inside organisations are generally improved by the Companies Act of 2013 by encouraging an environment of transparency and accountability.

The expanded role of the audit committee

The Companies Act of 2013 in India has expanded the function of audit committees within organisations, transforming the corporate governance environment. To offer comprehensive and objective oversight, the legislation mandates that an audit committee consist of at least three directors, with most having to be independent. This strategic makeup emphasises a dedication to objectivity and skill diversity, which are crucial foundations of good governance, together with the financial knowledge of at least one committee member. The primary duty of the audit committee is to closely monitor the financial reporting process to guarantee the integrity of the reporting methods and the correctness of the financial statements.

In addition, the committee takes on a crucial role in the selection, compensation, and supervision of auditors, protecting their objectivity and maintaining the integrity of the auditing process. By thoroughly evaluating risk management and internal control systems, the committee strengthens the governance framework by resolving vulnerabilities and promoting efficient risk reduction. Through the supervision of the whistleblower mechanism, the audit committee assumes the role of a protector of moral behaviour, cultivating an environment of honesty and responsibility inside the company. The committee also significantly impacts open communication with stakeholders by sharing significant audit results and critical financial data, which boosts confidence in the business’s operations. Fundamentally, the Companies Act of 2013’s extended function for the audit committee is consistent with international best practices, strengthening corporate governance with a multimodal strategy that includes supervision, independence, competence, and moral behaviour.

Constitution of Stakeholders Relationship Committee

The Board of Directors’ Committee is the Stakeholder Relationship Committee (Committee). Resolving the complaints of the company’s security holders is this Committee’s primary goal. The rights of stakeholders bear great significance in the Corporate Governance of publicly traded organisations. A Stakeholders Relationship Committee will be established by the listed firm to examine the interests of shareholders, holders of debentures, and other security holders.

The Companies Act, 2013[10] (“the Act”) and Regulation 20[11] of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time (“SEBI Listing Regulations”) mandated the creation of the Stakeholders Relationship Committee (“the Committee”). The Committee’s primary responsibility is to support the Board of Directors (also known as “the Board”) and the Company in managing the interests of all parties involved in the business, such as investors, debentures, deposits, and other security holders. The Committee’s primary goal is to address and settle complaints and issues with share transfers, dividends that have been declared, annual reports that have not been received, interest that has not been received, etc.

One of the most critical components of corporate governance is the legislative framework’s requirement for creating a Stakeholders Relationship Committee (SRC), which is best represented by India’s Companies Act of 2013. This committee is pivotal in cultivating open, responsible, and positive connections between the organisation and its stakeholders. The SRC acts as a channel for effective communication, ensuring that stakeholders’ expectations and concerns are adequately considered and taken into consideration by actively interacting with shareholders, holders of debentures, and other security holders. The committee contributes to developing trust and maintaining a favourable company reputation by doing this.

The SRC’s responsibilities go beyond simple liaison, including dispute resolution and grievance redress. Using this method, the committee strengthens the ethical aspect of corporate governance by playing a crucial role in maintaining the values of justice, equity, and moral behaviour.

Enhanced disclosure of remuneration policies

According to section30(5)[12], the disclosure has to include the total amount of any compensation or benefits that have been given to or received by individuals for:

  1. Duties carried out while serving as directors or designated officers of the company.

  1. Duties fulfilled while serving as directors or designated officers of any other company within the identical group of companies.; or
  2. services performed in any other capacity in connection with the company’s or any other company’s business conduct.

Corporate governance processes are strengthened mainly by the Companies Act of 2013’s improved disclosure of the pay policy requirement. Companies must give directors, workers, and senior managerial people a thorough and open explanation of their pay plans, as the Act requires. This disclosure also includes the methods for balancing fixed and variable components and the standards for calculating compensation and performance.

Fostering accountability, matching CEO pay to the company’s success, and improving shareholder comprehension of the compensation system are the goals. Corporate governance ideals and this clause are closely related, especially when ensuring CEO remuneration is appropriate, fair, and connected to long-term company results. The Companies Act 2013 seeks to reduce conflicts of interest, balance the interests of executives and shareholders, and eventually support a governance framework that places a premium on accountability, fairness, and the generation of long-term shareholder value by encouraging greater transparency in the disclosure of remuneration policies. The larger goals of sound corporate governance are reinforced by this increased transparency, which helps shareholders make educated decisions and cultivates an honest and transparent culture.

Assessment of Independent Directors and the Board of Directors’ Performance

The procedure of evaluating a board’s and its committees’ performance in reaching the intended goals, abiding by the law, and successfully implementing the company plan is known as board evaluation.

In India, board assessment is required by law. The Companies Act of 2013 established it, and on December 1, 2015, the SEBI (Securities and Exchange Board of India) Listing Obligations and Disclosure Requirements (SEBI LODR), 2015, put it into force. Companies must develop and disclose the standards for evaluating independent directors by SEBI LODR. SEBI released a guideline note to inform businesses and their boards about several facets of the assessment procedure. To expand the scope of Board review, the Kotak Committee[13] has given additional suggestions on corporate governance, including those related to the makeup of the Board and the number of Independent Directors.

The audit committee’s approval is required for all related party transactions (RPTs)

Several authoritative guidelines discuss related parties, related party transactions, and their disclosures when we discuss related parties, RPTs, or any related law. As everyone knows, SEBI is strict regarding related party compliances. These are compliances about transactions controlled by a few parties holding dominant or influencing positions. As a result, SEBI is inclined to make these compliances more robust and stringent to prevent non-compliance. Still, these compliances make identifying related parties and RTP extremely difficult.

According to specific legislative frameworks, such as the Companies Act of 2013, requiring the Audit Committee’s permission for all RPTs is essential to corporate governance. This section seeks to uphold openness and equity and avoidconflicts of interest by requiring the Audit Committee to review and approve each transaction involving parties closely linked to the firm. The Audit Committee, mostly independent directors with solid financial backgrounds, acts as a watchful monitoring body to ensure that RPTs are carried out impartially and in the firm’s and its investors’ best interests. This system improves accountability and ethical behaviour inside the company by adhering to international best practices and as a buffer against any unfair benefit linked parties could try to get. Further, since it adds another level of scrutiny to transactions that could affect the company’s financial integrity and health, the requirement for Audit Committee approval for RPTs demonstrates a commitment to solid risk management and adherence to corporate governance principles. Byensuring that RPTs are subjected to a comprehensive and unbiased review by a competent and independent agency, this clause helps create a governance framework that puts integrity, accountability, and safeguarding of shareholder interests first.

Mandatory constitution of Nomination and Remuneration Committee.

Enacted under clause 49 of the Listing Agreement, the Nomination and Remuneration Committee (NRC) and the Stakeholders Relationship Committee were initially recommended. However, with the enactment of the Companies Act, 2013 and the accompanying Companies (Meetings of Board and its Powers) Rules, 2014, they became obligatory for specific categories of companies. The NRC’s scope now encompasses all publicly traded companies and other entities with a paid-up capital of at least Rs. One hundred crores and those with outstanding loans, borrowings, debentures, or deposits exceeding Rs. 50 crores. The parameters for determining the applicability of this regulation include the paid-up share capital, turnover, and any outstanding loans, borrowings, debentures, or deposits disclosed in the most recent audited financial statements.Top of Form

A key component of encouraging open, responsible, and strategic leadership practices is the NRC, which must be established within the corporate governance structure. Several legislative measures impose this need, notably the Companies Act of 2013. This committee is charged with significant duties such as selecting people who meet the requirements to be directors, setting their pay, and creating guidelines for their appointments and compensation. The NRC is essential to improving the governance structure because it ensures that the nomination and compensation procedures are impartial, equitable, and aligned with the company’s strategic goals.

Prohibition of Insider Trading

Apart from any correspondence necessary in the regular course of business, profession, or employment, or as required by law, no one, even executives or KMPs of an organisation, should engage in insider trading. Any executive or important administrative staff member who engages in insider trading within an organisation faces a maximum five-year prison sentence, a fine of up to 25 crore Indian rupees, or three times the gains generated via insider trading, whichever is larger[14].

Enforcing laws against insider trading and implementing strong corporate governance is essential for preserving equity, openness, and investor trust in financial markets. Insider trading is strictly prohibited due to its distortionary impact on the market, resulting in unequal treatment of investments. It involves buying or selling shares based on significant nonpublic information. Regulatory bodies, such as the Securities and Exchange Commission (SEC) in the United States, implement rigorous measures to prevent corporate insiders, including executives and employees, from exploiting their access to confidential information for personal profit. This ban protects the integrity of financial systems and promotes market trust. Robust corporate governance procedures are essential for monitoring CEO behaviour and a company’s general management.

Corporate Social Responsibility

The term “Corporate Social Responsibility” (CSR) describes a company’s duty to the environment, society, and communities in which it operates. Businesses can carry out this obligation by reducing waste and pollution, contributing to social and educational initiatives, being ecologically conscious, and engaging in related activities. Charity or simple donations are not what CSR is. Corporate social responsibility, or CSR, is an organisational strategy enabling businesses to support society publicly. Employing resources for purposes other than boosting profits is not the exclusive domain of socially conscious companies. Through CSR, they link the operations and expansion of the business with social, environmental, and economic goals.

The company’s operations have expanded throughout time. Despite having few resources, the firms usethem to achieve their goals. The businesses employ alternatives such as public spaces, public services, and other resources in addition to those found in nature. Therefore, the Companies’ principal obligation is to return something of themselves to society and the environment. Every corporation has a duty towards the environment and society as a whole.

“corporate social responsibility” enables companies to address ecological and social issues in everyday activities and stakeholder interactions. The widely accepted definition of CSR is the Triple-Bottom-Line Approach, which attempts to balance the needs of the economy, the environment, and society while satisfying stakeholder and shareholder requirements. That’s why separating corporate social responsibility from sponsorships, generosity, and charity donations is essential. CSR might be a creative concept for strategic company management. Conceptually, corporate social responsibility (CSR) goes beyond that, even if the latter may boost the image of a business, strengthen its identity right away, and potentially significantly impact ending economic hardship[15].

The Companies Act of 2013 also incorporates the idea of CSR. Corporate Social Responsibility is outlined under Section 135[16] of the Companies Act of 2013. A Corporate Social Responsibility (CSR) Committee must be formed by companies meeting certain financial thresholds, including a net worth of rupees 500 crore or above, a turnover of rupees 1,000 crore or above, or a net profit of rupees 5 crore or above during any financial year. This committee should consist of three or more directors, with at least one independent. The Board’s report should detail the composition of this CSR Committee. Additionally, the duties and obligations of the CSR Committee, as well as its compliance requirements, are specified in this section.

Schedule VII[17] of the Companies Act 2013 outlines a comprehensive list of activities companies can incorporate into their Corporate Social Responsibility (CSR) policies. Initiatives to combat diseases like HIV/AIDS, malaria, and others; eradicate extreme poverty and hunger; advance education; empower women; reduce child mortality; improve maternal health; ensure sustainability in the environment; improve vocational skills for employment; start social business ventures; and contribute to various government relief funds intended for social and economic progress and social welfare, including those for women, minorities, Scheduled Castes, and Scheduled Tribes. Additionally, the schedule allows for any other matters prescribed by relevant regulations.

Cases that shaped corporate governance

Satyam Scandal

The Satyam scandal unfolded in 2008 when Chairman Ramalinga Raju proposed a controversial acquisition of Maytas Properties and Maytas Infrastructure, leading to a 55% drop in share prices. Subsequent data theft and bribery revelations led to a World Bank ban and further stock devaluation. Raju admitted to a $1.6 billion financial scam, causing prominent board members to resign. Satyam’s auditors confessed to false financial reporting, and senior executives were arrested. After Raju’s resignation, a new board salvaged the company, which Tech Mahindra eventually acquired. Raju and his brother were sentenced to prison, along with eight others. They were fined and barred from financial activities. The scandal prompted regulatory reforms, including revised corporate governance guidelines and the establishment of committees to enhance transparency and accountability. SEBI and the government implemented director independence, whistleblower policies, and CFO appointments to prevent corporate misconduct[18]. The Ministry of Corporate Affairs issued guidelines on director roles, board responsibilities, and executive separation to ensure governance integrity. These reforms aimed to prevent future corporate fraud and restore investor confidence.

The Ricoh Case

The Ricoh India scandal in 2016 rocked the corporate world, revealing significant financial misconduct. It admitted to manipulating financial statements, leading to staggering losses of Rs 1,123 crore for the fiscal year ending March 31, 2016, with further manipulation detected in preceding years. The CEO and CFO resigned, taking responsibility for the irregularities, while SEBI fined senior executives for violating securities regulations.

This incident highlighted glaring deficiencies in corporate governance, particularly in supervision frameworks and internal regulatory measures. It exposed doubts about the board of directors’ effectiveness and the audit committee’s oversight responsibilities. The subsequent resignations underscored the organisation’s lack of accountability and leadership in addressing the crisis. SEBI’s imposition of fines emphasised the importance of adherence to securities rules and regulations, stressing the need for businesses to operate with integrity and compliance.

The Ricoh India scandal is a stark reminder of the critical role of robust corporate governance in upholding organisational integrity and sustainability. It underscores businesses’ need to promote responsibility, ethics, and transparency. Robust corporate governance frameworks are essential for protecting shareholder interests, mitigating risks, and maintaining public confidence in the honesty and integrity of business organisations. Ultimately, the incident highlights that good corporate governance is indispensable for companies’ long-term viability and success in the global marketplace.

A complicated and multidimensional story of business ambition, financial mismanagement, legal disputes, and political intrigue is narrated via the Vijay Mallya saga. After his father’s death, Mallya, the United Breweries Group scion, assumed company leadership at a young age. Under his direction, the firm expanded into brewing, aviation, and other industries, and the Kingfisher brand came to represent luxury and leisure in India[19].

But Mallya’s venture into the aviation business with Kingfisher Airlines proved his downfall. Despite its early success and enormous popularity, several causes contributed to Kingfisher Airlines’ increasing financial difficulties. Mallya’s financial resources were pressured due to its aggressive expansion goals, intense competition, and unfavourable market circumstances. The worldwide economic crisis and growing fuel prices worsened the airline’s problems.

The story of Vijay Mallya is a clear example of how vitalsolid corporate governance structures are to maintaining accountability, transparency, and moral behaviour in businesses. Mallya’s bold move to enter the aviation business with Kingfisher Airlines and the United Breweries Group’s quick growth underscores the necessity of solid control procedures to reduce the risks involved in such endeavours. Unfortunately, Mallya was able to pursue business ventures with reckless abandon due to shortcomings in corporate governance, which included poor risk management procedures, a lack of independent oversight, and a disregard for regulatory guidelines. This ultimately resulted in financial mismanagement and the demise of Kingfisher Airlines.


The significance of corporate governance in ensuring efficient capital allocation, fostering economic development, and maintaining ethical conduct within firms cannot be overstated. It encompasses competent management, moral integrity, and transparent disclosure practices, all crucial for instilling investor confidence and facilitating sustainable growth. The Companies Act of 2013 brought about significant changes to corporate governance practices in India, aiming to enhance accountability, transparency, and stakeholder protection.

The Act introduced various provisions covering corporate social responsibility, shareholder rights, disclosure obligations, and board composition, all aimed at promoting long-term value creation and improving stakeholder engagement. By emphasising the role of audit committees, independent directors, and corporate social responsibility initiatives, the Act has strengthened the governance framework of Indian companies.

Notable corporate scandals, such as the Nirav Modi fraud and the IL&FS disaster, have underscored the importance of effective governance in preventing financial mismanagement and protecting investor interests. The Companies Act underwent revisions to address loopholes and enhance oversight mechanisms in response to such incidents.

However, compliance with regulations alone cannot foster a good governance culture. It requires a commitment to ethics, integrity, and responsibility at all levels of an organisation. Cultivating a diverse and inclusive leadership and promoting stakeholder engagement is vital for improving decision-making processes and enhancing governance effectiveness.

While the Companies Act of 2013 has made significant strides in improving corporate governance standards in India, the success of these reforms ultimately depends on their implementation and enforcement by businesses and regulatory bodies. Organisations must continuously adapt their governance frameworks to evolving market dynamics and regulatory requirements to ensure sustainable development and shareholder value creation.

[1] Dash B. ‘Provisions relating to Corporate Governance under new companies act 2013’ (2016)

[2] Chattopadhyay, Amrita. “Importance of Corporate Governance and Companies Act, 2013.” (2015). Available at: https://www.caclubindia.com/articles/importance-of-corporate-governance-and-companies-act-2013-24923.asp. (Last Visited: 18th January 2024).

[3] ‘Ministry of Corporate Affairs, Government of India. “The Report of Companies Law Committee.” (2016).

[4] OECD. “Improving Business Behaviour: Why We Need Corporate Governance.” Available at: https://www.oecd.org/daf/ca/corporategovernanceprinciples/improvingbusinessbehaviourwhyweneedcorporategovernance.htm. (Last visited Jan. 27, 2024).

[5] National Foundation for Corporate Governance (NFCG). “Report of the Committee Appointed by the SEBI on Corporate Governance.” Available at: https://www.nfcg.in/UserFiles/kumarmbirla1999.pdf. (Last visited Jan 27, 2024).

[6] O’Reilly Online Learning. “Business Ethics and Corporate Governance, Second Edition.” Available at: https://www.oreilly.com/library/view/business-ethics-and/9789332511255/xhtml/c21s8.xhtml. (Last visited Jan 27, 2024).

[7] The Companies Act, 2013 (Act 18 of 2023), s.149(7)

[8] The Companies Act, 2013 (Act 18 of 2023), s.161(3)

[9]The Companies Act, 2013 (Act 18 of 2023), s.177

[10]The Companies Act, 2013 (Act 18 of 2023), s.178

[11] Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) (LODR) Regulations, 2015 (Listing Regulations), Regulation 20

[12]The Companies Act, 2013 (Act 18 of 2023), s.30(5)

[13]Securities and Exchange Board of India. “Report Submitted by the Kotak Committee.” Available at: https://www.nfcg.in/KOTAKCOMMITTEREPORT.pdf. (Last visited: 04 February 2024).

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[14] Securities and Exchange Board of India Act, 1992 (Act 15 of 1992), S.15G

[15] United Nations Industrial Development Organization (UNIDO). “G.M.D.G.”  Available at: https://www.unido.org/. (Last visited: 07 February 2024).

[16]The Companies Act, 2013 (Act 18 of 2023), s.135

[17] The Companies Act, 2013 (Act 18 of 2023), Sched. 7

[18] Singh, J. “Satyam Fiasco: Corporate Governance Failure and Lessons Therefrom.” (2010).

[19]“What is Vijay Mallya’s Scam? Vijay Mallya Case Study.” Available at: https://lapaas.com/vijay-mallya-case-study/. (Last visited: 16 February 2024).