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Corporate Governance
In India, Corporate Governance refers to the set of procedures,
regulations and practices for the management of businesses, and its primary purpose is to
provide consistency and transparency to all stakeholders, while also holding management
accountable for their actions. The foundation of corporate governance in India is
established through the Companies Act 2013, along with the direction and authority given to
the Securities and Exchange Board of India (SEBI), which provides oversight over publicly
traded companies. The overall objectives of corporate governance in India are protecting
stakeholder's interests; enhancing corporate performance; building trust; and creating
long-term value for investors.
Corporate Compliance
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Corporate compliance is the process of ensuring that a
business operates in accordance with all relevant laws including statutory,
regulatory and procedural, in addition to fulfilling the requirements of these laws
as per the Companies Act, 2013, LLP Act, GST Laws, Income Tax laws, and Labour laws.
It includes:
Statutory Record Maintenance
Maintenance of statutory records is a legal
obligation. These records serve as official proof of compliance, help during
audits, and safeguard the company during disputes. Failure to maintain them can
lead to penalties, legal action, and loss of credibility. For Companies these
records are Register of Members, Directors & KMP, Charges, Contracts,
Investments, Loans & Guarantees, Minutes Books, Books of Account. For LLPs,
these records are LLP Agreement, Register of Partners, Form 8, Form 11, Books of
Account, Minutes. For other entities, its GST records, Income-tax records (6-10
years), Labour registers, licences & permits.
Meeting Compliance
Board and shareholder meetings must follow rules on
notice, quorum, frequency, and documentation. Proper meeting compliance ensures
accountability, transparency, and statutory governance. It includes Board
Meetings, Annual General Meeting (AGM), EGM
Annual Filing
Annual filing ensures timely reporting of financial
performance, director details, shareholding, and corporate activities. All
companies must file income-tax returns, financial statements, and annual returns
within prescribed timelines. Non-filing attracts heavy penalties, prosecution,
and may even lead to strike-off of the company. The important Annual Forms
includes, INC-20A (Commencement of Business), ADT-1 (Auditor Appointment), AOC-4
(Financial Statements), MGT-7 (Annual Return), DIR-3 KYC (Director KYC), DPT-3
(Return of Deposits), CRA-4 (Cost Audit Report) etc.
Governance & Risk-Management
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The management of an organisation involves the process of
directing and controlling the company through the application of a governance
structure, whereas risk management involves the identification, analysis and
mitigation of potential risks that may threaten the success of the organisation.
Company Law requires that all listed companies have implemented specific governance
and risk management policies. In addition to Company Law, other legislative
frameworks such as SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015 require that every listed company establishes a risk management
committee to promote accountability, and to ensure compliance with all relevant laws
and regulations.
Director & Key Managerial Personnel (KMP) Compliance
Companies Act, 2013 highlighted the responsibilities
for the KMP. Under the provisions of Section 203 of the Companies Act, 2013,
every Listed Public and every Public Company with a Paid-up Capital of 10 Crore
rupees or more must appoint certain Whole-time KMP, which includes Managing
Director (MD), Chief Executive Officer (CEO) or Manager (this is interchangeable
terminology), Whole-time Director, Company Secretary and Chief Financial Officer
(CFO). All companies other than the above must appoint a Whole-time Company
Secretary if the Paid-up Capital is 5 crore rupees or more. Furthermore, the Act
defines Executive and Non-Executive roles so there cannot be an individual who
is both Chairperson and Managing Director (MD) or Chief Executive Officer (CEO)
at the same time unless there is a specific exception that was issued in an
official notice by the Registrar of Companies (MCA). A Whole-time KMP cannot
hold more than one KMP position in any Company with the exception of
Subsidiaries. An individual who is the Managing Director (MD) of a Company may
act as Managing Director of not more than two Companies, provided that the Board
approves such appointment. Appointments must be made by Board resolution and the
resolution must be filed in the form "DIR-12" and any vacancy arising must be
filled within six months. The penalties for non-compliance are substantial.
Corporate Policies
Corporate Policies are mandatory under Companies Act,
SEBI's Listing Regulations and RBI's guidelines for Banks and NBFCs. Policies
are a framework for the company's approach to doing business within the law and
provide clarity on how management should proceed. Policies must add value to the
Company by interpreting and/or expanding upon Regulatory requirements and not
simply restating them. In general, Policies should be high level but flexible
enough to allow for continued relevance. Policies should be reviewed
periodically to ensure continued relevance. In general, Policy content should
contain definitions, objectives, Governance Structure, Roles, Delegation Matrix,
Feedback Mechanisms, Amendment Process, and Review Frequency. A well-defined
Policy will provide management with an organised process for making decisions
and improve Governance, Transparency and Accountability throughout the
Corporation.
Risk & Compliance Management
Identification, evaluation and reduction of
non-compliance risk due to lack of adherence to applicable statutes and
regulations, as well as compliance with internal policies, Compliance risk
management is the means by which organizations safeguard their interests from
the consequences of non-compliance (e.g. legal penalties, financial damages,
interruption of business operations, and negative publicity). An effective
compliance framework consists of the following components: Exposure Mapping,
Risk Assessment, Gap Analysis, Development of Compliance Policies,
Implementation of Compliance Controls and Ongoing Program Monitoring. The
challenges that organizations face include continuously changing legislation,
delivery of compliance with inadequate resources, non-integration of all of the
different functions that perform compliance functions for the organization,
third party compliance issues, and limited visibility of compliance processes,
and a risk assessment team do take care of all these challenges.
Assurance Services
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Accredited accountancy organisations offer assurance
services to evaluate the credibility and accuracy of financial data, documents, and
transactions. The objective of assurance services is to improve the credibility of
financial data which will ultimately reduce risks and facilitate informed decisions
for stakeholders. Assurance services will provide greater transparency for
businesses and, therefore, greater relevance for businesses' disclosures.
Furthermore, assurance services create value for financial reports. In addition to
financial audits, assurance services include risk assessments, evaluations of
internal controls, analyses of business operations, sustainability criteria, and
transactions associated with e-commerce. Therefore, assurance services are essential
for developing stakeholder confidence that organisations will operate with integrity
and accountability.
Secretarial Audit
It is an independent compliance check conducted by a
Practicing Company Secretary, which confirms that businesses are following all
legal and procedural processes according to different Corporate Laws. The
Secretarial Audit attempts to determine the cause of any non-compliance, improve
governance, and create transparency in the company. The requirements to conduct
a Secretarial Audit is mandatory for all listed companies, as well as other
Large Public Companies. The audit contains information about Major Laws,
Secretarial Standardization, and Industry Specific Regulations. The Secretarial
Audit evaluates if the company's existing management systems and the processes
that govern those systems are adequate. A Secretarial Audit provides the company
with multiple benefits, including Better Compliance Management, Reduced Legal
Risk, Increased Stakeholder Confidence, and, as a result, improves the Company's
Credibility. A Secretarial Audit promotes a proactive approach to Governance,
and Allows Corporations to Protect Their Stakeholders.
Corporate Governance Reporting
The Corporate Governance Reporting is to provide all
stakeholders of a company's Corporate Governance disclosures in an Annual Report
or similar document, as well as the company's Risk Management, Board Structure
and Corporate Governance Practices, ethical standards, and compliance with
applicable Law. Corporate Governance provides the necessary transparency,
accountability, and fairness to the way a corporation is managed. Some
components of Corporate Governance Reporting are Board Effectiveness,
Stakeholder Engagement, Internal Control, Financial Transparency, Ethical
Conduct and Sustainability. Corporate Governance Reporting provides investors
with increased confidence, aids in complying with regulations, and facilitates
informed decision-making. Corporate Governance Reporting is built on the
principles of Fairness, Clarity, Timeliness, Materiality, and Completeness and
is designed to give an overall view of the Performance, Values and Long-term
Strategy of a corporation, thereby building Trust between Shareholders and
Stakeholders.
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