Evolution of Corporate Governance in India:

Evolution of Legal Framework of Corporate Governance in India:

1. Prior to Independence and Four Decades into Independence:

Indian associations/corporate entities were bound by colonial guidelines and a large portion of the principles and guidelines took into account the impulses and likes of the British employers. The Companies Act was enacted in 1866 and was amended in 1882, 1913 and 1932.  Partnership Act was enacted in 1932. These enactments had a managing organization model as a focus as people/business firms went into a legitimate contract with business entities to manage the latter. This period was an era of misuse/abuse of resources and shunning of obligations by managing specialists because of scattered and unprofessional proprietorship.

Soon after independence, there was interest among industrialists for production of a lot of essential items for which the Government directed and dictated fair prices. This was the point at which the Tariff Commission and the Bureau of Industrial Costs and Prices were set up by the Government. Industries (Development and Regulation) Act and Companies Act were introduced into the legal system in 1950s. 1960s was a time of setting up of heavy industries in addition to the routine affairs. The period between 1970s to mid-1980s was a time of cost, volume and profit examination, as a vital piece of the cost accounting activities.

2. Coming of Age:

India has been distinctly looked upon by the associations/organizations worldwide with the objective of making inroads into untapped new markets. Dynamic firms in India made an endeavor to put the frameworks of good corporate administration in place from the word go, whether or not any regulations were in place. However, the scenario was not too encouraging, being too promoter-centric and good governance norms given a go by for the sake of convenience or comfort of the promoters.

Realizing the need for governing the corporate more effectively and professionally to make them globally competitive, there have been a number of discourses and occasions prompting the advancement of corporate governance. The fundamental code for corporate administration was proposed by the Chamber of Indian Industries (CII) in 1998. The definition proposed by CII was—corporate governance manages laws, methods, practices and understood principles that decide an organization’s capacity to take administrative choices—specifically its investors, banks, clients, the State and the representatives.

Legal Framework on Corporate Governance:

1. The Companies Act, 2013.—consists of law provisions concerning the constitution of the board, board processes, board meetings, independent directors, audit committees, general meetings, party transactions, disclosure requirements in the financial statements and etc.
2. SEBI Guidelines.—SEBI is a governing authority having jurisdiction and power over listed companies and which issues regulations, rules and guidelines to companies to ensure the protection of investors.
3. Standard Listing Agreement of Stock Exchanges.—is for those companies whose shares are listed on the stock exchanges.
4. Accounting Standards Issued by the Institute of Chartered Accountants of India (ICAI).—ICAI is an independent body, which issues accounting standards providing guidelines for disclosures of financial information. In the new Companies Act, 2013 Section 129 provides that the financial statements would give a fair view of the state of affairs of the companies, following the accounting standards given under Section 133 of the Companies Act, 2013. It is further given that the things contained in such financial statements should be in compliance with the accounting standards.
5. Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).—ICSI is an independent body, which has secretarial standards in terms of the provisions of the new Companies Act. ICSI has issued secretarial standards on “Meetings of the Board of Directors” (SS-1) and secretarial standards on “General Meetings” (SS-2). Given secretarial standards have come into force from 1-7-2015. Companies Act, 2013, Section 118(10) provides that every company (other than one person company) shall observe secretarial standards specified as such by the ICSI with respect to general and Board meetings.