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Corporate Governance
📃 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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