A STUDY ON THE RECENT DEVELOPMENTS IN CORPORATE

GOVERNANCE WITH REFERENCE TO COMMPANIES ACT, 2013

Dr.M.Jayasree,
M.B.A,M.Com,M.Phill,PGDFMT,Ph.D
Assistant Professor, HBS
CS Pavana Jyothi
M.Com, MBA, ACS,
Research Scholar (GITAM University)
ABSTRACT:
This paper is an attempt to analyse the recent developments in corporate
governance area due to the introduction of Companies Act 2013. With the
enactment of Companies Act 2013 companys responsibilities and duties
towards stakeholders and itself has increased for implementing and improving
the good governance mechanism. With an effective internal management the
companies can ensure Transparency, fairness and can adhere to ethical
standards. The Companies Act 2013 has included implementation of core
principles of Corporate Governance. Be it the role and accountability of
directors or the establishment of internal as well as external committees, the
legislation has explored in detail each and every component of corporate
governance. The 2013 Act has also introduced certain provisions to facilitate
better governance. This paper seeks to highlight these provisions and its
implications on companies and its members.

I.

INTRODUCTION

The term Corporate refers to the company with characteristic of separate legal
entity and the term governance means to steer upon. Combination of these
two words gives the meaning that Corporate Governance is to stare the

company in a direction. It indicates that taking the company in a controlled and

right direction is the purpose of a Corporate Governance.

According to Institute of Company Secretaries of India (ICSI) - Corporate

Governance is the application of best management practices, compliance of law
in true letter and spirit and adherence to ethical standards for effective
management and distribution of wealth and discharge of social responsibility for
the sustainable development of all stakeholders.

The ultimate aim of Corporate Governance is to protect the interest of all

stakeholders through compliance of law in true letter and spirit and adherence to
ethical standards.
II.

PRINCIPLES OF CORPORATE GOVERNANCE:

The following four important pillars describes the core values and principles of
corporate governance on which it should be built.
1.
2.
3.
4.

Disclosure
Transparency
Accountability
Responsibility

Responsibility to follow these principles by the corporates has been increased

with the introduction of the Companies Act, 2013. This is done through the
Rules, Practices and Processes.
The following are the provisions in the Companies Act, 2013 with respect to the
enhancement in the Disclosure norms
III.

DISCLOSURE OF INTEREST BY DIRECTORS:

Sec 184 of the Companies Act, 2013 provides for disclosure of Interest of
Directors. This Section does not exempt any Director i.e all Directors are
required to comply with this Section and every company need to comply with it.
This section provides for General Disclosure and Specific Disclosure and
includes both financial and nonfinancial gains.
Contents of Disclosure given under MBP 1.
IV.

DISCLOSURES IN THE BOARD OF DIRECTORS REPORT

The following are the disclosures to be made in Directors Report Mandatorily:

1. Financial Summary or Highlights and change in the nature of the business
if any.
2. Extract of the Annual Return as prescribed under Section 92.
3. No. of Board meetings held during the year to be disclosed by all the
companies.
4. Names of companies which have become or ceased to be its subsidiaries,
joint ventures or associate companies during the year.
5. Performance and financial position of each of the subsidiaries, associates
and joint venture companies included in the consolidated financial
statement presented.
6. Directors responsibility statement
7. Explanations or comments by the Board on every qualification,
reservation or adverse remark or disclaimer made
a. by the Auditor in the auditors report; and
b. by the Company Secretary in the secretarial audit report
8. Particulars of loans, guarantees or investments u/s 186;
9. Particulars of contracts or arrangements with related parties referred to in
section 188(1) in a prescribed form (Form AOC 2), along with the
justification for entering into such contract or arrangement

10.Appointment or re-appointment of Independent Director and statement of

Declaration of Independence by Independent Directors.
11.Disclose about the remuneration and nomination committee
12.Directors disclose all loan, guarantee, investment, related party
transaction themselves.
13.A statement indicating development and implementation of a risk
management policy for the company including identification therein of
elements of risk, if any, which in the opinion of the Board may threaten
the existence of the company;
14.Details of significant and material orders passed by the regulators or
courts or tribunals impacting the going concern status and companys
operation in future.
15.Details in respect of adequacy of internal financial controls with reference
to the Financial Statements.
16.A statement of declaration given by independent directors that he meets
the criteria of independence under Section 149(6)
17.Corporate Social Responsibility (CSR) of the Company. The Boards
report shall disclose the composition of the Corporate Social
Responsibility Committee.
V.

DISCLOSURES IN THE ANNUAL RETURN

The new Annual Return has included a provision to furnish very elaborative
information related to non-financial activities. The form to be filled with ROC is
Form MGT 7. The following are the contents of Annual Return.
1. Company registration details which include Name, CIN, Category and
Sub-Category, address and whether AGM held or not.
2. Principal business activities of the Company (activities contributing 10%
or more of turnover with their %)
3. Particulars of holding, subsidiary and associate cos.
4. Shares, Debentures and Other Securities issued by the Company which
include the followinga. Change in promoters shareholding

b. Change in shareholding of Top 10 Shareholders (other than

Directors and Promoters)
c. Change in shareholding of Directors or KMP
5. Indebtedness (secured & unsecured), addition and reduction & interest
due but not paid and interest accrued but not due
6. Details of Members, Debenture holders and other security holders
7. Promoters/Directors/Key Managerial Personnel And Changes Therein
8. Meetings of Members, Board and its Committees with dates and
attendance at the meeting
9. Remuneration of the Directors and KMP which includes salary,
perquisites, stock option, sweat equity, as % of profits, other commission,
others to specify
10.Remuneration to ID and non-executive directors showing fees for
meeting, commission, others
11.Penalties or Punishment imposed on the company, its directors/officers,
compounding of offences and appeals made against penalty/punishment
under the Companies Act
12.Details of certification of compliances with due date, SRN, reason of
delay
13.Disclosures relating to closure of register of members, inter corporate
loans & investment, Related Party Transactions, details of resolutions
passed by postal ballot.
14.Details of shares held by or on behalf of FIIs indicating their names,
addresses, countries of incorporation, registration and % of shareholding
held by them.
15.Disclosures for CSR Amount spent, amount spent as % of PAT of
preceding 3 FY
16.Limits with brief description u/s 186 for loans & investment made by
Company
The Annual Return is to be signed both by a director and a Company secretary in
practice Under Section 92(1) of the Companies act 2013.

VI.

WEBSITE DISCLOSURES

Keeping in view the advancement in the technology and internet usage, the
Companies Act 2013 has incorporated certain provision and specified certain
important points to be disclosed on the website of the Company. The Act puts
onerous responsibility on companies to disclose various information on its
website. The following are some of them:
i.

Sec. 13 (8) (i):

The Company shall place a special resolution relating to change of objects if
any for which it has raised the money through prospectus and still has any
unutilized amount out of the money so raised on the website and also publish in
2 newspapers which are in circulation at the place where the registered office of
the company is situated

ii.

Sec. 124 (2):

The Company shall Place a statement of unclaimed dividend transferred to
Unpaid Dividend Account on the website of the company. The statement
should contain the names, addresses and the unpaid divided to each person.

iii.

Sec. 135:
The Board of every company referred to Section135 (1) has to approve the
Corporate Social Responsibility Policy for the company and disclose contents of
such Policy in its report and also place it on the company's website,
Every company having

 Net worth of Rs 500 crore or more, or

Turnover of Rs 1000 crore or more or
Net profit of Rs 5 crore or more during any FY
Shall constitute a CSR Committee of the Board consisting of three or more
directors, out of which at least one director shall be an independent director.
iv.

Sec. 136 (1):

A listed company shall also place its financial statements including consolidated
financial statements, if any, and all other documents required to be attached
thereto, on its website, which is maintained by or on behalf of the company:

v.

Sec. 177 : read with Rule 7 Chapter XII

Audit Committee: Vigil mechanism

Companies which accept deposits and have borrowed money from Bank or a
Financial Institution in excess of Rs.50 Crores shall establish a vigil mechanism
for directors and employees to report genuine concerns and the details of
establishment of such vigil mechanism shall be disclosed by the company on its
website.

VII. Schedule IV
Code of Independent Director: The terms and conditions of
appointment of independent directors shall also be posted on the
companys website.
Appointment & Qualification of Directorship: The Company shall
within 30 days from the date of receipt of notice of resignation from a

director, intimate the Registrar in Form DIR-12 and post the information
on its website, if any.
Acceptance of Deposit Rules Rule 4: Form and particulars of
advertisements or circulars
Every company inviting deposits from the public (if any) shall upload a copy of
the circular on its website.
Several other Disclosures are also given on the Rules providing for the
Disclosures on the website of the Company which enhances the Transparency
system of the company which is an important pillar of Corporate Governance.
Thus with the enactment of Companies Act 2013, there is enormous amount of
information to be disclosed by the company which signifies the impact of
implementation of Corporate governance by even Unlisted Companies also.

VIII. REFERENCE AND BIBLIOGRAPHY \

A guide to Company Secretary in Practice Institute of Company
Secretaries of India.
The Companies Act, 2013 Institute of Company Secretaries of
India.
Subash Chandra Das - Corporate Governance in India: An
Evaluation PHI,New Delhi 3rd Edition.
N.Gopalsamy A guide to Corporate Governance New Age
International Publishers.
Corporate Governance Under the Companies Act 2013: A More
Responsive System of Governance Indian Journal of Applied
Research Geetika Vijay.
Corporate Governance: Principles, Policies and Practices - A. C.
Fernando - Pearson Education India, 2009.
https://www.youtube.com/user/icsicompaniesact2013
http://www.mca.gov.in/MinistryV2/companiesact.html

 http://www.mca.gov.in/Ministry/pdf/AmendmentRules_23062014.
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