LEGAL ASPECTS OF BUSINESS

ASSIGNMENT - I

CORPORATE GOVERNANCE

Corporate Governance
Corporate governance is set of rules and regulations on which company is governed.
These rules and regulations or Principles is to drive company to reach its objectives and
provide value for their stake holders. Generally, some responsibilities are distributed to
different participants in the company like (Manager, accountant...etc.) and there are given
with some rules for decision making in corporate. Their decisions should be in favour of
Stake holders interests, Companys objective, and Social factors .
Stake holders are one who is affected by the corporate decisions.
Stake holders are divided into two groups:
1. Internal Stake Holders
2. External Stake Holders

External Stake Holders:

External Stake holders are the individuals who have financial trade with business.
Like Shareholders, customers, suppliers.

Internal Stake Holders:

Internal stake holders are the individuals who don't have any financial trade with the
business, but they can affect the business decisions. Like Board of Directors and other
employees.

Corporate Governance Importance:

On the off chance that an organization have great corporate administration,then
shareholders have more confidence to invest in the business. Because of poor corporate
governance leads to Principal Agent relationship. As we can see there are many scams
because of corporate governance failures like Satyam scam.

Objective of Corporate Governance:

Transparency in Corporate governance is important for the growth, profitability and stability
of any business, which indeed leads in good relationship with its stake holders.
To improve corporate governance in India Indian Companies Act 2013 has introduced
some transparent process which benefits its stake holders. Corporate Governance was guided
by Clause 49 of the listing agreements before introduction of Indian Companies Act 2013.
The main principles of corporate governance is
1. Equal and right treatment for shareholders, because company has only one class of
share not of different and every share has equal right there would be no
discrimination.

2. Interest of other stake holders like other employees have a right to behave like other
shareholders or other property owners, Article 43A of the Constitution, inserted by
the Forty-second Amendment of the Constitution of India in 1976,created a right to
codetermination by requiring the state to legislate to "secure the participation of
workers in the management of undertakings".
3. Roles and responsibilities of Board of directors: According to section 166 of ICA
2013 the directors duties are specified in such a way that avoids conflict of interest
and performs in desired standard.
4. Integrity and ethical behaviour: Corporate social responsibility would come into this
vertical, whereas according to ICA 2013, section 135 says that companies with net
worth more than rupee 500crores or turnover of rupee 1000crore or net profit over
rupee 5crore require to spend 25 of their profits on social responsible projects.
5. Disclosure and transparency:
Disclosures required to put in Annual report
Disclosures required to put in companys website
Disclosures required to put in SEBI
Transparency is nothing but information about board of directors, Risk information to
shareholders and implementation guideline which to more investment in the
company.
SEBI guidelines on corporate governance have rolled out real changes in duties of
board of directors and internal stake holders.