AN ANALYSIS OF PROVISIONS IN COMPANIES ACT 2013 TO IMPROVE CORPORATE GOVERNANCE

ABSTRACT The Companies Act 2013 which will be replacing the age old Companies Act 1956 once all its provisions are notified is aimed at ensuring higher standards of transparency and accountability, and seek to align the corporate governance practices in India with global best practices. In order to address the corporate governance requirements in unlisted companies which are more in number, a number of provisions are incorporated in the Companies Act 2013. The listed companies in India are obliged to comply with a more stringent requirement as provided under the listing agreement especially clause 49 of the stock exchange listing agreement. Apart from the provisions under the listing agreement, the listed companies have to comply with a number of regulations promulgated by Securities and Exchange Board of India (SEBI) under the SEBI Act. However, unlisted companies unless it is a material subsidiary of a listed company do not have to comply with any of the SEBI Regulations or listing agreement. There is a host of public limited companies and private companies which are very large in size with substantial exposure to public due the nature of their business. Apart from this most of the companies in India both public and private depends largely on bank borrowings. Taking into account the fact that healthy banking sector is an essential element of the overall ecosystem of the country's economy, it is important to ensure that the companies which have large exposure to bank borrowings are managed in a prudent manner and follow sound corporate governance practices. This paper makes an attempt to study various provisions in the Companies Act 2013 incorporated with a view to implement and improve the corporate governance practices generally in companies in India as the corporate governance provisions in the listing agreement are applicable only to listed companies. Under the Companies Act 2013, companies fulfilling certain conditions are required to comply with the provisions related to corporate governance. The objective behind this is to protect interest of other stakeholders including those of minority shareholders and the Government. The required information is gathered mostly from the Companies Act 2013 and the ruled framed there under.