Corporate Governance in India: Best Practices, Legal Framework & Board Responsibilities

A. Introduction

In the Indian corporate environment, the phrase “corporate governance” has often been used liberally, but only in the last several years has it begun to reflect deeper obligations within company boards and leadership structures. If one looks back at the initial phases of post-1991 liberalisation, much of the emphasis was still transactional. The larger push for ethical governance, however, has been shaped by a combination of regulatory evolution and some hard-learned lessons from governance failures.

Corporate governance in India today is no longer just about ticking compliance checklists. With greater scrutiny from regulators, particularly the Securities and Exchange Board of India (SEBI), and increased shareholder participation, both institutional and retail, there’s a visible shift toward substance over form. Whether in large listed companies or growing family businesses, the expectations from directors, especially independent directors in Indian companies, have expanded well beyond attending quarterly meetings or rubber-stamping board resolutions.

It would not be incorrect to say that many of the changes have been reactive. Scandals like Satyam, and more recently IL&FS, forced a complete relook at how board responsibilities under Companies Act 2013 are interpreted and implemented. The SEBI corporate governance regulations under the LODR framework further laid down granular obligations around board composition, audit committees, disclosure timelines, and shareholder rights. Yet, many companies, particularly mid-sized ones, still struggle to operationalise these norms as part of their everyday internal controls.

From a structural standpoint, corporate governance practices in Indian companies typically revolve around five pillars:

• board oversight and accountability;
• statutory compliance with the Companies Act and LODR;
• protection of minority shareholder rights;
• ethical conduct and whistleblower mechanisms; and
• clarity in related party transactions and financial disclosures.

Despite progress, challenges persist. Promoter dominance, lack of board diversity, and uneven enforcement remain significant roadblocks. But the direction of change is clear, governance is now viewed not as a legal formality, but as a marker of reputational strength. And as expectations around transparency rise, questions around how long this shift takes to reach tier-2 and tier-3 boards remain open.

B. Legal Framework For Corporate Governance In India

The statutory framework around corporate governance in India has been growing consistently tighter over the past decade, especially post-2013. The basic architecture draws from both corporate law and sectoral regulations. However, it’s not entirely codified. Much of it still depends on interpretation, enforcement, and industry-specific nuances.

It isn’t possible to speak of governance in India without starting with the Companies Act, 2013. For most corporates, especially those in the private sector or small unlisted spaces, the Act forms the backbone of board functions and duties. Larger and listed companies, on the other hand, operate under an overlapping regime that includes SEBI’s LODR norms and, for certain sectors, regulator-specific governance rules.

Companies Act, 2013: Base Layer of Compliance

The 2013 legislation replaced a long-outdated Act of 1956 and was meant to give Indian companies a governance framework that was more in sync with global practice. It defined the baseline for board constitution, laid out key board responsibilities under the Companies Act 2013, and brought independent directors into formal existence.

Key takeaways from the Act:

• Boards of specified companies must have at least one woman director;
• Appointment of independent directors is mandatory for listed companies and public companies meeting certain thresholds;
• Formation of board committees such as Audit, Nomination & Remuneration, and CSR became non-negotiable;
• Section 166 outlined statutory director duties, including a duty to act in good faith, avoid conflict of interest, and not derive undue gain; and
• Approval processes for related party transactions were more formalised under Section 188.

SEBI LODR Regulations, 2015: The Listed Entity Rulebook

For listed entities, SEBI’s LODR (Listing Obligations and Disclosure Requirements) regulations provide the sharper teeth. These regulations directly deal with how companies interact with their public shareholders and make disclosures.

Unlike the Companies Act, LODR isn’t just about structure, it’s about timing, manner, and content of disclosures. The SEBI corporate governance regulations here include:

• Minimum number of non-executive and independent directors;
• Appointment timelines and criteria for key managerial personnel;
• Requirements around separating the roles of Chairperson and MD/CEO (in certain cases);
• Structured disclosure formats for financials, shareholding patterns, press releases, and event-based updates; and
• Strict policies for related party transactions and audit oversight.

Sectoral Governance Rules: RBI, IRDAI & Others

In regulated spaces like banking, NBFCs, and insurance, there’s a third layer. RBI’s corporate governance frameworks for banks and NBFCs include specific conditions on tenure, board evaluation, fit and proper criteria, and risk committees. For insurers, IRDAI’s Corporate Governance Guidelines overlap with SEBI norms but add actuarial and solvency-related controls. PFRDA has also issued governance protocols for NPS intermediaries. Together, these show that corporate governance practices in Indian companies are not uniform—they vary widely by size, industry, and listing status.

Secretarial Standards & Voluntary Codes

Then there’s the ICSI’s Secretarial Standards, these aren’t statutory but are treated as mandatory under Section 118 of the Companies Act. Please read our other article: Important Clauses in a Business Contract: Key Terms Every Entrepreneur Should Know

Here’s a quick view:

Standard	Subject	Applicability
SS-1	Board Meetings	All companies (except OPCs)
SS-2	General Meetings	All companies (except OPCs)

These standards cover everything from quorum rules to how minutes are recorded. SEBI and MCA also occasionally release voluntary frameworks (e.g., for board evaluations, ESG reporting), which, while not enforced, often set the tone for institutional shareholder expectations.

C. Role Of The Board Of Directors

There was a time when the board in most Indian companies was a silent statutory necessity. Its presence is formally documented in filings and minutes, but its actual function is often diluted by the dominance of promoters or executive leadership. That has, over time, started to shift. Not entirely, but enough to raise the baseline. Today, the expectations from a board are more pointed, not just in listed entities, but increasingly also in large unlisted companies and regulated sectors.

The real measure of a board’s effectiveness isn’t in how often it meets but in what it questions and whether it records dissent, asks for redrafts, or pauses resolutions. That bar is still inconsistently applied. But SEBI and other regulators are looking more closely now, especially post-2019. And in several enforcement actions, minutes of board meetings and the conduct of independent directors have been directly examined.

Composition of the Board

Under the Companies Act and the LODR regime, board composition isn’t a matter of convenience. There are very specific requirements that companies are expected to follow. These rules were initially compliance checkboxes, but over time, they’ve come to be seen as necessary governance thresholds. Among the core obligations:

• One-third of the board must comprise independent directors (for listed and certain public companies);
• At least one woman director is compulsory on the board of every listed company;
• A healthy balance between executive and non-executive directors is to be maintained; and
• One director must reside in India for not less than 182 days in a year [Section 149(3)].

Now, while these norms are complied with on paper, the real issue often is the quality of the board’s deliberations, not the number of directors. Weak board constitution, especially when overloaded with insiders, correlates directly with risk blind spots. That’s been observed repeatedly across audit failures and related party mismanagement cases.

Functional Duties and Statutory Expectations

The Companies Act, 2013, didn’t just define the existence of a board; it put its legal responsibilities into black-letter law. Section 166 lays out what a director is expected to do, and the scope is wide enough to create real liability. It applies across categories: executive, non-executive, nominee, and independent directors in Indian companies.

While not exhaustive, some of the statutory duties include:

• Act in accordance with the Articles of Association;
• Promote the interests of the company and its shareholders, taken together;
• Use reasonable care, skill, and diligence in their functioning;
• Disclose conflicts of interest or personal benefit in any decision-making process; and
• Refrain from achieving undue gain, directly or through associates.

These duties have been cited by SEBI in penalty orders and by courts in derivative litigation. For many boards, especially those in family-controlled firms, the difficulty is in translating these expectations into day-to-day meeting behaviour.

Role and Limits of Independent Directors

The concept of an independent director is now deeply embedded into the legislative design of corporate governance in India, but it remains practically contentious. There are companies where independent directors genuinely serve as external voices, flagging issues, resisting bad deals, and adding rigour. There are others where independence is compromised either by historic relationships or the dynamics of promoter-led nominations.

When it works well, the role of the independent director extends to:

• Providing objective oversight during board discussions;
• Chairing key committees like audit and nomination;
• Raising questions around compliance failures, internal audit red flags, and ESG reporting gaps; and
• Offering a moderating voice during executive overreach or decision fatigue.

The appointment process of directors is more regulated now. There are formal eligibility tests, a declaration of independence, and role clarity through the Codes of Conduct. But effective participation still depends on individual initiative and institutional support.

Governance Through Board Committees

For most practical purposes, the heavy lifting of board oversight happens not in the full board meetings, but in the committees. These are where details are debated, documents scrutinised, and concerns minuted, if done right.

In most listed companies, the following committees are mandatory:

• Audit Committee: Reviews financial statements, internal controls, and oversees the work of statutory auditors. Also the first recipient of whistleblower complaints.
• Nomination and Remuneration Committee: Handles director appointments, board evaluations, succession planning, and KMP compensation.
• CSR Committee: Required under Section 135 for companies meeting CSR thresholds. It proposes, monitors, and reports CSR spending and project execution.
• Risk Management Committee: Required for the top 1000 listed companies by market cap. Focuses on risk identification, ownership mapping, and enterprise mitigation strategies.

These committees are not optional and are increasingly viewed as core to corporate governance practices in Indian companies. In fact, for large groups, the committee minutes often attract more scrutiny than general board meeting records.

Real Pressure Points

Boards are now under greater pressure than before, internally and externally. Shareholders have become more vocal, regulators more intrusive, and even internal compliance teams have become more assertive. Yet, many boards still rely heavily on management’s presentations, often without deeper questioning.

Some boards have begun implementing periodic performance evaluations, using external advisors to assess effectiveness. There’s also growing emphasis on board diversity, not just by gender, but in terms of background, age, and skillset.

As Indian companies navigate more cross-border deals, investor scrutiny, and sectoral transitions, the strength of the board will increasingly define whether a company is seen as investable or high-risk. For counsel advising boards, understanding how to balance formality with functionality remains a critical skill.

And as always, where governance slips, litigation follows.

D. Shareholder Rights & Stakeholder Engagement

There’s been a noticeable shift in how shareholders, especially non-promoter ones, engage with the governance process. While most of the statutory duties are directed toward the board and executive management, the actual weight of accountability often starts with shareholders raising questions, demanding transparency, or voting against resolutions. On the other side, the legal landscape around stakeholders and not just shareholders, is broadening steadily. And in both cases, companies are being called upon to balance profit with participation.

Shareholder Democracy and Voting Rights

The foundational idea in any company law system is that those who contribute capital should have a say in how that capital is used. Under Indian law, shareholder democracy is operationalised through voting rights, annual general meetings (AGMs), and rights to requisition and inspect records.

Key features include:

• Ordinary and special resolutions that require majority thresholds for different matters;
• E-voting rights for all shareholders in listed companies under the Companies Act and the SEBI corporate governance regulations;
• The ability to call EGMs (extraordinary general meetings) for urgent matters: and
• Disclosure of voting results within 48 hours under LODR norms.

While institutional investors use these mechanisms more actively, retail shareholders are also increasingly engaging through voting platforms and public activism, especially in cases involving executive compensation or questionable M&A transactions.

Minority Shareholder Protections

The principle of majority rule does not allow oppression of the minority. This has been judicially reiterated and statutorily addressed under several provisions. Key protections include:

• Section 241 of the Companies Act, 2013, enables shareholders holding 10% or more (or 100 members) to approach the NCLT for oppression and mismanagement.
• Provisions under Sections 244 and 245 allow for class action suits against directors, auditors, and related parties.
• SEBI’s role in scrutinising schemes of arrangement that may adversely impact public shareholders.
• Mandatory fairness opinions and valuation reports for mergers and related party deals.

In essence, where promoter-led boards ignore dissent, the law gives minority holders statutory tools to respond. The evolving jurisprudence is beginning to put more burden on boards to justify differential treatment.

Stakeholder Theory in the Indian Corporate Context

Although corporate governance in India was historically shareholder-centric, there’s a growing movement toward recognising other stakeholder interests like those of the employees, vendors, regulators, communities, and even the environment.

Some of this shift is formal:

• Section 135 of the Companies Act makes Corporate Social Responsibility (CSR) spending mandatory for qualifying companies.
• Labour codes (once fully in force) will push companies to reassess worker rights and contract structuring.
• ESG norms from SEBI are driving listed entities to go beyond profit metrics and consider environmental and governance impact.

Stakeholders aren’t just a narrative device anymore. They show up in compliance risks, social media scrutiny, and even investor mandates. For boards, this means governance decisions have to consider broader optics and impact.

Whistleblower Protection & Grievance Redressal

As internal controls become more complex, so does the risk of internal misconduct. For companies, having credible internal grievance systems is now a reputational necessity, not just a compliance formality.

Under the law:

• Every listed company is required to establish a vigil mechanism under Section 177 of the Companies Act;
• Audit Committees must oversee complaints and reports; and
• Many boards now adopt whistleblower frameworks with confidentiality protocols, anonymous reporting, and third-party ethics hotlines.

These mechanisms are especially critical in identifying breaches in accounting, insider trading, harassment, and vendor kickbacks. The role of the board of directors in India includes ensuring that whistleblowing frameworks are not only adopted but also meaningfully used and protected.

E. Disclosure & Transparency Norms

One of the most consistently evolving areas in the Indian governance regime relates to what companies must disclose, and when. While disclosures were once limited to annual financials and the odd shareholder notice, the past several years have witnessed an unmistakable shift in both regulatory expectations and board-level accountability. Companies are now under considerable pressure, statutory and reputational, to demonstrate timely, consistent, and credible transparency. And this doesn’t just apply to public statements; what gets recorded in minutes, what gets shared internally, and what is tabled before sub-committees all form part of the broader compliance landscape.

The framework isn’t abstract. It’s structured under multiple headings, like financial reporting, insider conduct, stakeholder transactions, and is embedded directly into company law, SEBI circulars, and enforcement action precedents. Much of this change has stemmed from observed failures. The regulatory intention is clear: prevent governance abuse by mandating daylight.

Financial Disclosures

For any company, whether listed or not, financial clarity remains the first threshold of governance performance. But listed companies in particular have a set of obligations that go beyond audited reports. These include unaudited quarterly results, notes from auditors, explanations for deviations, and direct board commentary in many cases.

To illustrate how this plays out under law:

• Under Section 129 of the Companies Act, financial statements must conform to accounting standards; it’s a filing prerequisite.
• Holding companies that have control over subsidiaries are expected to prepare consolidated financial statements. Non-compliance here has drawn serious observations from regulators.
• The LODR Regulations require quarterly and annual results to be published, 45 and 60 days respectively, with full comparative data and management input.
• The Companies Auditor’s Report Order (CARO) and other provisions under Section 134 often include pointed remarks from auditors. These can no longer be brushed off. Directors are expected to respond formally and such responses must be recorded.

Where the board remains silent, SEBI has in recent years treated that silence as wilful negligence. The board’s role is no longer ceremonial when it comes to disclosures; it must ensure that finance teams, auditors, and CFOs are in sync and that what’s presented externally holds up to internal checks.

Related Party Transactions

Possibly one of the most contentious issues in any governance conversation, related party transactions (RPTs) are no longer internal matters. They have to be disclosed, reviewed, and in many cases approved by shareholders. The underlying idea is simple: control-related bias must not distort company value or stakeholder equity.

Here’s what companies are dealing with:

• Section 188 of the Companies Act makes it compulsory to get board or shareholder nod for certain RPTs. If skipped, such contracts are voidable and potentially penal.
• Listed entities must clear material RPTs through the Audit Committee, where ideally, only non-interested and independent members vote.
• Independent directors in Indian companies are required to be especially vigilant here, as SEBI and stock exchanges often look to their conduct when evaluating fairness.
• The LODR norms now demand that RPT summaries be published in the annual report and also disclosed as material events, if applicable.

The level of documentation required for even intra-group service agreements has increased, particularly after recent scrutiny around family-owned listed companies. For law firms advising clients, the emphasis is now as much on paper trail and fairness opinions as it is on legal validity.

Insider Trading & Sensitive Information

This is one area where enforcement has moved faster than legislation. Over the past few years, SEBI has gone after insider trading with sharper investigative tools, digital tracking systems, and greater expectations from compliance teams. And the burden doesn’t fall only on traders; it falls directly on the company.

The SEBI corporate governance regulations, read with its Insider Trading Rules, require companies to do the following:

• Frame and publish a Code of Conduct for Insider Trading and Fair Disclosure;
• Identify and track “designated persons” with access to unpublished price-sensitive information (UPSI);
• Maintain an internal, structured digital database (SDD) capturing the flow of UPSI across departments and external consultants; and
• Ensure that the Audit Committee or board undertakes periodic reviews of internal compliance around insider trading.

The line between company compliance failure and individual breach is getting thinner. Boards can no longer plead ignorance where breaches occur within senior management. And under the SEBI framework, the liability can extend to the Compliance Officer, KMPs, and even the board responsibilities under the Companies Act 2013, if willful oversight is proven.

ESG and Sustainability – From Optional to Expected

Until recently, environmental, social, and governance (ESG) disclosures were tucked into a page or two in the annual report, if they were included at all. However, things have changed, as the SEBI has introduced a structured regime, and ESG readiness is now being used as a filter by institutional investors, proxy advisors, and even lenders.

The Business Responsibility and Sustainability Report (BRSR) is now the baseline. But beyond that, there’s a reputational and strategic expectation: companies must show that they are not just profitable, but responsible.

Here is a summary of where BRSR currently stands:

Table: Applicability of BRSR Filing for Listed Companies

Financial Year	Applicability	Format	Mandatory Filing?
2022–23	Top 1000 listed companies	BRSR Core	Voluntary
2023–24	Top 1000 listed companies	BRSR Core	Mandatory
2025–26	Likely Top 2000 & beyond	BRSR Core	Expected

The BRSR includes quantitative and qualitative parameters: environmental data (energy usage, emissions), social criteria (diversity, working conditions), and governance (board independence, ethics codes). For several mid-sized companies preparing to list or attract ESG-focused funds, internal alignment with BRSR format is already underway. In practice, this also expands the role of the board of directors in India. Directors must now engage in conversations that weren’t part of traditional financial governance: carbon neutrality, workplace equity, and reputational alignment.

F. Enforcement And Regulatory Oversight

If there’s been any meaningful shift in Indian corporate governance over the last 10–12 years, it’s not just in what the law says, it’s in how regulators are now enforcing it. The rules themselves haven’t changed all that much on paper. But the way in which boards, promoters, and key management personnel are being held accountable.

Until recently, companies that found themselves in breach of disclosure norms or audit gaps could usually find a procedural exit by a clarification letter here and a delayed filing there. But those escape routes are narrowing. SEBI, for instance, isn’t waiting for a scandal to reach media headlines anymore. They’ve been actively using their enforcement powers even on procedural issues if they think something’s structurally off.

SEBI, NFRA & How Accountability is Now Being Tracked at the Board Level

The Securities and Exchange Board of India, technically, always had strong powers; the difference is, it’s actually exercising them now, especially after 2018. Whether it’s insider trading investigations, audit failures, or corporate disclosures that don’t add up, SEBI doesn’t just issue a general notice to the company. It identifies directors, names them and sends individual show cause notices to such identified directors, often to non-promoter directors too, clearly stating the offences committed.

There’s one particular shift that boards across listed companies are now aware of: silence is being treated as complicity. If the minutes of a meeting show that red flags were discussed and no one raised an objection, that silence is not benign anymore. SEBI has passed orders where it clearly says: the board knew, or should have known.

As for the National Financial Reporting Authority (NFRA), its focus remains on auditors. But in at least three separate cases, board-level conduct was indirectly evaluated. Audit committees are expected to understand what an auditor’s red flag really means. If they don’t ask for clarifications, NFRA now sees that as a governance problem, not just an audit one.

Penalties on Individuals, Not Just Companies

There used to be an informal belief among many directors, especially independent ones, that legal risk was for executive roles. That belief is outdated now. Several SEBI orders in the last five years have imposed penalties directly on directors. These include fines running into lakhs and, in some cases, restrictions on holding board seats for future terms.

Regulator	Who Can Be Penalised	Max Penalty	Debarment?
SEBI	Promoters, Directors, KMPs	₹1 crore+	Yes
NFRA	Auditors, Audit Committee Chairs	₹25 lakh–₹5 crore	Yes
MCA	Officers in Default	₹5 lakh (per breach)	Sometimes

And it’s important to note that these penalties are often issued in situations where no fraud was found. They are issued for inaction. For approving financials without asking enough questions. For ignoring early signs from internal audit reports. All of this falls squarely within the scope of what the law refers to as fiduciary care under Section 166. These are not optional traits; they define the statutory scope of what board responsibilities under the Companies Act 2013 actually entail.

Where Enforcement Changed the Conversation – Major Governance Failures

Three cases in particular shaped how regulators began treating governance failures as enforcement opportunities. These cases forced regulators to dig deeper into how boards function, or don’t.

A. Satyam

Everyone recalls the ₹7,000 crore accounting scandal. But what’s often missed is how the board went through multiple quarters of abnormal margins and inflated figures without sounding the alarm. The problem wasn’t just fraud; it was a board that didn’t challenge anything. The scandal exposed a vacuum in independent oversight, especially around financial review. And it permanently altered the lens through which corporate governance practices in Indian companies were judged.

B. IL&FS

Unlike Satyam, IL&FS was about slow erosion. Hidden liabilities, cross-holding within group companies, and over-leveraging it was all visible in the structure, but no one acted. Committee minutes were signed off without follow-up. The collapse created a domino effect in NBFC markets. More importantly, it raised real questions about risk governance and whether audit committees actually understood the material they were approving.

C. NSE Co-Location

This wasn’t about money misreported; it was about access. SEBI found that certain brokers had been given unfair speed advantages. But more than that, the issue was how whistleblower complaints had been received and buried. There were meetings, there were mentions, but there was no action. Eventually, the matter resulted in action against both the exchange leadership and certain directors. It redefined what oversight meant for independent directors in Indian companies, especially when tech or process risks were involved.

What This Means for Boards Going Forward

The broader takeaway is this: compliance today includes action. A passive board is not a compliant board. Whether it’s SEBI, NFRA, or even the MCA, enforcement bodies are starting to treat non-involvement as evidence of indifference. That change is perhaps the single most important evolution in how corporate governance in India functions.

What this has triggered across industries, especially among listed entities, is a kind of internal recalibration. Director training sessions have become more frequent. Legal teams are now tasked not just with preparing agendas, but with ensuring that each discussion is documented properly. More boards are refusing to clear resolutions in a single meeting. There’s real pushback.

For companies that haven’t faced scrutiny yet, these changes might feel excessive. But when faced with scrutiny, the quality of a board’s past decisions, and the seriousness with which it approached its obligations, can make the difference between reputational survival and regulatory damage. In that sense, the role of the board of directors in India has shifted from ceremonial to central. And it’s unlikely to ever go back.

G. Best Practices In Corporate Governance

There is no shortage of compliance obligations in India. Between the Companies Act, SEBI LODR, MCA circulars, sectoral guidelines, and exchange requirements, the average board already has a full plate. But the companies that consistently distinguish themselves on governance grounds aren’t just the ones doing the bare minimum. It’s those that take a step beyond, by building internal systems that anticipate scrutiny, enable director engagement, and reduce reliance on external fixes when things go wrong.

These practices, while not mandated, have gradually come to be expected by investors, proxy advisors, and even regulators. Especially in companies where promoter involvement is high or where recent listings have placed new demands on governance visibility.

Going Beyond Compliance – Voluntary Governance Protocols

In practice, voluntary adoption of higher standards has taken many forms. Some companies choose to create internal governance charters, documents that map out how the board interacts with management, how agenda items are curated, and when committees are expected to meet. Others bring in external consultants every couple of years to audit board performance or evaluate director contributions. These are not legally required, but over time, they’ve become the baseline in well-run boards.

Examples include:

• Splitting the roles of Chairperson and MD voluntarily, even in companies where it isn’t compulsory.
• Creating structured term limits for committee chairs.
• Publishing board meeting attendance in a format more detailed than SEBI requires.
• Documenting detailed rationales in the minutes of key decisions—especially for large related party transactions or strategic hires.

What’s important here is not the specific form, but the intention. These practices don’t exist to impress the regulator. They help ensure that decisions taken today will stand up to questions tomorrow. This approach supports the broader objectives of the SEBI corporate governance regulations, but goes beyond them.

Technology Use in Board Process and Oversight

Most directors today serve on multiple boards, across companies, sectors, and even countries. Paper-based packs, delayed agenda items, and long, unstructured meetings are no longer sustainable. As a result, governance is moving online, not just meetings, but the way documents are prepared, stored, annotated, and tracked.

Companies that lead on governance have invested in:

• Encrypted board portals, with secure document access;
• Digital review tools for resolutions, allowing directors to suggest changes before the meeting;
• Version-controlled circulation of board papers;
• Committee workspaces for risk, audit, and nomination teams; and
• Dashboards that track KPIs, ESG metrics, and internal audit concerns, not just financials.

This shift, while subtle, strengthens the underlying corporate governance practices in Indian companies. It makes it easier for directors to ask the right questions because they get the material earlier and can see how it’s changed over time.

Internal Controls That Work in Practice, Not Just on Paper

It’s common for companies to say they have an enterprise risk policy, a fraud reporting matrix, or a compliance framework. The test is whether these policies translate into day-to-day behaviour. In many cases, the documents exist. What’s missing is follow-through.

Where companies have taken governance seriously, we’ve seen:

• Risk registers that are updated quarterly, not annually;
• Escalation matrices that actually trigger a board-level alert when thresholds are crossed;
• Internal audit teams are empowered to engage directly with the audit committee, without managerial filtering; and
• Clearly mapped authority frameworks so that no major financial commitment is made without visible checks.

These are not checkboxes. They’re mechanisms that reduce dependence on firefighting. They also give the board a defensible position when something does go wrong, which, eventually, it always does. For any serious board, especially one fulfilling its board responsibilities under the Companies Act 2013, this is no longer optional.

Evaluations That Actually Drive Change

The annual board evaluation requirement under Indian law is often treated as a routine tick-box. But done properly, it can be one of the most valuable tools in improving board quality.

Well-structured boards go beyond merely circulating forms. They:

• Use third-party experts to design surveys and collect director input anonymously;
• Evaluate not just the board, but also each committee and individual directors;
• Benchmark director skill sets against company needs, and use the gaps to inform succession plans; and
• Have one-on-one meetings between the Chairperson and each director to discuss feedback.

Where this process is taken seriously, it doesn’t just improve decision-making. It changes the board culture, especially for independent directors in Indian companies, who often hesitate to raise concerns without structured feedback mechanisms.

Cultural Foundations That Can’t Be Legislated

It’s tempting to view governance as a set of laws, forms, and minutes. But the best boards don’t operate that way. What distinguishes a well-run board is often unspoken. How directors talk to each other, whether they listen more than they speak, whether the Chair encourages honest disagreement, whether a dissenting note is welcomed or discouraged, all remains within the boardroom.

These cultural habits can’t be legislated. But they define the true strength of the role of the board of directors in India. Over time, these habits shape how decisions are made, how risks are seen, and how companies respond when things don’t go according to plan. This is where governance moves from being a legal requirement to a strategic asset. It’s not about compliance anymore, it’s about credibility.

H. Challenges And Emerging Issues

It’s often easy to assume that once a compliance checklist is in place, governance follows. But in reality, while statutes like the Companies Act and SEBI’s LODR regulations lay out what is required, what actually happens inside boardrooms and what doesn’t continues to vary. And that’s where the fault lines emerge.

Some of the most significant governance challenges today don’t come from a lack of law. They come from situations where there’s just enough structure to look compliant, but not enough accountability to prevent slippage. The issues below tend to recur, not always obviously, but steadily.

Promoter Control That Silently Shapes Board Conduct

The discussion around promoter dominance has been going on for years, but not much has changed at the core. In many listed companies, particularly those controlled by founding families, promoters continue to dictate terms, from board appointments to agenda setting.

This plays out in subtle ways: candidates proposed by promoters rarely face scrutiny; board minutes often reflect consensus without any visible deliberation; and committee chairs are filled based on proximity, not competence. Even though the SEBI corporate governance regulations try to address these gaps, mandating independent directors, disclosures, etc., most promoter-controlled boards still operate in a way that centralises power. There’s no immediate fix for this. But until boards start acting like they’re accountable to all shareholders, not just the founding block, these imbalances will persist.

The Unspoken Conflict Between Independence and Familiarity

Independence on paper and independence in thought are not the same. Most companies are careful now to appoint directors who technically meet independence criteria. But the real issue begins when those same directors hesitate to question management or raise concerns.

Some red flags have become common: board meetings that last under an hour, even with 12–15 agenda items; nomination committees that simply renew terms without formal evaluation; and risk oversight being reduced to perfunctory updates from CFOs. When audit committees rubber-stamp documents, or compliance reports are barely read, governance failures are no longer hypothetical. This has a chilling effect on dissent. The intent of placing independent directors in Indian companies is to bring an external perspective. But if independence is reduced to formality, its very purpose is defeated.

Board Diversity: Still Mostly a Statutory Exercise

Yes, most boards today have at least one woman director. But gender diversity in Indian companies has largely been compliance-driven. In many cases, the women directors are family members of promoters or long-time associates. There’s little participation in critical committees, and even less involvement in risk or audit functions.

More broadly, there’s a lack of professional and functional diversity. Boards are still stacked with ex-bureaucrats, group veterans, and professionals from finance backgrounds. Legal, tech, ESG, these skill sets are only rarely seen.

The net result? Boards are ill-equipped to engage with issues like cyber risks, climate exposure, or cross-border structuring. These aren’t fringe concerns anymore. They’re core to how modern companies operate.

Startups and Family-Run Firms: The Governance Blind Spot

Much of the governance conversation centres around listed companies. But outside that space, in startups and closely held businesses, governance is often built reactively, if at all.

In these firms, it’s common to see founder-CEOs double as board chairs. Committee structures are rare. Shareholder agreements often dictate key decisions, bypassing any board-level debate. Documentation is sparse. Sometimes, it’s not even clear who signed off on what.

As these companies scale and seek external investment, their lack of structure becomes a liability. Due diligence flags pile up. And if an exit is on the horizon, say through IPO, the existing board setup simply cannot hold. These companies don’t just need legal advice. They need to shift their view of what a board is for, not as a compliance burden, but as a mechanism that makes businesses more resilient.

I. Comparative Insights: India Vs Global Governance Models

Anyone working with boards in India will tell you that the legal architecture is not the problem. The country has, over the last decade or so, put in place a fairly dense and structured set of obligations, through the Companies Act, through SEBI’s LODR framework, and increasingly via sectoral guidelines. Most of the ingredients are there.

The challenge, though, is not just about what the law says. It’s about how consistently those rules are followed and how deeply they’ve been absorbed into boardroom culture. When compared to other markets like the UK or the US, India seems aligned, until you look more closely at what happens in practice. That’s where the gaps start to show.

India’s Framework Is Strong, But Implementation Is Uneven

On a purely statutory level, India’s governance regime appears robust. The idea of codified board duties, mandatory disclosures, independent oversight, and shareholder protections, all of this is very much present. Many of these elements were influenced by international frameworks, especially the OECD’s guidelines, which have been used as reference points for some of SEBI’s reforms over the years.

That said, there’s a visible difference between how these systems are embedded in large professionally-managed companies, particularly those headquartered in Mumbai, Delhi, or Bengaluru, and how they play out in smaller listed firms or family-run conglomerates in the second and third tier of the market. One might comply on paper, but still fall short in spirit.

There are boards that never ask a single challenging question. Minutes that record unanimous decisions without any discussion. Audit committee meetings that last less than an hour. The legal setup allows for good governance, but it doesn’t guarantee it. And that’s where enforcement becomes crucial, which is still, in many ways, developing.

Comparison with UK and US Models: What’s Similar, What’s Not

Let’s set aside theory for a moment. What happens in boardrooms, in different jurisdictions, still varies significantly, not so much because of the written laws, but because of how directors see their role.

Feature	India	UK	US
Board System	Single-tier, legal duties codified	Single-tier, strong non-exec participation	Single-tier, litigation-backed deterrence
Independence Requirement	Mandatory for listed firms	Recommended but flexible	Expected; non-compliance leads to lawsuits
Audit Oversight	NFRA, SEBI-based framework	Regulated by FRC	Overseen by PCAOB
Shareholder Engagement	Class actions permitted, limited use	Stewardship codes, active investors	Litigation + proxy fights
ESG Reporting	BRSR required for top 1000 companies	TCFD-aligned reporting (not mandatory)	SEC disclosures in development

On the surface, India checks most boxes. In some cases, like mandatory CSR spending or independent director thresholds, it actually imposes more than other jurisdictions. But the issue isn’t with rules, it’s with the lack of credible consequences for not taking them seriously.

For example, in the US, even mid-cap boards think twice before approving anything controversial. Not because the SEC might intervene immediately, but because shareholder lawsuits are real. They’re frequent and they sting. The UK, meanwhile, relies more on reputation and institutional pressure. In India, consequences arrive slowly, sometimes not at all. That changes how boards behave.

What Other Jurisdictions Got Wrong – And How India Might Avoid It

The big governance collapses abroad weren’t caused by a lack of law. They were almost always due to boards failing to see what was in front of them or choosing not to ask the right questions. Take Enron: It wasn’t just about fake numbers. It was about audit committees that nodded along, compensation structures that rewarded risk-taking, and directors who didn’t probe. After that, Sarbanes-Oxley changed the rules in the US. But it also changed the mood in boardrooms.

Or Carillion in the UK: what you had there was a company that kept telling its board it was in control of debt. Except it wasn’t. Directors relied on internal updates, didn’t press for independent analysis, and didn’t demand more time on key decisions. The collapse eventually forced the UK government to look harder at director qualifications and board effectiveness. Then there’s Wirecard in Germany: a textbook case of auditors missing fraud, but also of supervisory boards being too comfortable with management’s story. The red flags were there. They just weren’t chased.

India has seen its own versions of Satyam, IL&FS, but the response often stops at regulatory tightening. The deeper change, the cultural reset within boards, is still a work in progress. That’s where the problem lies. There are still boards where papers are sent late. Where independent directors don’t get proper briefings. Where whistleblowers are labelled troublemakers. And in such settings, the gap between formal compliance and real oversight continues.

For global investors watching from outside, this gap matters. They don’t assess governance just by the Companies Act. They assess it by how directors engage, whether questions are being asked, and whether the minutes reflect any kind of tension or pushback. That’s why corporate governance in India, despite all its structural improvements, still attracts cautious optimism rather than full-throated confidence. And that’s also why, in any comparative matrix, the role of the board of directors in India will remain under scrutiny, not for what the law says, but for what the board actually does when it has to make a hard call.

Conclusion

Governance isn’t about checking boxes or quoting sections from the Act. It’s about how decisions get made inside the boardroom, how risks are evaluated before deals are signed, and whether someone is willing to say “hold on” when needed. Over the last decade, India has added structure, more laws, more disclosures, more committees. But structure isn’t enough if engagement remains passive.

The reason why corporate governance in India is receiving more attention is not just because the law requires it. It’s because investors, regulators, employees, and even consumers, are beginning to expect more from leadership. And that expectation is shifting what boards can ignore.

From Legal Requirement to Business Imperative

Once upon a time, governance was viewed as a legal expense, a cost of doing business. Today, that view has changed. Governance is increasingly seen as a business advantage. Companies that demonstrate real oversight, board-level rigour, and ethical alignment don’t just avoid trouble; they build investor confidence, attract better talent, and survive turbulence more consistently.

The role of the board of directors in India is changing because boards themselves are changing. Many directors now ask better questions. Some refuse to sign off on inadequate disclosures. And a few boards, not enough yet, are beginning to treat governance as strategy, not as compliance.

What Lies Ahead — Practical Priorities for Companies

Going forward, the companies that succeed in embedding strong governance will likely do a few things differently:

• Appoint board members for their skill sets, not proximity or loyalty;
• Ensure that corporate governance practices in Indian companies are reviewed annually — not just the format, but the actual discussions;
• Encourage dissent in meetings and record it properly;
• Use board committees to surface issues early, not hide them late; and
• Bring legal, ESG, finance, and risk functions into the board’s direct line of sight,

These are not expensive steps. They just require intent.

Closing Note — What Makes Governance Real

At the end of the day, what separates a governed company from one that just looks like it is governed isn’t the policy; it’s the people. How they read, how they push, how they record objections, and whether they actually listen to each other. And that’s where the future of corporate governance in India will be decided, not in courtrooms or government offices, but at boardroom tables, over decisions that seem small at the time, but eventually define the company.

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