The passing of The Companies Bill 2012 by Rajya Sabha on 8th August 2013, is a step forward towards transformation in the corporate governance practices of the country. The new bill that requires President’s assent for it to become law, replaces the Companies Act of 1956. The bill, when enacted will bring in reforms to enhance corporate governance by giving voice to the minority investors in India, strengthening the role of independent directors and expanding the responsibility on auditors.
A key objective of corporate governance in India has been to strike a balance between the rule of majority shareholders and the protection of the rights of minority shareholders. The protection of minority shareholders rights is particularly critical given the often concentrated ownership of Indian companies.
Unlike in the developed countries such as US & UK, where ownership of a company is widely dispersed and is generally separate from the management of the company. In India, listed companies are usually parts of a large business group, characterized by a promoter or a controlling shareholder.