Independent directors, as the name suggests are directors on Board of a company who are independent individuals, not having any further relationship or business with the company. The concept of Independent directors gained momentum in the late 1980s and early 1990s due to the finding of various corporate frauds and transgression. In India, Clause 49 of the listing agreement mandates appointment of independent directors on Board of a listed company. With the passage of the new Companies Act of 2013, the concept of independent directors has found place in the Companies Act itself. The requirements prescribed under the Companies Act 2013 seem to be much stricter than that of the previous version of the act 1956.

Demand for independent directors got fuelled after the New Companies Act was passed. In fact, now being the chairman’s or any executive’s friend isn’t anymore the most important qualification to get a call from the company to be an independent director and fill up that position. Companies are increasingly looking to induct on board people who can add value to decision-making.

The regulatory environment in India around corporate governance is changing rapidly and those entrusted with governance i.e. the Board of Directors and the Audit Committee are being made responsible for the prevention and detection of any frauds.

The ownership structure of the companies is changing: In recent years, public financial institutions, mutual funds, etc. are the single largest shareholder in most of the large companies. So, they have effective control on the management of the companies. They are the ones who force the management to use corporate governance. They put pressure on the management to become more efficient, transparent, accountable, etc. They also ask the management to make consumer-friendly policies, to protect all social groups and to protect the environment. The changing ownership structure has resulted in corporate governance. Today, social responsibility is given a lot of importance. Growing number of scams, frauds and corrupt practices need to be wiped off completely. Misuse and misappropriation of public money needs to be strongly controlled. In order to avoid these scams and financial irregularities, many companies are following the path of corporate governance.

Who can be an ID? As per clause 49 of the listing agreement, an independent director is a non-executive director who does not have any financial relationship with the company, its promoters, and senior management or affiliate companies, and/or has not been an executive with the company in the three preceding financial years. It also says that an independent director should not have been a partner or executive director of the auditors/lawyers/consultants of the company in preceding three years or should not hold 2% or more of shares of the company. Further, he should not be a supplier, service provider or customer of the company.

Independent directors act as a guide to the company. Their roles broadly include improving corporate credibility and governance standards functioning as an overseer, and playing a vital role in risk management. Independent directors play an active role in various committees set up by company to ensure good governance.

Some famous IDs: Examples of some famous independent directors are former banker K.V Kamath served on the board of Infosys between 2009 and 2015. Kamath is one of the famous and rich independent directors in the global list. He, Damodaran and Ron Sommer are famous for doing excellent job and earning handsomely from companies as independent directors. Former SEBI chairman M. Damodaran sits on the board of Tech Mahindra.

Should IDs be held responsible? The current legislation framework does not differentiate between Independent Directors (IDs) and executive directors (EDs) as it fails to distinguish between their liabilities. The real question is, since independent directors only play a supervisory role, should they be penalized only in the event of a discrepancy that directly relates to their responsibilities? Several independent directors on boards of companies are now seeking legal advice to find out to what extent they can be held liable for any operational issues in those firms.

Kiran Mazumdar Shaw, Chairperson of Biocon, said the country is moving from poor governance to extreme governance. “It is unfair to place the entire onus on independent directors who are only privy to the information shared with them by the management.” She further added that instead of penalizing independent directors, the management and promoters should be penalized because they are the whole time controllers.

A corporate veteran who is on the board of several blue chip companies on the condition of anonymity has said that an independent director should be provided immunity and protection except in cases of willful fraud or gross neglect. IDs spend so much time and energy to understand issues although the compensation for the same is not adequate enough.

Healthy ratio of ID: A healthy ratio of the board of director of a company should have both executive and non-executive directors. At least 50% of the board should have non-executive directors. If the chairman of the board is a non-executive director, then at least one-third of the board should comprise independent directors. If the chairman is an executive director, then independent directors should make up at least half of the board. If an independent director resigns or is removed from the board, he/she has to be replaced by a new independent director within 180 days from the day of such resignation or removal.

IDs must bring objectivity: The corporate governance structure hinges on the IDs, who are supposed to bring objectivity to the functioning omission function of the board and improve its effectiveness. However, the problem is that an ID cannot play an effective role in isolation despite their commitment to ethical practices. They cannot stop a decision that is damaging to the members individually, but if they act collectively, then they can proceed prudently before arriving at any such decision. IDs may not be in a position to stop fraud at the highest level, but with a high level of commitment and due-diligence, they may be well placed to identify signals that indicate that the lot is not as it should be.

Prevent frauds: Globally, with the evolving regulatory landscape, which makes them responsible for the prevention and detection of fraud, directors have begun exercising adequate oversight on the management on account of the risk of fraud. Non-compliance with these regulations or guidelines can have serious repercussions for directors, including their reputational loss and personal liabilities. The role of IDs in fraud prevention and detection has come under the direct scanner of regulators, members and other stakeholders due to the recent exposure of high-profile instances of fraud in India. In the last few months, we can clearly see IDs taking direct interest in reviewing the

scam risk management framework put in place by their organizations to mitigate the risk of fraud.

IDs must have some important questions to ensure compliance with governance: Some questions like clarity in communication from top to bottom; effectiveness in assessing corruption risk; effective standards, policies and processes to address risks; effective training and development from top to bottom; what incentives are provided for compliance and penalties for non-compliance; regular monitoring and auditing to detect improper conduct; adequate clout for compliance officers, resources and independence; effectiveness of compliance program etc are important.

Thus, the IDs can play the crucial role of bringing objectivity to the decisions made by the board of directors by playing a supervisory role, while not taking part in the company’s day-to-day affairs or decision making. For IDs raising the appropriate red flags at the right time would help them in avoiding the occurrence of unwanted situations and their consequences to a great extent.

The need of the hour is for the legislature to draw a line between IDs and EDs by defining their roles and responsibilities, and distinguish their liabilities. Discretion lies with the enforcement authority to determine the extent of the liability that the IDs may incur.

Greenwashing is a phrase used in advertising to describe initiatives taken by organizations to preserve the environment, this they do to improve their public image. The term is in use since 1960s but became famous in 1990s when environmental awareness became a movement across the world. Organizations struggle to get public attention and customer’s mind share; pretending to be environment friendly is one such attention seeking measure.

One of the huge corporations Royal Dutch Shell has been frequently accused and penalised for its greenwashing campaigns. It’s most famous ad campaign -“Don’t throw anything away- there is no away” highlights the claim of growing flora and fauna out of CO2 emissions but it was found to be misleading and heavily criticized. In January 2017, a UK High Court ruled out a claim against Dutch Shell’s Nigerian subsidiary’s oil spill in which two Niger Delta communities were shattered completely. The Court’s order clearly showcased robbing of justice and allowing the UK multinational to commit abuses overseas with impunity. Law is indeed blind.

Another example is of General Motors; it wanted to promote its production and development of fuel-efficient vehicles. In 2007, General Motors launched its “Gas-Friendly to Gas-Free” campaign, attempting to reframe the company as environmentally progressive. Regardless of its effort, General Motors continued to be the leading producer of gas-guzzler automobiles. The campaign highlighted its ways of greening the automobile industry: increasing fuel efficiency, producing vehicles that can run on E85 ethanol, developing hybrids, plug-in hybrids and fuel cells. The pretence went on while still heavily producing gas-guzzling vehicles.

Greenwashing is a spin of corporate social responsibility (CSR) in declaring itself to promoting environmentally friendly policies whereas in reality, the company does not live up to the commitment. Companies keep making unsubstantiated or misleading claim about the environmental benefits of its products, services, technology and strategic practices. It’s in fact an eye wash.

In 2013, Revlon campaigned for breast cancer awareness and raising funds for patients of breast cancer. During the campaign, it got accused of using chemicals linked to cancer in its cosmetics; the company called the charges “false and defamatory.” But, later, Revlon went on to publish its ingredients policy and was declared as one of the environmental friendly working groups. The company reformulated some products to eliminate certain chemicals of concern; long-chain parabens and DMDM Hydantoin and Quaternium-15, which release tiny amounts of formaldehyde. Revlon later communicated that they their campaign of breast cancer was genuine and eliminating the harmful chemicals from the production process was well under way before it began talking about the Breast Cancer Fund.

Today, when people are well informed about side effects products and services due to social media impact, the transparency matters. In fact transparency is the foundation of Corporate Governance.

In 2013, Asia Pulp & Paper committed to halt deforestation under its Forest Conservation Policy. Prior to this, APP and its pulpwood suppliers had a history of almost 30 years of deforestation, destruction of wildlife habitat, peat drainage and conflicts with local communities related to the acquisition of land for wood harvesting and pulpwood plantation development in Sumatra and Kalimantan, Indonesia. The Forest Stewardship Council (FSC) announced its decision to suspend APP’s illegal activities in the forests; APP remains the first among a very small number of the most controversial companies in the world FSC has disassociated from. In August 2018, FSC gave an order to APP to align and put in place its corporate structure aligned with measures to put a full stop to its alleged unacceptable forest management activities including its suppliers.

Throughout the 1990s, Nike was targeted by labor activists and anti-globalization forces for allowing its suppliers in poor countries to abuse and exploit workers. In the beginning, Nike said it couldn’t be responsible for conditions in factories it didn’t own. Protests and media reports proliferated. In 1996, Life magazine published a story headlined “Six Cents an Hour” with a photo of a Pakistani boy sewing Nike soccer balls. Though it was slow in coming, Nike eventually set up an extensive and expensive system for monitoring and remedying factory conditions in its supply chain and the rest of the footwear and apparel industry followed in its footsteps.

In essence, greenwashing involves incorrectly conveying to consumers that a given product, service, company or institution cares for the environment. As consumers become more eco-conscious, organizations are buckling up numerous stories going greater lengths to present themselves as environmentally friendly. Some companies make inflated and absurd claims, others resort to blatant lies.

But, let’s understand that there is a growing concern about environmental safety worldwide. There are tools to safeguard the environment and a consensus is made on easing the production of environmentally-friendly products. To make the use of these tools more efficiently, companies have adopted corporate governance principles that are not only put into practice in the higher ranks of organisations, but are also spread among small and medium scale organizations and are closely monitored by government agencies. Workplace safety, correct work procedures, worksite analysis, hazard prevention and control has become crucial.

Globalization has created cross border alliances paving way for more opportunities but it also has put stringent rules and regulations for human and environmental protection. Adding environmental management to their internal policies is a must for organizations. Companies must conform and endorse to legislation by investing more in clean technologies and merchandise that cause lowering pollution. Greenwashing is a temporary measure which might help organizations for a while, in long run, it just doesn’t work.

A paradigm shift which is also called radical theory change is a concept identified by the American physicist and philosopher Thomas Kuhn (1922–1996); it is a fundamental change in the basic concepts and experimental practices of a scientific discipline. Kuhn described scientific work done within a prevailing framework as paradigm. His 1962 book ‘’The Structure of Scientific Revolution’’ talked about term paradigm shift, which has since become an English-language idiom. People tend to use the word paradigm shift loosely sometimes.

Kuhn made several notable claims in his book concerning the progress of scientific knowledge that scientific field undergoes periodically. It does not solely progress in a linear and continuous way, and that these paradigm shifts open up new approaches to understanding what scientists would never have considered valid before; and that the notion of scientific truth, at any given moment, cannot be established solely by objective criteria. Competing paradigms are frequently incommensurable (not able to judge by the same standards) that is, they are competing and incompatible accounts of reality. Thus, our comprehension of science can never rely wholly upon “objectivity” alone. Science must account for subjective perspectives as well, since all objective conclusions are ultimately founded upon the subjective conditioning. If there are few scientists working on a topic, each one will be having a different viewpoint on it.  This means one fact can have different meanings when seen from different perspectives. The perspective each person adopts influences what is considered central or obvious. Some perspectives can appear as obscure.

Kuhn also has mentioned in his book that some innovations took place without evocative research. Archimedes had been working on a method to find the density of an irregularly shaped object, and was taking a break at the baths. In other words, he suddenly got an insight which he called “eureka moment” the principle was the result of previous study combined with a sudden insight.

Since the 1960s, the notion of a paradigm shift has also been used in numerous non-scientific contexts to describe a profound change in a fundamental model or perception of events, even though Kuhn himself restricted the use of the term to the physical sciences.

A truth about Paradigm shift is that it is sporadic. In the modern world we have got so used to creative destruction; it refers to the nonstop product and process innovation mechanism in scientific, education and business world.  The concept was coined by Joseph Schumpeter (1942), who considered it ‘the essential fact about capitalism’. A paradigm shift can be defined as an important change that happens when the usual way of thinking about or doing something is replaced by a new and different way, which Schumpeter called ‘’creative destruction’.

Whether we like it or not a sporadic paradigm shift in business management keeps happening. It’s a shift from a firm-centric view of the world in which the firm’s purpose is to make money for its shareholders to a customer-centric view of the world in which the purpose of the firm is to add value for customers.

Another paradigm shift is an up-and-coming corporate governance framework that derives from the recognition by CEOs, board of directors, institutional investors, banks, and asset managers. The economic impact of a myopic approach to managing and investing in businesses has become abundantly clear and has been generating rising levels of concern across a broad spectrum of stakeholders, including corporations, investors, policymakers and academics. People look at organizations from ethical point of view; therefore corporate governance requires two levels of analysis: the internal concerns of corporate agency and the emergent effects on social welfare. People at large disapprove of organizations which don’t practice transparency.

There are many paradigm shifts occurring in medicine today. Hospitals have started thinking at their business model from patient cantered point of view. The patient’s experience matters. The biggest shift is happening in the field of psychiatry. The world is seriously concerned about mental health today. Most medical scientists and pharma companies are researching on underlying pathology of diseases for and treating it. The paradigm shift towards treating psychiatry as an important and valuable field is slow, yet the tides are turning in its favour. It is amusing to see that in a world where we know so much, where technology is so advanced that varied information is available to a person in split seconds; we still have not been able to discover the mystery of the human brain and what exactly is mind and its full effects on the body.

Another shift in medicine is the issue of overspecialization. As more information is exposed because of Internet, it is deemed unfeasible to be well versed in everything and so specialties began to arise and collaboration between teams of doctors have started working together. The problem is that this trend of overspecialization has led to an undetermined amount of doctors consulting on one patient case. This makes the patient feel disconnected from their care and more confused due to often contradictory instructions placed by various expert doctors.

The field of education is under transformation at all levels. In a globalized marketplace with advancing technology is a pressing concern for educators and policymakers in order to help students learn and develop and prepare students for life after graduation.  According to the U.S. Department of Labor, 65% of today’s grade school students will end up employed in jobs that have yet to be discovered. This signifies a shift in demand for competencies and expertise, where jobs are now utilizing skills such as non-routine interpersonal and non-routine analytic skills, compared to previous decades that were more focused on routine cognitive and routine manual skills. Additionally, the kind of things that were once easy to teach are now easy to automate, digitize or outsource, creating the need to rethink the role of teachers in education.

As the role of teachers change, the question before educators and policymakers is how schools can adopt to the changing demand of skills, and the digital revolution. This is further compounded by shifts in the economy, where the digital economy is now becoming the main economy, and schools will now be confronted with challenges and opportunities as they adopt to help students learn. Paradigm shift is taking place in organization of schools itself. While education today is mostly about the system, content, and mastery (specialization again), we are getting half baked masters everywhere. The fact is that inexperienced substitute teachers go to the class rooms to teach.

In the words of Sean Covey, paradigms are like glasses, when you have incomplete paradigms about anything in general, it’s like wearing glasses with wrong lenses, which affect how you see everything.

Largely people believe that only public limited companies or conglomerates and established companies, with many shareholders need to be concerned about corporate governance. They feel that these companies can benefit from implementing corporate governance practices; whereas, the reality is that all companies – big small, micro, private and public, start-ups, early stage (new) or established (old) compete in an environment where good governance is a business imperative. One size doesn’t fit all, but right-sized governance practices will positively impact the performance and long-term viability of every company.

Corporate governance is a tricky topic that board members and senior management must constantly revisit and improve. The business environment sometimes experiences recession and at times a boom. Increased fraudulent behaviours by business owners pull down citizen’s faith in businesses. There are some common myths about corporate governance which need illumination.

What are the common myths about corporate governance?

Myth 1: Corporate Governance is theoretical term.

This myth that corporate governance “doesn’t apply” comes from a view that it’s only theoretical and doesn’t impact the bottom line or performance. Also a lot of people believe that it is costly to implement it and it evolves bureaucratic practices when it comes to decision making. Some feel that it cannot be tailored to a company’s size and stage of development.

Reality: In reality, all companies (with or without) corporate governance compete in an environment where good governance is a business imperative in relation to things like raising capital, obtaining loans, attracting and maintaining talented and qualified people, meeting the demands and expectations of shareholders and expansion of firms.

Myth 2: Corporate governance does not have a single accepted definition, therefore it is vague idea.

Reality: Broadly, the term describes the processes, practices and structures through which a company manages its business and affairs and works to meet its financial, operational and strategic objectives and achieve long-term sustainability. It is generally a matter of law based on corporate legislation, securities laws and policies, and decisions of the courts and securities regulators.  Directors owe a duty of loyalty to the companies they serve, and have a fiduciary duty to act honestly, in good faith and in the company’s best interests. Corporate governance is also shaped by other sources, like stock exchanges, the media, shareholders NGOs and interest groups. Corporate governance practices help directors meet their duties and the expectations of them.

The objectives of corporate governance are to promote strong, viable competitive corporations accountable to stakeholders. There is no one particular design which fits every company, and there is no uniform, comprehensive set of policies or practices. The practices of corporate governance depend on several factors: the nature of the business, firm’s size, its lifecycle stage, how well the firm is expanded, availability of resources, shareholder expectations and its legal and regulatory requirements.

People who believe in corporate governance say that there is a direct connection between good corporate governance practices and long-term shareholder value.  Some of the key elements for corporate governance practices are: a strong board of directors, accountability, good management practices, tough internal controls, increased shareholder engagement, risk taking ability, manageable risks and effectively monitored and measured performance.

Myth 3: One cannot expect a Return on Investment in Corporate Governance

Reality: Some companies view investment in corporate governance as a mandatory expenditure, whereas, few realize that it gives significant returns—directly and indirectly. In Asia and Latin America, for example, institutional investors pay on an average 22% premium for companies showing improvements in governance because they get better returns from improved stock performance. Companies with good governance also receive better credit ratings, which in turn help them get better interest rates, better supplier terms and improved working capital. Better governed firms do better than peers.

Companies must not view investment in governance as a necessary evil, but as an opportunity to mitigate risk, improve the brand and generate returns. CFOs and legal officers should measure and use return on investment in governance to obtain the support of the board for further improving the governance framework. Progressive organizations have corporate governance codes and conducts online; stakeholders can visit the websites and interact with the organizations.

Myth 4: Training Staff in ethical conduct can create a culture of good governance

Reality: Most firms will prove ineffective in establishing a culture of ethics. The amount spent on training the employees in ethical behaviour and their understanding differs. The percentage of employees completing training, does not measure whether employees are behaving more ethically. Moreover, high-sounding principles in standardized governance training hold little meaning for employees and are rarely applied. Individuals have their core moral standards, which is difficult to be altered.

Practically, the training modules must be tailored for each employee segment based on their work. Training should be scenario-based, describing ethical conduct in real-life situations.

Myth 5: Regulatory compliance ensures good governance

Reality: Legislation can never account for a large proportion of corporate frauds; firms which want to get into frauds can find loopholes in system. Firms cannot rely on compliance to create ethical behavior.  A lot of large scale corporate frauds are committed by employees at firms that comply with all necessary regulations. For example, Satyam Computer Services Ltd, saw its employees commit India’s largest ever corporate fraud, was compliant with Indian law and International Financial Reporting Standards financial disclosures.

Firms should not wait for laws to become stricter and then change the governance standards in the daily working. Instead, firms must ensure that they comply with best practices and highest possible standards, which helps the firms stay ahead of legislative change and also puts senior managers in a stronger position to argue for reforms that benefit companies as well as society.

Myth 6: Audit committees are the most important to reinforce corporate governance

Reality:  While audit committees take the blame for lapses in governance, the reality is that boards often do not give the audit committee the right scope or support it with the right processes. Audit committees’ ineptness has little to do with their powers or the quality of the directors. Their focus is often diluted as committee charters and responsibilities are rarely defined, and the group often becomes an owner of risks which he board of the firm does not want. This impedes oversight on governance and increases risks of frauds.

Firms which formalize the audit committee charter and conduct meetings and agendas at the beginning, and make those reports available to public build market confidence.

Myth 7: A strong fraud management system is the most important way to record misconduct

Reality: When firm establish fraud detection and controls systems, but do not take actions which are most important, it loses sense. Fraud managements are not enough to reduce misconduct.  To build an effective governance framework, progressive companies create a culture of ‘speaking-up’ under which employees report misconduct without the fear of retaliation. It has been observed that when employees speak up (who are called whistleblowers), they are fired, or harassed by the top officials. According to a 2010 Association of Certified Fraud Examiners report, employee information was found crucial in clearing up 47% of fraud cases, which is more than all the other tools fraud management relies on. Organizations must reinforce the commitment to integrity with a strong ‘tone from the top’ and demonstration of organizational justice. A lot depends on the conduct of top management people’s behaviour.

The concept of a class action suit is originated in the United States. It offers a platform to investors facing common legal challenges to join hands and participate in a lawsuit. It is a cost-effective way to seek legal redress as otherwise it would be expensive for an individual shareholder to launch a lawsuit and seek compensation.

In India last year in August 2013 Parliament approved a long-awaited overhaul of the legislation vide the new company’s law which governs Indian business world. The amended law is aimed at easing the process of doing business in the country and improving governance by making firms more accountable, making this one of the few reform measures that the Congress-led United Progressive Alliance has succeeded in getting through the House. We should loud the efforts of minister of state for corporate affairs, Mr. Sachin Pilot for this historic move! The private companies, while maximizing growth, also have a greater responsibility towards society, besides balanced and sustainable growth of the country. Mr.Pilot’s efforts in getting the bill passed in parliament have ushered in a new era for the company law.

The new law will mandate the setting up of a National Financial Reporting Authority, which will monitor compliance with accounting and auditing standards. It will also have the power to investigate auditors that are registered under section 22 of the Chartered Accountants Act, 1949. And, the new legislation will, for the first time, also permit class action suits against companies. A class action suit is typically a lawsuit in which a group of people file a claim before a court in which a specific class of defendants is being sued.

About 10 years back, Indian companies used to take people from India to the US and give them lower salaries compared to the local employees. Many did not comply with minimum salary norms. The other problems such as racial, sex, colour-creed discrimination added to problems. The language used for running operations at times is foul. Some smaller Indian companies are seen to be not complying with local labour laws. This is lowering the image of the big Indian companies as well. But, there the class action law suit is a powerful tool for individual workers to seek justice.

In February 2013, Tata Consultancy Services had to settle a class action lawsuit brought against it by Indian former employees working in the US over what they claimed were unpaid wages. The lawsuit dates back to 2006, when TCS staff working onsite for US clients alleged that the company had unfairly docked their salaries and forced them to refund it for tax payments. TCS first tried to have the case moved to India, then twice motioned to have the lawsuit dismissed. In April last year, a California court ruled that the trial could proceed. The law firm representing the plaintiffs won the case. TCS agreed to set up a £29.75 million settlement fund available for all members of the class. TCS spokesperson said in a statement that they decided to end this case so that they could focus their energies entirely on continuing to provide world class service to their clients. Obviously, it agreed to settle this matter to eliminate any on-going distraction to its associates and management. The workers were lucky that the case was heard in US.

Between – March 2012 till May 2013, outsourcing firm iGate has been slapped with class action lawsuit in the US for alleged violations of federal securities laws in view of its sacked CEO Phaneesh Murthy’s “improper relationship” with a subordinate employee. The suit has been filed on behalf of persons or entities that purchased or acquired securities of iGate between March 14, 2012 and May 21, 2013. The shareholders have a say in moral conduct, decency and of honesty of the management and governance of the company in which they have invested  money.

Back home, four investors have filed a class action lawsuit against Financial Technologies (India) Ltd, Jignesh Shah, in Bombay high court to prevent it from selling its assets as the company’s unit National Spot Exchange Ltd (NSEL) battles a Rs.5, 574.35 crore payment crisis. The case has been filed as a representative suit under the Civil Procedure Code, 1908 because the new law enacted in August to regulate Indian companies, which provides for class action suits, but is yet to be notified.

So how will class action law suit be helping the Indian business environment?

The new Companies Bill allows class action suits, including a national financial reporting authority, gender equality on boards, and mandatory audit firm rotation. It is up to India Inc. to side itself with the new law that replaces the Companies Act of 1956. The new Companies Bill, on its enactment, will allow the country to have a modern legislation for growth and regulation of corporate India. The new law will facilitate business-friendly corporate regulation, improve corporate governance standards, enhance accountability on the part of corporates/ auditors, raise levels of transparency and protect interests of investors, predominantly small investors.

At present, India ranks 132 out of 185 countries in the World Bank’s ranking on the parameter for ease of doing business. Long periods and complex procedures in setting up, reorganizing and even winding up of businesses have contributed largely to this undesirable positioning of India on the global platform.  With the new law, a One-Person Company may get an impetus to structure its emerging business in a corporate form and what more – provisions of fast track approvals, measures of transparency and increased governance norms are expected to put companies on an easier and smoother ride.

The new legislation also permits inbound and outbound mergers with a simplified and fast-track process of merger/demerger in cases of specified small companies. This will also facilitate cross border mergers. An Indian company with prior approval of RBI may merge into a foreign company and vice versa by discharging the deliberation to the shareholders of the merging company in cash or Depository Receipts or partly in cash and partly in Depository Receipts.

In addition, the new legislation provides that companies would have to rotate audit firms over a ten-year period. This move may provide a solution to break the auditor-client nexus and the threat posed by the long-term association between firms-and-clients. At present we have approximately 1000 audit firms registered, so this legislation has paved way more auditors, lawyers, company secretaries!!  So, the new company’s law – 2013 has strengthened the corporate governance while widening the frontiers of trade and commerce.