Centre for Corporate Governance is a research hub under the rubrics of National Law University, Jodhpur, dedicated to research and development of governance standards for the corporate world. In order to promote holistic research on areas covered within the wide ambit of corporate law, the Centre came out with an annual publication in 2008, presently known as Journal on Corporate Law and Governance (formerly known as ‘Journal on Governance’). The Journal is peer-reviewed with ISSN serial publication No. 0976-0369 and indexed on prestigious legal databases, SCC Online and Manupatra. The journal also publishes the winning essay of the prestigious Pranita Mehta Memorial Essay Writing Competition conducted by the Corporate Law Society, NLUJ. The competition aims to create profound discussions and discourse around contemporary issues within the corporate law realm.

The Journal is now inviting submissions for the publication of Volume V Issue 1 on the theme “Addressing Emerging Trends: Navigating Murky Waters of Corporate Law and Governance“. The authors may refer to the call for papers and submission guidelines for further information. The last date of submission is 31st January 2022.

We are pleased to announce that our latest Issue, Volume IV Issue 2 on the theme “Evolving Precepts of Corporate Governance: Lessons to Learn and Unlearn” is out now. This issue, along with contributions from eminent experts, academicians and students, also includes the winning essay of the 5th Pranita Mehta Memorial Essay Writing Competition.

Notes

‘G’ in ESG – The Steering Force of the Company
– Manendra Singh and Tanvi Goyal

E, S and G, just three random alphabets of English language, but when put together have given businesses across the globe something to think about, especially in the wake of COVID-19 and the changing regulatory regime. ESG – Environment, Social and Governance factors are becoming increasingly important as investors are moving towards impact investing and sustainable development. This shift is evident from the number of ESG initiatives taken across the globe. Of late we have even seen funds launching specific ESG related products for investment as an answer to the public demand for sustainable investments. The inflows in ESG funds increased 76% to INR 3,686 Crores in financial year 2021 against INR 2,094 Crores in financial year 2020 and ESG funds together had an asset base of nearly INR 9,900 Crores as of March-end. In another research publication by Bloomberg Intelligence, it stated that global ESG assets are on track to exceed USD 53 trillion by 2025, representing more than a third of the USD 140.5 trillion in projected total assets under management. The ESG reporting in India has been recently revised by the Securities and Exchange Board of India (hereinafter referred to as “SEBI”) and a new reporting format, the Business Responsibility and Sustainability Report (hereinafter referred to as “BRSR”), has been introduced by SEBI on May 10, 2021. The concept of ESG, however, is not new in India. One of the first notable step in the area of social responsibility of businesses was the release of the Corporate Governance Voluntary Guidelines in 2009 by the Indian Ministry of Corporate Affairs (hereinafter referred to as “MCA”), which encouraged corporates to voluntarily achieve high standards of corporate governance. This was followed by the release of the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (hereinafter referred to as “NVGs”) in 2011, which were subsequently used by SEBI to frame the Business Responsibility Reports (hereinafter referred to as “BRR”) in 2012. The BRR has now been replaced with BRSR, which will be implemented in a phased manner, and aims at further strengthening the social responsibility of businesses. The BRSR requires reporting on various Governance aspects and is likely to help business to be more organized and help in monitoring their compliances in a more effective manner. In this article, we look at the Governance aspect of ESG reporting under the BRSR.

Articles

Independent Directors: Guarding the Guardians
Dr. Ashish Kumar Srivastava

Transparency and accountability are two pillars of Indian Corporate Governance structure. Independent directors are qui vive of shareholders‘ democracy in corporate governance. The abuse of corporate veil for the biggest corporate scams and crisis raises a question about the robustness of the system guarded by regulators like SEBI, RBI and Ministry of Corporate Affairs. The normative structure of corporate governance has been more or less confined to listed public companies. Private companies have been aloof to the idea of corporate governance. This leads to cultural issues when a private company graduates to become a public company and goes for listing. The listing agreement, especially clause 49 along with SEBI LODR Regulations provide for norms of good corporate governance. The Uday Kotak Committee in 2017 recommended for time-bound changes in many aspects of corporate governance. But due to the COVID-19 pandemic, there has been huge disruptions. The SEBI on March 01, 2021, floated a consultation paper wherein it proposed the idea of ‘Dual Approval System’. The Dual Voting Structure has been adopted in the United Kingdom. On June 29, 2021 SEBI proposed many changes based on the consultation paper in the present corporate governance norms for making the institution of independent directors more authoritative which shall be effective from January 1, 2022. In this paper, the author has attempted to examine the institution of independent directors and its evolution in Indian Corporate Regime and changes proposed by SEBI recently, especially the utility of dual approval system.

Sustainability Reporting: A Step Towards the Future or a Shot in the Dark?
Noyonika Nair & Saranya Mishra

The principle of sustainable development and sustainable development goals have emerged due to the realisation that economic advancement has to be balanced with the protection of the environment. Over the course of time, sustainability as a concept has become the centrepiece of attention from the corporates and regulators, across the world. The concept of ESG has also been developed to incorporate and apply the principles of sustainable development in the corporate world. Various international organisations have come up with voluntary disclosure frameworks to promote sustainability reporting. Regulatory interventions by countries have also increased in the last two decades which reflects the growing requirements for sustainability reporting. In this paper, the authors discuss the concept of ESG and sustainable reporting, highlighting the regulatory and non-regulatory actions taken by international organisations and different countries to create awareness about ESG and promote sustainability reporting. The authors analyse these regulatory interventions and the corporate responses to the same. In conclusion, the authors argue that sustainability reporting is irreplaceable and therefore, sustainability as a way of doing business should be adopted.

Regulatory & Governance Challenges Arising Due to the Emergence of Special Purpose Acquisition Companies (SPACs) in the Indian Corporate Environment
Navaneet Desai

A confluence of many factors which drove the popularity of SPACs in the US post the COVID-19 pandemic also managed to quickly attract the attention of many capital-starved global companies and market regulators across other jurisdictions. As the initial global scepticism surrounding the mechanism declined and the world balked at the pace with which the US SPAC juggernaut smashed all capital raising records in 2020, market regulators across various jurisdictions jumped aboard the SPAC bandwagon in announcing a framework for their domestic capital markets. Now, even as the US SPAC market, forced on its knees by the SEC, finally cools down, there seems to be no hesitation in many global markets in accepting the fact that SPACs are a risky, yet a viable fund-raising alternative. Recently, the Indian Market Regulator, SEBI, too set up an expert group under its Primary Market Advisory Committee (PMAC) to explore the possibility of a SPAC framework in India. While the current global sentiments seem to accept SPACs as more than just a passing fad, one cannot ignore that the SEC itself has time and again expressed frustration with certain quirky issues surrounding SPACs which also make them immensely popular. In this context, this article firstly attempts to understand what makes SPAC IPOs so special in comparison to the traditional IPOs. Secondly, this article breaks down the basic SPAC structure in the US which, in turn, helps in understanding the inherent sticky issues surrounding US SPACs. Lastly, the article, while highlighting the regulatory challenges for implementing SPACs in India, further analyses the inherent issues surrounding US SPACs in the Indian context and attempts to provide potential workaround solutions to potential governance issues arising from adopting a US-style SPAC framework in India.

The Principle of Alter Ego & the Evolution of Corporate Criminal Liability in India
Anubhav Chakravorty

The principle of alter ego lays down that criminal liability may be attributed to a company for the acts of the individuals in control of the affairs of the company. The doctrine endeavours to view both the directors/shareholders and the company as a single entity—thereby lifting the corporate veil. This article attempts to sketch the course of the development of the principle of alter ego in India by dissecting various landmark judgements passed by Indian courts. The Supreme Court‘s decisions in Iridium India Telecom Ltd. v. Motorola Inc. and subsequently in Sunil Bharti v. CBI paved the way for a more nuanced approach towards corporate criminal liability. This article draws from that context and discusses the rapidly changing position of law, leading up to the recent amendments to the Companies Act, 2013, which furthers the Indian government‘s goal to find a balance between making the legal framework conducive for businesses and ensuring that reasonable measures continue to be in place for wrongful acts or omissions by companies. Newer hurdles that could potentially prop up in the wake of the newly amended Companies Act has also been deliberated and the legal position on corporate criminal liability in the United States of America and the United Kingdom has been studied to place the current framework in the broader context of how other jurisdictions treat corporate criminal liability. Although the recent reforms are a welcome change for turning India into a more business-friendly nation, this article reinforces the imminent need to overcome hurdles that are likely to be encountered with the imposition of the revised framework.

Do Edtech Companies Fall Under the Ambit of E-Commerce Entities Under the Consumer Protection (E-Commerce) Rules, 2020?
Aaryan Mohan

The Consumer Protection Act, 2019, explicitly recognizes the need to afford specialized protection to the interests of consumers who avail services of e-commerce entities like EdTech companies, through a digital or electronic network. However, for EdTech companies to come under the purview of the Act, the education they impart would need to come under the ambit of “services” under the Act. On that backdrop, this article analyses the conflicting jurisprudence behind the exclusion of education from the ambit of “services” under the Act, and sheds light on exceptions to this exclusion: to formulate a uniform standard, which can be referred to while deciding on the inclusion of education rendered by EdTech companies under the ambit of services under the Act, generally, and the Consumer Protection (E-commerce) Rules, 2020, especially. The article recognizes two types of EdTech companies: K-12 EdTech companies, and other EdTech companies (based on their targeted consumer base), and tests the education they impart on the anvil of the uniform standard, to determine whether they fall under the ambit of the Consumer Protection (E-Commerce Rules), 2020. Further, for the purposes of conducting informed regulation, EdTech companies, which come under the ambit of the E-Commerce Rules, 2020, need further classification as a “marketplace e-commerce entity”, an “inventory e-commerce entity”, or a “seller”; so that duties and liabilities more suited to a particular company‘s modus operandi can be prescribed. The preceding analysis would also facilitate the formulation of an objective test to determine whether a particular EdTech company would fall under the ambit of the E-Commerce rules or not.

A Recurrent Quest for Corporate Governance in India: Revisiting the Imbalanced Scales of Shareholders‟ Protection in Tata- Mistry Case
Shreya Pandey & Himanshu Kaswa

Corporate governance exists as a notional fragment in the overall mechanism of a company for which different set of standards, procedures and codes are adopted. The objective criterion set forth in the legislation and regulatory authorities‘ leaves scope for subjective enactment of procedures by the companies which raises concerns for unethical practices. Articles of Association (hereinafter referred to as ―AoA‖) carries enormous significance in a corporate set-up as it contains rules and regulations for the entire management of a company. Extant loopholes and inadequate provisions in AoA cause a burgeoning effect on the poor governance system. The legal tangle involved between Tata and Mistry presented a set of procedural problems incorporated in AoA affecting the substantive rights of the members of a company. National Company Law Appellate Tribunal comprehensively dealt with provisions of AoA, minority shareholders‘ right and removal of chairman, however, on appeal the Supreme Court delved into the matter with a different legal tangent recognizing the corporate governance norms. Through this paper, we discuss the decision rendered by Supreme Court in Tata-Mistry case by placing emphasis on the conundrum of clustered concentration of power among the directors, procedures involved in the removal of chairman and shareholders‘ transfer of shares exhibiting the derailment of minorities‘ protectionist regime. A critical analysis is drawn on the position of corporate governance in the epoch of majority shareholders‘ hegemony.

Company Secretaries as Chief Governance Officers in Indian Companies
Nipun Ninad Naphade

India has witnessed changing legal and financial structures inside its corporate entities over the past few decades. With an increase in financial irregularities in company records, the need for transparent and independent corporate governance is felt stronger than ever. The latest amendments to the Companies Act provide some regulatory mechanisms to make corporate administrations more accountable and accessible. However, mere external monitoring is not viable for the giant corporate nexus that accommodates companies of varying financial structures, sizes and technical setups. In such circumstances, the office of the Company Secretary often provides a convenient solution acceptable to both, the company management and the stakeholders. The CS is envisioned as a champion of stakeholder interests, and not as a mere employee of the management, as they have been traditionally stigmatized. This research article explores the foundation on which the office of Company Secretaries has been assimilated into Indian Company law, and whether it can be improved upon to empower them as governance officers. The researcher attempts to compare the position of company secretaries with that of the public office of an ombudsman. The paper involves analysis of committee reports, contemporaneous research, statute laws, case laws and opinio juris to understand the prevalent views on this concept. The research attempts to suggest a projected path for laws on company secretaries to elevate their responsibilities from being mere compliance officers to leaders in good governance enforcement.

Integration of Blockchain Technology in Corporate Governance: Implications and Applications
Chitransh Bhansali & Devansh Dev

Blockchain is receiving a lot of attention in almost every industry, including the corporate world, and is attracting significant investments worldwide. Blockchain in its bare form is a sort of ledger which is in the public domain. It has garnered attention for huge returns on minimal investments in the cryptocurrency realm, however, there are multiple applications of the technology that will ease the overwhelming burden of data that they need to store and organize in every field, including corporate governance. Blockchain technology can revolutionize the way companies are handled and how they work. It is a framework that provides stakeholders with greater decentralization and greater capacity for active and accurate decision-making and will be crucial to modern corporate governance. Stakeholders can be highly benefitted from the transparency, permanence, and efficiency that blockchain technology holds. Even organizing the data in a way that it is not easily altered, or easily accessible would significantly improve the efficiency by which any corporate would work. This paper aims to study the implications of the application of Blockchain technology in the corporate governance world. The paper will attempt to describe Blockchain in a non-technical language and will compare the implication with the three major theories of corporate governance. The authors will then delve into its potential application in the current corporate world; we will also highlight the potential challenges with its implementation in order to provide a holistic study. The paper will ultimately conclude with a short note on the future of Blockchain technology.