Companies Act, SEBI & Corporate Governance
Corporate governance in India is anchored in the Companies Act, 2013, which replaced the archaic Companies Act of 1956. The 2013 Act introduced transformative provisions, including the statutory mandate under Section 135 requiring eligible profitable corporations to spend at least 2 percent of their average net profits on Corporate Social Responsibility (CSR) activities. It also strengthened minority shareholder rights, mandated female representation on boards, and instituted the National Company Law Tribunal (NCLT) and NCLAT for corporate dispute resolution. Capital market integrity and listed corporate disclosures are overseen by the Securities and Exchange Board of India (SEBI), established as a statutory body in 1992, which enforces regulations against insider trading, fraudulent trade practices, and market manipulation.
Key Concepts & Examination Highlights
- Section 135 of the Companies Act, 2013 made India the first country in the world to statutorily mandate Corporate Social Responsibility (CSR) spending (2% of net profits).
- SEBI was established as a non-statutory body in 1988 and given statutory powers under the SEBI Act, 1992.
- The National Company Law Tribunal (NCLT) was constituted in 2016 under Section 408 of the Companies Act, 2013.
- The Companies Act, 2013 introduced the concept of One Person Company (OPC) and mandated at least one woman director for specified public companies.