PG Deparment of Commerce

MOUNT CARMEL COLLEGE , AUTONOMOUS

Subject: CORPORATE LAW AND GOVERNANCE

Submitted by :Iswerya N.S

Class:1st M.com(FA)
Register no:M18FA09
Submission date:15/9/2018
 1)Discuss and elaborate the recent issues and challenges in
corporate governance in family business in India. And list out
the number of company which did not maintain the corporate
by way of money laundering, scandal fraud batter nationally
and internationally.
 Corporate governance is set of principles or guidelines on which a
company is governed. It ensures that the corporate works in a way it
supposed to work to achieve the desired goals. It makes the
corporations accountable to each stakeholder including, directors,
shareholders, employees, customers etc. The term governance itself
explains the meaning that it is an act of managing a corporate entity.
The entity of a corporation is separate from its officials which makes
corporate governance an important subject to study. Corporate
governance plays an important role to protect the rights of thousands
of shareholders, who have ownership in the company but do not play
an active role in governing day to day business activities.

Corporate governance is a part of Indian corporate sector since the beginning but
corporate governance failure and fraud of Satyam Computer Services Limited
increased the concerns about corporate governance in India.

The need for Corporate Governance in India

In the last decade, corporate fraud and governance failure is occurring frequently
which is why we require good corporate governance in the country. India provides
proper norms and laws aligned with international requirements to govern a
corporate. Some of the important reasons are discussed below which raised the
need for corporate governance in India.
 1. A corporate has a lot of shareholders with different attitudes towards
corporate affairs, corporate governance protects the shareholder
democracy by implementing it through its code of conduct.
2. Large corporate investors are becoming a challenge to the management of
the company because they are influencing the decision of the company.
Corporate governance set the code to deal with such situations.
3. Corporate governance is necessary to build public confidence in the
corporation which was shaken due to numerous corporate fraud in recent
years. It is important for reviving the confidence of investors.
4. Society having greater expectations from corporate, they expect that
corporates take care of the environment, pollution, quality of goods and
services, sustainable development etc. code to conduct corporate is
important to fulfil all these expectations. Takeovers of the corporate
entity created lots of problems in the past. It affects the right of various
stakeholders in the company. This factor also pushes the need of
corporate governance in the country.
5. Globalization made the communication and transport between countries
easy and frequent, so many Indian companies are listed with international
stock exchange which also triggers the need for corporate governance in
India.
6. The huge flow of international capital in Indian companies are also
affecting the management of Indian Corporates which require a code of
corporate conduct

Corporate Governance Framework in India

The Indian framework on Corporate Governance has been vastly in sync with the
international standards. Broadly, it can be described in the following:
 1. The Companies Acts 2013 has provisions concerning Independent
Directors, Board Constitution, General meetings, Board meetings, Board
processes, Related Party Transactions, Audit Committees, etc.
2. SEBI (Securities and Exchange Board of India) Guidelines ensure the
protection of investors and have mandated the companies to adhere to the
best practices mentioned in the guidelines.
3. Accounting Standards issued by the ICAI (Institute of Chartered
Accountants of India) wherein the ICAI is an autonomous body and
issues accounting standards. The disclosure of financial statements is also
made mandatory by the ICAI backed by the Companies Act 2013, Sec.
129.
4. Standard Listing Agreement of Stock Exchanges applies to the
companies whose shares are listed on various stock exchanges.
5. Secretarial Standards Issued by the ICSI (Institute of Company
Secretaries of India) issues standards on ‘Meetings of the board of
Directors’, General Meetings’, etc.. The companies Act 2013 empowers
this autonomous body to provide standards which each and every
company is required to adhere to so that they are not punished under the
Companies Act itself.

Challenges faced by Family Businesses in India

In study done by the Thomas Schmidheiny Centre for Family Enterprise at the
Indian School of Business, significant trends in transition in family businesses
were noticed.
Leadership in family business seems to be undergoing a phenomenal change.
While earlier it was autocratic, now it is gradually becoming participative. The
younger generation is joining the family businesses and increasingly taking up
leadership roles. The senior generation has begun to regard them as capable and
well-trained professionals. Some family firms have adopted radical changes in
leadership style whereas at the other extreme of this continuum there still remain
some firms that are being lead in traditional ways.

Succession planning was something almost unheard of among family firms just
about a decade ago. Following the family hierarchy was the usual norm when it
came to leadership succession. There was lack of clarity on roles and
responsibilities of family members. However, family firms seem to have now
learnt the importance of succession planning. The elder generation has also started
to realise the importance of professional training and grooming of the younger
generation to take up business responsibilities in future.

Wealth management in Indian family businesses largely remains the domain of the
family. Family businesses were found to predominantly manage their wealth at the
family level. Though many families have begun to take help of professional wealth
managers, a significant number of family business owners are not satisfied with the
existing wealth management practices and see scope for improvement in this area.
An interesting shift in that area is being witnessed with family firms opening to
external sources of funding and throwing themselves open to financial scrutiny.
This indeed seems to have become a virtue out of the necessity for funds to propel
business growth.

Family business owners have realised the importance of harmonious relationships

among family members for achieving business success. They have begun to
establish communications forum to help family members reach out to each other,
sort out differences and have cordial relations. Family firms are slowly beginning
to formulate clear guidelines for compensating non-participating family members.
Retirement and estate planning is being done in many of the progressive family
businesses.

Family firms are increasingly moving towards a professional approach to

managing businesses. They are defining clear roles and responsibilities of all
family members. In a positive move towards good corporate governance,
progressive family firms are also ascertaining the accountability of family
members and clearly communicating it to them. However, still processes are more
flexible for family members than non-family members. Non-family members are
actively scouted for their talent and are gradually being given freedom to make key
decisions. Family firms are moving towards establishing stronger systems and
processes.

Another trend that emerged from the study is the separation of ownership and
management which is being increasingly realised by family business owners. They
are gradually beginning to view business management and family ownership as
two distinct phenomena. Consequent to this understanding is the realization that
management and ownership may have conflicting goals that need to be balanced.

Though it sure has begun, the transition of family business towards modern
management is quite a gradual process. Many family firms are yet to implement
progressive changes. However, there is widespread recognition among the family
business leaders that their businesses must alter the traditional ways to make space
for modernity if they need to sustain. Family firms need to shake themselves out of
the status quo, overcome the resistance to change and effectively reform their
business. Many Indian family firms have taken lead in their march towards
professionalisation and modernization. This transition bodes well for India and is a
reflection of a nation that is changing for better. The future of Indian family
businesses certainly appears to be promising.

Just a few of the challenges I see businesses facing that are best
addressed with the help of a consultant include:

 Uncertainty about the future

 Being able to predict customer trends, market trends, etc. is vital to a
changing economic climate, but not every CEO has Warren Buffett-like
predictive powers. Bringing in a consultant trained in reading and predicting
those all-important trends could be the difference between a bright future and
a murky one.

 Financial management
Many CEOs I know are ideas people; that means they’re great at the big
picture and disruptive thinking, but less good with things like cash flow,
profit margins, reducing costs, financing, etc. Small and medium businesses
may not require a full-time CFO, but would do better to employ a financial
consultant who can step into the role as needed.

 Monitoring performance
Using a meaningful set of rounded performance indicators that provide the
business with insights about how well it is performing is key. Most business
people I know are not experts in how to develop KPIs, how to avoid the key
pitfalls and how to best communicate metrics so that they inform decision-
making. In most cases companies rely on overly simple finance indicators
that just clog up the corporate reporting channels.

 Regulation and compliance

As markets and technologies shift, so do rules and regulations. Depending on
your industry, it can make much more sense to bring in a consultant to help
with these areas rather than trying to understand the complexities yourself —
and risk fines or worse for non-compliance.

 Competencies and recruiting the right talent

Again, a small or medium-sized business might not need full-time human
resources or recruiting staff, but during peak growth periods, finding the right
people and developing the right skills and competencies is the key to a
sustainable future. Bringing in a consultant with the expertise to find exactly
the workers you need would be a wise investment.
 Technology
As technologies change practically at the speed of light, it’s vital for
companies to innovate or be left behind — but many CEOs started their
careers and businesses before many of these technologies even existed!
Consultants can be vital for integrating new technologies, in particular
mobile, app development, and cloud computing.

 Exploding data
Grandpa’s generation certainly didn’t have to deal with terabytes of data or
worry about what to do with it. 90% of the world’s data was created in the
past two years and managing, keeping safe and extracting insights from the
ever-increasing amounts of data your company produces needs to be in the
hands of a qualified professional who can help you get the most return from
that data.

 Customer service
In a world of instant gratification, customers expect instant customer service
— and can take to the web to share their displeasure at less than satisfactory
service just as quickly. Consultants can find ways to improve customer
service and bring it into the 21st century.

 Maintaining reputation
In a similar vein, because customers can voice any displeasure so much
more publicly and loudly than ever before, businesses have to monitor and
maintain their online reputations. And while it’s an important task, its one
best suited to a third party who can monitor and mediate with a certain
amount of distance.

 Knowing when to embrace change

Early adopter or late to the game? Consultants can help CEOs determine
when to embrace change and when to stay the course. Not everything new is
better; yet eschewing every change runs the risk of becoming obsolete. A
professional outside opinion can make all the difference in these decisions.
 We are living in an era of constant change for the foreseeable future: change
is the new normal. Preparing for and embracing that change by investing in
the right kind of advice is the best way to meet these challenges head on.

 List of 5 scams in india

Wakf Board land scam

Pegged to be possibly the biggest land scam in the country till date, the
Karnataka Wakf Board land scam involves the alleged misappropriation of
land allocation worth Rs 2,000 billion.

In 2012, the Karnataka State Minorities Commission submitted a report alleging

that 27,000 acre of land controlled by the Karnataka Wakf Board had either been
embezzled or allocated illegally. The said property was supposed to be donated to
the underprivileged and poor through the Muslim charitable trust.

Anwar Manippady, Chairman of the Karnataka State Minorities Commission, said

that over 50 percent of the land has been misappropriated by politicians and board
members. This was supposedly done in collusion with the real estate mafia for a
fraction of its market value under the watch of the Karnataka Wakf
Board.Investigation is currently ongoing.
Telgi scam

This scam seems to be straight out of a Hollywood movie. In 2002, Abdul Karim
Telgi was charged for counterfeiting stamp paper in India.
He appointed 350 fake agents to sell stamp papers to banks, insurance
companies, and stock brokerage firms. The scam spread across 12 States and
the amount involved was pegged at Rs 200 billion.

The investigation revealed that Telgi enjoyed support from various government
departments that were involved in the production and sale of high-security stamps.
In January 2006, Telgi and several associates were sentenced to 30 years rigorous
imprisonment.

The ‘Coalgate’ scam

September 2012 unearthed a scam that involved bureaucrats, political leaders
and several ministers from the ruling political party. The Comptroller and
Auditor General, India’s audit watchdog, reported inefficient and possibly illegal
allocation of coal blocks between 2004 and 2009.
While initially the loss to the exchequer was pegged at Rs 10.7 lakh crore, the
final report stated that the scam amounted to Rs 1.86 lakh crore.Essentially,
the Government of India followed a system of competitive bidding to allocate coal
blocks. However, CAG’s investigation revealed that the government followed
another route that was “opaque and subjective”.As a result, CAG noted that both
the private and public sector enterprises paid less, resulting in loss revenue for the
government.

2G Spectrum scam

This scam surfaced when it was revealed that the government, in 2008, had
undercharged mobile telephone companies for frequency allocation licences. These
licences are used to create 2G spectrum subscriptions for cell phones.
The Comptroller and Auditor General of India stated that “the difference
between the money collected and that mandated to be collected was Rs 1.76
trillion”.

In February 2012, the Supreme Court of India declared the allotment of spectrum
as “unconstitutional and arbitrary” and cancelled the 122 licences issued in 2008
under A. Raja, then Minister of Communications and IT.
Adarsh Housing Society scam

A posh 31-storey building located in Colaba, Mumbai, was constructed for the
welfare of war widows and personnel of Defence ministry. In 2011, the
Comptroller and Auditor General of India observed that over a period 10 years
the society flouted various Environment ministry rules. It was noted that
politicians, bureaucrats and military officers bent several rules concerning land
ownership, zoning, and floor-space index.

It was also alleged that members allocated flats to themselves in the cooperative
society below market rates. In 2011, the Comptroller and Auditor General of India
said,
The episode of Adarsh Co-operative Housing Society reveals how a group of
select officials, placed in key posts could subvert rules and regulations in
order to grab prime government land – a public property – for personal
benefit.

The scam forced the then Chief Minister of Maharashtra, Ashok Chavan, to resign
in 2010. Further, the CAG also indicted three other former chief ministers —
Vilasrao Deshmukh, Sushilkumar Shinde and Shivajirao Nilangekar Patil — two
former urban development ministers— Rajesh Tope and Sunil Tatkare —
and 12 top bureaucrats, for various illegal acts.
List of 5 scams in international

Shimmer

Out: Thieves "skimming" your ATM card and stealing your details from the
magnetic strip.

In: Bad actors "shimming" the embedded smart chip in your ATM card.

Fraudsters are using devices called "shimmers" in card slots at ATMs to snag your
card data from the chip.

Thieves can use this information to create a clone of your card and rack up
charges.

Fake vacation listings

Among travel and vacation scams, the Better Business Bureau highlighted con
artists who post photos of properties that aren't for rent or that don't exist in a bid
to get your credit card information.
In all, travel and vacation scams accounted for 2,560 consumer complaints in
2017, the BBB said.

Jackpotting

If you see an ATM spewing out money, it's probably been hijacked by hackers.

Here's how it works: Bad actors disguised as repairmen install malicious software
in an ATM, causing the machine to dispense all its cash, according to the U.S.
Attorney's Office in Connecticut. Others in on the scheme then pocket the money.

Just this February, federal prosecutors in Connecticut charged two men with bank
fraud based on a "jackpotting" scheme.

Death threats via email

Late last year, the FBI's Phoenix office warned of an increase in people reporting
email threats, demanding that they pay a sum in virtual currency or prepaid cards
— or else.

The FBI suggests that individuals who receive such messages report them to the
agency's Internet Crime Complaint Center.

An email from the 'Secretary of State'

No, former Secretary of State Rex Tillerson is not emailing you about a $1.85
million payment that that you're owed because of an investigation by the FBI and
the CIA.

That's just another scam, according to the Federal Trade Commission.

In this rip-off, thieves impersonate government officials and tell victims that
they're eligible to receive an ATM card with a large sum of money on it —
provided they send along cash and personal information first.