External and Internal Rules of Corporate Governance

The corporate governance mechanisms can be categorized into two types: internal and external governance mechanisms. The internal governance mechanisms primarily focus on boards of directors, ownership and control, and managerial incentive mechanisms, whereas the external governance mechanisms cover issues related to the external market and laws and regulations. Corporate Governance refers to practices by which organisations are controlled, directed and governed. In the context of liberalization and globalization there is growing realization in the emerging economies including India that a country’s business environment must be maintained and operated in a manner that is conducive to investors’ confidence so that both domestic and foreign investors are induced to make adequate investment in corporate companies. This will be conducive to rapid capital formation and sustained growth of the economy. Finally, the paper deals with The Companies Act, 2013 provisions relating to board constitution, board meetings, board processes, independent directors, general meetings, audit committees, related party transactions, disclosure requirements in financial statements, Securities and Exchange Board of India (SEBI) Guidelines, Standard Listing Agreement of Stock Exchanges, Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI), Section 129 of the New Companies Act.