Corporate governance is no longer optional for Indian businesses. The Securities and Exchange Board of India (SEBI) LODR Regulations, the Companies Act 2013, and the Corporate Laws Amendment Bill 2026 set a comprehensive governance framework that both listed and unlisted companies must navigate.
This guide covers the full framework. We explain board composition, committees, disclosure requirements, and the significant changes brought by the 2026 Amendment Bill.
What Is Corporate Governance?
Corporate governance is the system by which companies are directed and controlled. It involves balancing the interests of a company’s stakeholders, including shareholders, management, customers, suppliers, financiers, the government, and the community.
Effective governance ensures transparency, accountability, and fairness in all corporate operations. It mitigates risks and fosters long-term sustainable growth.
In India, this system is governed by the Companies Act 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. These frameworks dictate how boards operate, how you handle disclosures, and how ethical standards are enforced.
Legal Framework for Corporate Governance in India
The Indian corporate governance framework operates across three distinct layers. This ensures robust oversight for both public and private entities.
Companies Act, 2013
The Companies Act 2013 acts as the primary statute governing corporate entities in India. Sections 134 to 177 specifically cover corporate governance provisions.
This statute applies to all companies registered in India. Both listed and unlisted entities must adhere to its baseline requirements. For comprehensive guidance on these statutory obligations, you can refer to our Compliance resources.
SEBI (LODR) Regulations, 2015
The SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 provide an additional governance overlay specifically for listed companies. Compliance with LODR is mandatory for any entity listed on the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE).
The regulations focus on transparency, shareholder rights, and timely market disclosures.
Corporate Laws Amendment Bill, 2026
The Corporate Laws Amendment Bill 2026 introduces significant governance changes designed to tighten accountability. The bill makes several key changes:
- It enforces stricter “fit and proper” standards for directors
- It introduces a mandatory auditor and valuer cooling-off period (statutory auditors must wait at least three years before appointment as a director in the same company)
- It empowers the National Financial Reporting Authority (NFRA) as a quasi-judicial regulator with suo motu powers over audit quality
- It strengthens board oversight requirements for subsidiary companies
Board Composition Requirements in India
A well-structured board of directors forms the foundation of good corporate governance. Indian law sets specific requirements regarding board size and composition.
Minimum Number of Directors
The required number of directors depends on the company type:
- Private company: minimum of two directors
- Public company: minimum of three directors
- Listed companies: minimum of six directors
- One Person Company (OPC): one director
The maximum statutory limit is 15 directors. Companies can increase this number by passing a special resolution. For more details on board structuring, view our Directors (Link to B3) guide.
Independent Directors
Independent directors maintain objective oversight. For public companies operating above specific financial thresholds, at least one-third of the board must comprise independent directors.
Listed companies must ensure at least half the board is independent if they have an executive chairman. Section 149(6) of the Companies Act defines an independent director as someone who is not related to the company and has no material financial relationship with it.
Their term lasts for five years. They can be renewed for one additional term.
Women Director
To promote gender diversity at the corporate level, listed companies must appoint at least one woman director. This requirement also extends to certain unlisted public companies with a paid-up share capital of ₹100 crore or more, or a turnover of ₹300 crore or more.
Resident Director
Under Section 149(3) of the Companies Act, every company must have at least one director who qualifies as a resident in India. To meet this criterion, the director must have stayed in India for not less than 182 days during the previous calendar year.
Fit & Proper Person Standards (2026 Amendment)
The Corporate Laws Amendment Bill 2026 introduces statutory “fit and proper” criteria for company directors. While previously applied through sectoral regulatory guidance, these standards are now codified.
Regulators assess a director’s track record, integrity, financial soundness, and professional competence before and during their appointment.
Key Board Committees Mandated by Law
The law mandates the formation of specific board committees to ensure focused oversight on critical operational areas.
Audit Committee
An Audit Committee is mandatory for all listed companies and unlisted public companies that meet specific financial thresholds. The committee must consist of a minimum of three directors, with independent directors forming the majority.
The chairperson of the committee must be an independent director. This committee reviews financial statements, oversees the internal audit process, and scrutinises related party transactions.
Nomination and Remuneration Committee (NRC)
Mandatory for listed companies and larger unlisted entities, the NRC shapes leadership and compensation. It recommends director appointments, formulates the company’s remuneration policy, and administers Employee Stock Ownership Plans (ESOPs).
The committee must have a minimum of three non-executive directors, with a majority being independent directors.
Stakeholders Relationship Committe
Any company with more than 1,000 shareholders, debenture holders, deposit holders, or other security holders during a financial year must constitute a Stakeholders Relationship Committee.
This committee handles the resolution of investor grievances, oversees share transfers, and manages matters related to dividends.
CSR Committee
A Corporate Social Responsibility (CSR) Committee is required if a company meets the specified statutory thresholds (currently a net profit of ₹5 crore or more, though the 2026 Bill proposes raising this to ₹10 crore).
The committee requires a minimum of three directors, including at least one independent director if the company is mandated to have independent directors. Explore our CSR (Link to B4) resources for compliance strategies.
Risk Management Committee
Mandatory for the top 1,000 listed companies by market capitalization, the Risk Management Committee evaluates and oversees the company’s risk management framework and policy. This includes cyber security and operational risks.
NFRA - Empowered as Quasi-Judicial Regulator (2026)
The National Financial Reporting Authority (NFRA) undergoes a transformation under the Corporate Laws Amendment Bill 2026. The changes empower the NFRA with expanded suo motu powers (the authority to act on its own initiative).
This allows it to independently initiate investigations into auditors and valuation professionals without waiting for a formal complaint. The NFRA gains the authority to debar auditors for up to 10 years for professional misconduct.
This strengthens audit quality oversight in India. Companies must ensure their auditing processes meet the highest standards to avoid severe regulatory penalties.
Disclosure and Transparency Requirements
Transparency remains a cornerstone of the Indian corporate governance framework. Companies must adhere to rigorous reporting standards.
Related Party Transactions (RPTs)
For listed companies, related party transactions (transactions between the company and parties related to it, such as directors or subsidiaries) are subject to intense scrutiny.
RPTs that cross statutory materiality thresholds require prior approval from the audit committee. They also demand explicit shareholder approval to ensure that no transaction unfairly benefits insiders at the expense of the company.
BRSR - Business Responsibility and Sustainability Report
The top 1,000 listed companies by market capitalization must file a Business Responsibility and Sustainability Report (BRSR). This mandate has been active since FY 2022-23.
The BRSR covers Environmental, Social, and Governance (ESG) disclosures, including energy consumption, water usage, greenhouse gas (GHG) emissions, and internal governance practices. SEBI continues to expand the scope and depth of these requirements annually.
Board Report and Annual Report
Section 134 of the Companies Act outlines mandatory disclosures for the Board Report. Companies must provide:
- Detailed accounts of their financial performance
- Statements on related party transactions
- Corporate governance compliance reports
- CSR activities
- For listed companies, a declaration of their dividend policy
Corporate Governance for Unlisted Private Companies
Corporate governance for unlisted private companies is critical but often overlooked. Private limited companies that cross specific paid-up capital or turnover thresholds must comply with many governance provisions under the Companies Act.
Even when not legally mandated, adopting best practices is recommended. This includes appointing independent directors, voluntarily establishing an audit committee, and conducting annual board evaluations.
Governance quality is increasingly scrutinised by investors during funding rounds and by buyers during M&A due diligence. We frequently assist private entities in establishing robust frameworks that appeal to institutional investors.
ESG and the Future of Corporate Governance in India
Corporate governance and sustainability are becoming indistinguishable. SEBI has laid out a clear sustainability roadmap, aligning Indian standards with the global Value Reporting Foundation.
Mandatory ESG assurance will be introduced for the top 150 listed companies starting from FY 2026-27. Boards must recognise that corporate governance and ESG are increasingly interlinked.
This requires strategic oversight over carbon footprints, community impact, and ethical supply chains to maintain regulatory compliance and stakeholder trust.
Expert Governance and Compliance Strategies
Ensuring complete compliance with the Companies Act, SEBI LODR Regulations, and the upcoming 2026 Amendment Bill requires expert legal guidance. We advise boards and management teams on comprehensive corporate governance frameworks, committee structuring, independent director appointments, and SEBI compliance across India.
Contact our corporate team at info@altacit.com or explore our Corporate Law Services to ensure your company meets the latest governance standards.
Frequently Asked Questions - Corporate Governance India
Q1: How many independent directors are required on an Indian company board?
At least one-third of the board must comprise independent directors for public companies operating above the statutory threshold. For listed companies, at least half the board must be independent if the company has an executive chairman.
Q2: What is the NFRA and what does the 2026 Amendment change?
The NFRA (National Financial Reporting Authority) is India’s primary audit regulator. The 2026 Amendment Bill empowers it with suo motu investigation powers and expanded debarment authority. This strengthens proactive audit oversight across the Indian corporate landscape.
Q3: Is a women director mandatory for private limited companies?
A woman director is only mandatory for listed companies and unlisted public companies with a paid-up capital of ₹100 crore or more, or a turnover of ₹300 crore or more. It is not legally mandatory for private limited companies.
Q4: Can an independent director serve on the same board for more than 10 years?
No. An independent director can serve a maximum of two consecutive terms of five years each (10 years in total). After completing these terms, they must step down and can only return to the board after completing a mandatory three-year cooling-off period.
