India Overhauls Corporate Governance

by Neil Baker, for Compliance Week, December 30, 2009.

Indian companies will have to raise their boardroom practices to comply with a new corporate governance code aimed at reforming corporate India after the Satyam scandal last year.

The new code, produced by the Ministry of Corporate Affairs, tells listed companies to separate the role of chairman and CEO, change their external auditor every five years, and conduct an annual review of internal control effectiveness. The code also cuts the number of directorships one person can hold from 15 to 7.

To enhance the independence of non-executive directors, the code says they should be appointed on fixed, six-year contracts, after which they would not be able to hold any role at the company for three years. Companies should change their audit firm every five years, so they get a “fresh outlook”, and rotate their audit partner every three years, the code says…(continue reading)

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