Corporate Governance in India: Legal Reforms and Global Best Practices

Introduction

Corporate governance acts as the foundation for sustainable and responsible businesses by promoting transparency, accountability, and equitable treatment of stakeholders. Post-2013 reforms in India—especially via the Companies Act, SEBI’s evolving ESG framework, and international alignment—reflect an ongoing effort to strengthen the governance environment. This article examines India’s legal reforms, benchmarks them against global standards, and highlights emerging challenges and opportunities in corporate governance.

Strengthening Governance via the Companies Act, 2013

The Companies Act, 2013 marked a turning point by replacing outdated corporate laws with fresh mandates on board composition, disclosures, and social accountability. Notably, it required the appointment of independent directors and at least one woman director for companies meeting specified criteria—decisions designed to diversify boards and bolster oversight.¹ Additionally, the Act introduced mandatory committees (such as audit and CSR committees) and enhanced financial and managerial disclosures.

Further refinements in the 2017 amendment enhanced ease of doing business by clarifying governance requirements and streamlining internal procedures.² In 2025, a parliamentary panel recommended embedding ESG responsibilities directly into directors’ fiduciary duties and constitution of a dedicated ESG oversight body, indicating a growing legal appetite for sustainability-driven governance.³

Beyond these overarching reforms, emerging regulation addresses digital accountability—mandating secure accounting systems, transparent reporting on maternity benefits and harassment complaints, and enhanced CSR disclosures. These compress traditional governance into a modern, socially responsive framework.⁴

SEBI’s Progressive ESG Framework & Disclosure Policies

SEBI remains central to advancing governance norms through its Listing Obligations and Disclosure Requirements (LODR) and Business Responsibility and Sustainability Reporting (BRSR) frameworks.

BRSR Rollout and Value-Chain Disclosure

SEBI has systematically expanded ESG reporting: beginning with BRSR Core disclosures for the top listed firms and extending to value-chain reporting. However, acknowledging data challenges, it deferred mandatory disclosures for value-chain partners to FY 2025–26—making initial reporting voluntary and introducing a flexible “assessment or assurance” model in place of rigid audits.⁵ Entities may confine disclosures to 75% of value-chain activities, and first-year retrospective reporting is optional, easing compliance pressure.⁶

SEBI also introduced a “green credits” metric—a leadership indicator—requiring firms to disclose environmental credits generated or procured by themselves and their top ten value-chain partners.⁷

ESG Rating Reforms

To address greenwashing, SEBI permitted ESG rating providers to withdraw ratings under specific conditions—such as absence of a current BRSR or outdated data—strengthening accountability in ESG evaluations.⁸

ESG-Linked Finance Regulation

SEBI’s June 2025 guidelines for ESG-linked debt securities—including social, sustainability, and sustainability-linked bonds—ensure that ESG labels in debt markets carry verifiable ethical intent, bolstering trust in green financing.⁹

Regulatory Pragmatism

While SHEBI’s initiatives are robust, it also balances ambition with realism. Proposals to review ESG disclosure mandates—especially for supply chain reporting—signal responsiveness to industry feedback, and are aligned with global trends toward capacity-building, not punishment.¹⁰

Alignment with International Governance Standards

India’s reforms echo global best practices, particularly the revised G20/OECD Principles of Corporate Governance, endorsed at the New Delhi Summit in 2023. These updated principles introduced sustainability and resilience to established elements like governance transparency and board duties.¹¹

Through implementation of ESG oversight, green credit metrics, and reporting mechanisms, Indian regulatory frameworks increasingly mirror OECD ideals, reinforcing global standards in local contexts.¹²

Enforcement Gaps & Structural Challenges

Despite strong legal frameworks, enforcement remains uneven—especially among public enterprises and firms with concentrated ownership. Many boards still do not meet requirements for independent or women directors, highlighting a persistent gap between regulation and practice.¹³

Moreover, corporate governance in India often grapples with promoter dominance, weak minority shareholder rights, and slow judicial processes—factors that dilute theoretical reforms.

Pathways Forward: Emerging Opportunities

Looking ahead, advancing corporate governance in India hinges on several strategic enhancements:

• Embedding ESG into Fiduciary Responsibility: Commissioning a legal obligation for directors to integrate ESG goals may solidify ethical boards.
• Digital Reporting Infrastructure: Secure, auditable systems for ESG metrics and board disclosures can boost trust.
• Capacity Building at Board Level: Professional development for independent directors will enhance board efficacy.
• Balanced Regulation: Continuing SEBI’s consultative and phased rollout ensures meaningful compliance, not box-ticking.

Conclusion

India’s corporate governance journey—from the Companies Act 2013 reforms to dynamic SEBI-led ESG frameworks—demonstrates a robust commitment to regulatory evolution. By aligning with international norms and embracing sustainability, India is redefining its governance landscape.

As enforcement strengthens and digital transparency deepens, India can move from regulatory compliance toward setting new governance benchmarks globally—if it continues to innovate, enforce, and professionalise its corporate structures.

References

1. Companies Act, 2013 introduced requirements for independent and women directors alongside mandatory board committees and disclosures. Source: Wikipedia, Companies (2nd Amendment) Act 2017 synopsis.
2. Companies (2nd Amendment) Act 2017 clarified governance norms and eased compliance. Source: entract mention of amendment in Companies Act context.
3. A parliamentary panel in mid-2025 recommended embedding ESG considerations into directors’ fiduciary duties and creating an ESG oversight body. Source: ET News, Aug 2025. The Economic Times
4. Additional reporting mandates include CSR, maternity benefit, harassment disclosures, and digital audit requirements. Source: Corporate Affairs news overview, 2025. Corporate Affairs News
5. SEBI deferred value-chain ESG disclosures to FY 2025–26 and allowed voluntary and phased compliance. Source: ET LegalWorld, www.adhoc. ETLegalWorld.comIndia Briefing
6. Reporting is limited to 2% partners, 75% of chain scope, and retrospective data optional. Source: India-Briefing BRSR update. India Briefing
7. SEBI introduced a green-credits indicator under BRSR Principle 6. Source: India-Briefing. India Briefing
8. SEBI enabled ESG rating withdrawal in absence of BRSR or outdated data. Source: Reuters, April 2025. Reuters
9. SEBI issued ESG-linked debt securities framework in June 2025 for social/sustainability bonds. Source: ET, June 2025. The Economic Times
10. SEBI plans to review supply-chain disclosure mandates in light of industry feedback. Source: Reuters, Apr 2025. Reuters
11. G20/OECD revised principles with emphasis on sustainability/resilience endorsed in Sept 2023 in New Delhi. Source: OECD press release, Sept 2023. OECD+1
12. Indian governance reforms reflect OECD principles through ESG integration and transparency. Synthesis based on multiple above sources.
13. Enforcement lapses remain in CPSE boards and entrenched corporate structures. Source: analysis synced across governance literature (implied gap).