GRMCE Taxman

TAXMANN'S
ICS] S-PROFESSIONAL CRACKER

PREVIOUS EXAMS SOLVED PAPERS
Governance
Risk Management
Compliances
&
Ethics
Key Highlights
Topic-wise Coverage of Past Examination Questions& Answers
(Including June 2021 Exam)
Sub-topic wise Arrangement of Questions in Each Chapter
Chapter-wise Marks Distribution and Trend Analysis of Past Exams

(New Syllabus)
Important Additional Questions with Answers
ULANN
aXlalUL
07T113G038
Adv. Ritika Godhwani
December 2021 Exam

2nd Edition New Sylabus
Contents
PAGE
1-7
Chapter-wise Marks Distribution
Previous Exams Trend Analysis (June 2019 Onwards)
1-9
(New Syllabus)
Material I-15
Chapter-wise Comparison with Study
Amendments I-17
Changes in Questions Due to
Chapter 1
1.1
Conceptual Framework of Corporate Governance
Chapter 2
Framework of Corporate Governance In India 2.1
Legislative
Chapter 3
Board Effectiveness 3.1
Chapter 4
Board Processes through Secretarial Standards 4.1
Chapter 5
Board Committees 5.1
Chapter 6
Corporate Policies and Disclosures 6.1
Chapter 7
Accounting and Audit Related Issues, Related Party
Transactions and Vigil Mechanism 7.1
I-5
CONTENTS
1-6
PAGE
Chapter 8B Shareholders Rights
Corporate Governanceand 8.1
CHAPTER9
other Stakeholders
Corporate Governance and 9.1
Chapter 10
Governance and Compliance Risk 10.1
Chapter 11
Corporate Governance Forums 11.1
Chapter 12
12.1
Risk Management
Chapter 13
13.1
Internal Control
Chapter 14
14.1
Reporting
Chapter 15
15.1
Ethics and Business wwtoww.arwwwas
Chapter 16
16.1
CSR and Sustainability
Chapter 17
Anti-Corruption and Anti-Bribery Laws in India 17.1
P1
Solved Paper Dec. 2020 (New Syllabus) P26
Solved Paper June 2021 (New Sylabus)
Chapter-wise Marks
Distribution_
2019 2020 2021

J D June
Chapter Name
S.No. 13 10 5 5
Framework of Corporate
1 Conceptual
Governance 10
10 8
Leglslative Framework of Corporate
2
Governance in India
15
Board Effectiveness
3 3 20
Secretarial
Board Processes through
Standards 6 3 5 11
Board Committees
5 8 10
Policies and Disclosures
25
6 Corporate 10 3
related issues, 15 10
Accounting and Audit
Mechanism
RPTs and Vigil
0
Governance and Sharehold-
Corporate
ers Rights
3 5
Governance and Other
9 Corporate
Stakeholders
13 15 13
Governance and Compliance Risk
10 3 3
Corporate Governance Forums 5
11 20
20 0 20
12 Risk Management
-
10 0 20 15
Internal Control
13 5 10 25
14 Reporting8 5
Ethics and Business 0 15 5
15 10
16 CSR and Sustainability 5 15
Laws 5 15
|17 Antl-Corruption and Anti-Bribery
In India
A hyt B art c
D2
I-7
fo
Previous Exams Trend
Analysis (June 2019
Onwards) (New Syllabus)
Year Question Com Chapter Name Marks Category

No. pulsory
June 1(a) Yes Corporate Policies and Disclosures 5 Theory
2019 1(b) Yes Corporate Policies and Disclosures Theory
1(c) Yes | Corporate Policies and Disclosures 5 Theory
1(d) Yes Corporate Policies and Disclosures 5 Theory
2(a) Conceptual Framework of Corporate Theory
Governance
2(b) Legislative Framework of Corporate 5 Theory
Governance in India
2(c) Conceptual Framework of Corporate 5 Theory

Governance
2A(i) Legislative Framework of Corporate 5 Theory

Governance in India
2A(i) Accounting and Audit related issues, | 5 Theory
RPTs and Vigil Mechanism
2A(iin) Corporate Governance Forums 5 Theory

3(a) Governance and Compliance Risk Theory
3(b) Board Committees 3 Theory
3(c) Board Committees 3 Theory
3(d) Conceptual Framework of Corporate 3 Theory
Governance
3(e) Corporate Governance and Other 3 Theory
Stakeholders
4(a) Risk Management 5 Theory

4(b) Risk Management 5 Theory
4(c) Risk Management 5 Theory
4(d) Risk Management 5 Theory
I-9
I-10 PREVIOUS EXAMS TREND ANALYSIS (JUNE 2019 ONWARDS)

No. pulsory
Governance and Compliance Risk
5(a) Theory
5(b) Accounting and Audit related issues, 5
RPTs and Vigil Mechanism Theory
5(c) Accounting and Audit related issues, 5
RPTs and Vigil Mechanism Theory
5(d) Corporate Policies and Disclosures 5
5A() Governance and Compliance Risk 5

Theory
5A(ii) Internal Control
Theory
5A(ii) Reporting 5
Theory
5A(iv) Internal Control 5
Theory
6(a) CSR and Sustainability
-
Theory
6(b) Anti-Corruption and Anti-Bribery 5
Theory
Laws in India
Dec. 1(a) Yes Accounting and Audit related issues,
2019 RPTs and Vigil Mechanism
5
Theory
1(b) Yes Accounting and Audit related issues, 5 Theory
1(c) Yes Board Effectiveness 5 Theory
1(d) Yes Accounting and Audit related issues, 5 Theory
2(a) Conceptual Framework of Corporate Theory
Governance
2(b) Corporate Governance Forums 5 Theory
2(c) Corporate Policies and Disclosures 5 Theory
-
2A() Board Processes through Secretarial| 5 Theory

Standards
2A(ii) Corporate Governance and Share- 5 Theory
holders Rights
2A(ii) Governance and Compliance Risk 5 Theory
3(a) Corporate Governance Forums 3 Theory
3(b) Corporate Governance and Other Theory
3
Stakeholders
3(e) Legislative Framework of Corporate Theory
3
Governance in India
3(d) Board Committees 3
3(e) Corporate Policies and Disclosures 3 Theory
4(a) Risk Management
PREVIOUS EXAMS TREND ANALYSIS (JUNE 2019 ONWARDS)
Year Ouestlon Com Chapter Name Marks Category

No. pulsory
4(b) Risk Management
4() Risk Management Theory
4(d) Risk Management Theory
5(a) Reporting Theory
5b) Ethics and Business Theory
5(c) Internal Control Theory
5(d) Reporting anates rem
Theory
5A() CSR and Sustainability Theory
5A(ii) Governance and Compliance Risk Theory
5A(iii) Governance and Compliance Risk Theory
5A(iv) Internal Control Theory
|6(a)i) Anti-Corruption and Anti-Bribery 5 Theory
Laws in India
6a)ii) Anti-Corruption and Anti-Bribery Theory

Laws in India
Ethics and Business
6a)tii) Theory
6liv) Ethics and Business 5 Theory
6(a)()_ CSR and Sustainability 5 Theory
6(b) cSR and Sustainability Theory
Dec. 1(a) Yes Accounting and Audit related issues, 5 Theory
2020 RPTs and Vigil Mechanism
1(b) Yes Conceptual framework of corporate 5 Theory
Governance
1(c) Yes Board Effectiveness 5 Theory
1(d) Yes Board Effectiveness
-
5 Theory
2(a) Corporate Policies and Disclosures 5 Theory
2(b) Corporate Governance and Other Theory
Stakeholders
2(c) Board Conmmittees
Theory
2A() Board Effectiveness 5 Theory
2A(i) Legislative Framework of Corporate
Governance in India
Drafting
2A(iii) Accounting and Audit related issues,
RP'Ts and Vigll Mechanism
5 Theory
3a. Governance and Compllance Risk 3 Theory
P'REVIOUS EXAMS TREND ANALYSIS (JUNE 2019 ONWAR DS)
I-12
Chapter Name
Year Question Com
pulsory
Marks Category
No.
3b. Corporate Governance Forums 3
Corporate Policies and Disclosures
Theory
3c. 3
Board Processes through Secretarial
Theory
3d. 3
Standards Theory
3e. Legislative Framework of Corporate 3
Theory
Governance in India
Risk Management 5
4a. Theory
4b. Risk Management 5
Theory
4c. Risk Management Theory
4d. Risk Management 5
Theory
5a. Governance and Compliance Risk 5
Theory
5b. Internal Control 5 Theory
5c. Reporting 5 Theory
5d. Internal Control
Theory
5A(i) Governance and Compliance Risk 5 Theory
Reporting 5 Theory
5A(ii)
5A(ii) Internal Control Theory
5A(iv) Internal Control Theory
6a. Ethics and Business Theory
6b. CSR and Sustainability Theory
June 1(a) YES Board Processes through Secretarial 5 Theory
2021 Standards
1(b) YES Board Processes through Secretarial 5 Theory
Standards
| 1(¢) YES Board Processes through Secretarial 5 Theory
Standards
1(d) YES Board Processes through Secretarial 5 Theory
Standards
2(a) Legislative Framework of Corporate 5 Theory
Governance in India
2c) Corporate Polícies and Disclosures Theory

2A() Legislative Frameworkof Corporate 5 Theory
Governance in India
2A(i) Conceptual Framework of Corporate 5 Theory
Governance
PREVIOUS EXAMS TREND ANALYSIS (JUNE 2019 ONWARDS) I-13

No. pulsory
Policies and Disclosures 5 Theory
2A(ii) Corporate
Board Committees 3 Theory
3(a)
3(c) Corporate Governance Forums 3 Theory

Governance and Compliance Risk 3 Theory
3(d)
Accounting and Audit related issues, 3 Theory
3(e) RPTs and Vigil Mechanism
5 Theory
4(a) Risk Management
Risk Management 5 Theory
4(b)
Risk Management 5 Theory
4) Theory
4(d) Risk Management
5(a) Internal Control 5 Theory
Theory
5(b) Reporting
Internal Control Theory
5(c)
Reporting Theory
5(d)
5A() Reporting Theory
Internal Control 5 Theory
5A(i1)
5A(iti) Reporting 5 Theory
Reporting 5 Theory
5A(v) 5 Theory
Ethics and Business
6a) Theory
CSR and Sustainability
6(6)0 CSR and Sustainability Theory
-
6b#1) Anti-Corruption and Anti-Bribery Theory

Laws in India
6(b)(iv) Anti-Corruption and Anti-Bribery 5 Theory

Laws in India
6(b() Anti-Corruption and Anti-Bribery Theory

Laws in India
Chapter-wise Compari-
Son with Study Material
S.No. Chapter Name Study Material

Chapter
Conceptual Framework of Corporate Governance
Legislative Framework of Corporate Governance 2

2
inIndia
Board Effectiveness 3
3 4
Board Processes through Secretarial Standards
Board Committees 5
Policies and Disclosures 6

Corporate
Accounting and Audit related issues, RPTs and Vigil 7
Mechanism
Corporate Governance and Shareholders Rights
Governance and ther Stakeholders 9
Corporate
10 Governance and Compliance Risk 10
11 Corporate Governance Forums 11
12 Risk Management 12
13 Internal Control 13
14 14
Reporting
15 Ethics and Business 15
| 16 CSR and Sustainability 16
17 Anti-Corruption and Anti-Bribery Laws in India 17
I-15
Changes in Questions
Due to Amendments
CHAPTER 4 BOARD PROCESSES THROUGH SECRETARIAL STAN

DARDS
Q12. CSB Ltd. a Listed Company is holding a Meeting of Board of

Directors. The Agenda Items inter alia include the item
for approval with
Dividend for current fiscal. However,
respect to declaration of Interim window
information of the Meeting as well as for closing of the trading
There are 7 members
has already been intimated to the Stock Exchange.
on the Board of Directors. On
the date of Meeting, 2 Directors were out of
whereas the remaining Directors were present in the Meeting. The
Country,
Directors in abroad were willing to participate through video conferencing.
item for declaration
One of the Independent Directors objected that the
video conferencing andd
of Interim Dividend can't be discussed through
Board of Directors.
should be deferred for ensuing physical meeting of
2013 and list
Examine in the light of the provisions of the Companies Act,
Out the matters which shall not be dealt with in any meeting held through
audio visual means. (June 2019, 3 Marks)
video conferencing or other
Ans. Section 173(2) of the Companies Act, 2013 states that the participation
of directors in a meeting of the Board may be either in person or through
video conferencing or other audio visual means, as may be prescribed,
the participation of the
which are capable of recording and recognising
directors and of recording and storing the proceedings of such meetings
time:
along with date and
such
Provided that the Central Government may, by notification, specify
a meeting through video confer
matters which shall not be dealt with in
encing or other audio visual

means.
and its Powers) Rules, 2014

Rule 4 of the Companies (Meetings of Board
not be dealt with in any meeting
prescribes restriction on matters which shall
video conferencing or other audio visual
means.
held through
I-17
1-18 CHANGES IN QUESTIONS DUE TO AMENDMENTSs
(1) The following be calt with

matters shall not
inany meetingheldthr
video conferencing or other audio visual means.- through
()The approval of the annual linancial statements.
(i) The approval of the Board's report.
(in) The approval of the prospectus.
() The Audit Committee Meetings tor consideration of financial
stateme
including consolidated financial statement it any, to be approved by
the board under sub-section (1) of section 134 of the Act
and
(1) The approvalof the matter relating amalgamation, merger, demerger.
to
acquisition and takeover:
Provided that where there is quorum presence in a meeting
cal presence of directors, any other director may
through physi.
participate conferencing
through video or other audio visual means.
(2) For the period beginning from the commencement of the Companies
(Meetings of Board and its Powers) Amendment Rules, 2020 and ending
on the 30th June 2021, the
meetings on matters reterred to in sub-rule (1)
may be held through video conferencing or other audio visual means in
accordance with rule 3. Substituted by the Companies (Meetings of Board
and its Powers) Fourth Amendment Rules, 2020, dated 30 Dec. 2020.
Further the proviso to Section 173(2) of the Companies Act, 2013 states
that where there is quorum in a meeting through physical presence of
directors, any other director may participate through video conferencing
or other audio visual means in such meeting on any matter specified under
the first proviso.
Therefore, there is no restriction on discussing declaration of interim
dividend through video conferencing. Also, if the majority of directors are
present in the meeting physically, other directors can participate through
video conferencing even though they shall not be counted in
quorum.
CHAPTER 6 CORPORATE POLICIES AND DISCLOSURES
02. What are the guidelines provided in the Listing Obligations and Dis
closure Requirements (LODR) Rules, 2015 related to annual report of
companies? June 2017, 5 Marks)
Ans. Regulation 34 of the SEBI (LODR)
the listed entity shall submit the annual
Regulations, 2015 provides that
report to the stock exchange within
twenty one working days of it being approved and adopted in the annual
general meeting as per the provisions of the Companies Act, 2013.
CHANGES IN QUESTIONS DUE TO
AMENDMENTS I-19
The annual report shall contain the following:

a. Auditedlinancial statemcnts i.e.balanceshects, profit and loss accounts
Qualilications stipulated in
clc., and Statement on Impact of Audit as
regulation 33(3(d), if applicable.

audited by its statutory auditors.
b. Consolidated financial statements
method
presented only under the indirect
as
c. Cash flow statement
Indian Accounting Standard
prescribed in Accounting Standard-3 or
of the Companies Act, 2013
7, as applicable, specified in Section 133 the
read with relevant rules framed thereunder or as specified by
Institute of Chartered Accountants of India, whichever is applicable.
d. Directors report.
either as a part of direc-
e. Management discussion and analysis report -
tors report or addition thereto.
Forthe top one thousand listed entities based on

market capitalization,
f.
a business responsibility report describing
the initiatives taken by the
listed entity from an environmental, social and governance perspective,
in the format speciied by the Board from time to time:
as
Provided that the requirement of submitting a business responsibility report
shall be discontinued after the financial year 2021-22 and
thereafter, with
thousand listed entities
effect from the financial year 2022-23, the top one
and
based on market capitalization shall submit a business responsibility
the Board from time to
sustainability report in the format as specified by
time:
Provided further that even 2021-22, the top one
during the financial year
thousand listed entities may voluntarily submit a business responsibility
and sustainability report in place of the mandatory business responsibility
report:
Provided further that the remaining listed entities including the entities
which have listed their specified securities on the SME Exchange, may
voluntarily submit such reports.
capitalization shall be
Explanation: For the purpose of this clause, market
calculated as on the 31st day of March of every financial year.
[Clause (fA is substituted by the SEBI (Listing Obligations and Disclosure

Requirements) (Second Amendment) Regulations, 2021 w.e.f. 5.5.2021].
Additional Disclosures in Annual Report
The annual report shall contain any other disclosures specified in the
with the following additional disclosures as
Companies Act, 2013 along
specified in Schedule V:
CHANGES IN QUESTIONS DUE TO AMENDMENTS
1-20
Disclosure
(a) Related Party
Discussion andAnalysis
(b) Management
(c) Corporate Governance Report
(Declaration signed by the chief executive officerstating that themem
bers of board of directors and sernior management personnel have
affirmed compliance with the code of conduct of board of dircctor
tors
and senior management.
(e) Compliance certificate from either auditors or practicing company
secretaries regarding compliance of conditions of corporate gover.
nance be annexed with the directors' report.
( Disclosures with respect to demat suspense account/unclaimed sus.

pense account.
ADDITIONAL QUESTIONS si
011. Write a note on the following:
A. CSR implementation
B. Display of CSR activities on its website
C. Transfer of unspent CSR amount
D. CSR Expenditure
E. Annual action plan by CSR committee
Ans.
A. Rules on CSR Implementation have been'substituted by the Companies
(Corporate Social Responsibility Policy) Amendment Rules, 2021 dated
22nd Jan., 2021 effective from 22ndJanuary, 2021. Rule 4of The Companies
(Corporate Social Responsibility Policy) Rules, 2014 states as follows:
1. The Board shall ensure that the CSR activities are undertaken by the
company itself or through
a. A company established under section 8 of the Act, or a registered
public trust or a registered society, registered under sections I2A
and 80G of the Income-tax Act, 1961 (43 of 1961), established by
the company, either singly or along with any other company, or
b. A company established under section 8 of the Act or a registerea

trust or a registered society, established by the Central Gover
ment or State Government; or
C. Any entity established under an Act of Parliament or a State
legislature; or
CHANGESs IN QUESTIONS DUE TO AMENDMENTS 1-21
d. A company established under section 8 of the Act, or a registered

public trust or a registered society, registered under sections 12A
and 80G of the Income-tax Act, 1961, and having an established
track record of at least three years in undertaking similar activities.
2. (a) Every entity, covered under sub-rule(1), who intends to undertake
any CSR activity, shall register itself with the Central Government by
filing the Form CSR-1 electronically with the Registrar, with effect
from the 1st day of April, 2021:
Provided that the provisions of this sub-rule shall not affect the CSR
projects or programmes approved prior to the Ist day of April, 2021.
(b) Form CSR-I shall be signed and submitted electronically by the
entity and shall be verified digitally by a Chartered Accountant in
practice or a Company Secretary in practice or a Cost Accountant in
practice.
(c)On the submission of the Form CSR-1 on the portal, a unique CSR
Registration Number shall be generated by the system automatically.
3. A company may engage international organisations for designing
monitoring and evaluation of the CSR projects or programmes as per
its CSR policy as well as for capacity building of their own personnel
for CSR.
4. Acompany may also collaborate with othercompanies for undertaking
projects or programmes or CSR activities in such a manner that the
CSR committees of respective companies are in a position to report
separately on such projects or programmes in accordance with these
rules.
5. The Board of a company shall satisfy itself that the funds so disbursed
have been utilised for the purposes and in the manner as approved
by it and the Chief Financial Offhcer or the person responsible for
financial management shall certify to the effect.
6. In case of ongoing project, the Board of a Company shall monitor
the implementation of the project with reterence to the approved
timelines and year-wise allocation and shall be competent to make
modifications, if any, for smooth implementation of the project within
the overall permissible time period.
B. Rule 9 of the Companies (Corporate Social Responsibility Policy) Rules,
2014 provides that the Board of Directors of the Company with effect from
22ndJanuary, 2021 shall mandatorily disclose the composition of the CSR
Committee, and CSR Policy and Projects approved by the Board on their
1-22 CHANGES IN QUESTIONS DUE TO AMENDMENTS
website, if anv, for public access. However, earlier the Board of

Dirert
ectors
of the company shall, after taking into account the recommendatione
CSR Committe, approve the CSR Policy for the company and discl of
contents of such policy in its report and the same shall be displayed onclose
th
company's website, il any, as per the particulars specifed in the Annex
e.
C. Rule 10 of the Companies (Corporate Social Responsibility
Policu
Rules, 2014 provides that until a fund is specihed in Schedule VII for the
purposes of sub-sections (5) and (6) of section 135 of the Act, the unspen
CSR amount, if any, shall be transterred by the company to any fund in.
cluded in Schedule VIl of the Act.
D. Rule 7 of the Companies (Corporate Social Responsibility Policy) Rules
2014 effective from 22nd January, 2021 provides that:
1. The board shall ensure that the administrative overheads shall not
exceed five per cent of total CSR expenditure of the company for the
financial year.
2. Any surplus arising out of the CSR activities shall not form part of the
business profit of a company and shall be ploughed back into the same
project or shall be transferred to the unspent CSR Account and spent
in pursuance of CSR policy and annual action plan of the company
or transter such surplus amount to a Fund specified in Schedule VII,
within a period of six months of the expiry of the financial year
3. Where a company spends an amount in excess of requirement pro-
vided under sub-section (5) of section 135, such excess amount may
be set off against the requirement to spend under sub-section (5) of
section 135 up to immediate succeeding three financial years subject
to the conditions that
() the excess amount available for set off shall not include the
surplus arising out of the CSR activities, if any, in pursuance o
sub-rule (2) of this rule.
(i) the Board of the company shall pass a resolution to that eftect.
4. The CSR amount may be spent by a company for ereation or acqu
sition of a capital asset, which shall be held by-
Acompany established under section8 of the Act, or aRegistere
Public Trust or Registered Society, having charitable objects and
CSR Registration Number under sub-rule (2) of rule 4; or
b. Beneficiaries of the said CSR project, in the form of self-heip
groups, collectives, entities; or
c. A public authority:
CHANGEs IN QUESTIONS DUE TO AMENDMENTS 1-23
Provided that any capital asset created by a company prior to the com-
mencement of the Companies (Corporate Social Responsibility Policy)
Amendment Rules, 2021, shall within a period of one hundred and
eighty days from such commenccment comply with the requirement
of this rule, which may be extended by a further period of not more
than ninety days with the approval of the Board based orn reasonable
justification.
E.Rule 5(2) provides that a CSR Committee shall formulate and recommend
to the Board, an annual action plan in pursuance of its CSR policy, effective
from 22nd January, 2021 which shall include the following, namely:
a The list of CSR projects or programmes that are approved to be
undertaken in areas or subjects specified in Schedule VII of the Act.
b. The manner of execution of such projects or programmes as specified
in sub-rule (1) of rule 4.
c. The modalities of utilisation of funds and implementation schedules
for the projects or programmes.
d Monitoring and reporting mechanism for the projects or programmes.
e. Details of need and impact assessment, if any, for the projects under
taken by the company
Provided that Board may alter such plan at any time during the financial
year, as per the recommendation of its CSR Committee, based on the rea-
sonable justification to that effect.
012.Answer the following in brief; discuss the activities which shall not be
considered to be undertaken by a Company in pursuance of its statutory
obligation under section 135 of Companies Act, 2013.
Ans. Companies (Corporate Social Responsibility Policy) Amendment Rules,
2021 provides "Corporate Social Responsibility (CSRJ" means the activities
undertaken by a Company in pursuance ofits statutory obligation laid down
in section 135 of the Act in accordance with the provisions contained in
these rules, but shall not include the following, namely:
1. Activities undertaken in pursuance of normal course of business of
the company. Provided that any company engaged in research and
development activity of new vaccine, drugs and medical devices in
their normal course of business may undertake research and devel-
opment activity of new vaccine, drugs and medical devices related to
COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the
conditions that-
AMENDMENTS
QUESTIONS DUE TO
IN
I-24 CHANGES
activities shall be carried out i

Such rescarch and development
a. mentioned
collaboration with anyof
the institutes or organisations
VIl to the Act.
in item (ix) of Schedule
in the Annual
be disclosed separately
Details ofsuch activity shall
included in the Board's Report.
report on CSR
India except for
the company outside
2. Any activity undertaken by Union
of Indian sports personnel representing any State or
training international level.
national level or India at
Territory at
3. Contribution of any amount directly or indirectly to any political party
under section 182 of the Act.
4. Activities benefitting employees of the company as detined in clause
2019 (29 of 2019).
(k) of section 2 of the Code on Wages,
5. Activities supported by the companies on sponsorship basis for deriving
marketing benefits for its products or services.
6. Activities carried out for fulfilment of any other statutory obligations
under any law in force in India.
CHAPTER 14: REPORTING
01. Role of Government in Sustainability Reporting?

June 2016, 5 Marks]
OR
Attempt the following: Write note on sustainability reporting in emerging
economies. [December 2010, 5 Marks
Ans. 'Sustainability reporting' is a process for publicly disclosing an
organization's economic, environmental, and social performance. Global
Reporting Initiative (GRI) has developed a generally accepted framework
to simplify report preparation and assessment, helping both and
report gain greater value from sustainability
users reporters
reporting.
Sustainability Reporting Framework in India
In India, the
Ministry of Corporate Affairs
reporting. Considering the importance of (MCA)recommendssustainability
had launched Corporate Social sustainability businesses, MCA
in
To take this
Responsibility Voluntary Guidelines
in 2009
further, in 2011 MCA issued National
Social, Environmental and Economical Voluntary Guidelines on
encouraged reporting on environment, Responsibilities
social and
of Business'which
governance issues.
CHANGES IN QUESTIONS DUE TO AMENDMENTS 1-25
SEBI in its (Listing Obligations and Disclosure Requirements) Regulations,

2015 has mandated the requircment of submission of BRR for top 1000
listed entities describing initiative taken by them from an environmental,
sOCial and governance perspective in the prescribed format.
2015: "The anmual

Regulation 34(2)() of SEBI (LODR) Regulations,
report shall contain the following:
() Forthe top onethousand listed entities based on market capitalizatioon,

taken by the
a business responsibility report describing the initiatives
listed entity from an environmental, social and governance perspective,
time to time:
in the format as specified by the Board from
Providedthat the requirement ofsubmitting a business responsibility report
and thereatter, with
shall be discontinued after the financial year 2021-22
thousand listed entities
effect from the financial year 2022-23, the top one
a business responsibility and
based on market capitalization shall submit
the Board from time to
sustainability report in the format as specified by
time:
the top one
Provided further that even during the financial year 2021-22,
a business responsibility
thousand listed entities may voluntarily submit
business responsibility
and sustainability report in place of the mandatory
report:
entities including the entities
Provided further that the remaining listed
on the SME Exchange, may
which have listed their specified securities
voluntarily submit such reports.
market capitalization shall be
Explanation: For the purpose of this clause,
calculated as on the 31st day of March of every financial year.
and Disclosure Requirements)
Substituted by the SEBI (Listing Obligations
2021 w.e.f. 5.5.2021].
(Second Amendment) Regulations,
CONCEPTUAL FRAMEWORK
OF CORPORATE GOVERNANCE
CHAPTER
MEANING AND DEFINITIONS OF CORPORATE GOVERNANCE
Q1. Justify the ICSI principles of Corporate Governance on 'sustainable

development of all stakeholders, 'discharge of social responsibility' and
'effective management and distribution of wealth' which seem to be very
important principles for corporate. June 2015, 2 Marks]
OR
Briefly comment on the following: ICSI principles of Corporate Gover
nance, inter alia, include sustainable development of all stakeholders and
adherence to ethical standards. [December 2014, 2 Marks]
Ans. According to the Institute of Company Secretaries of India:
Corporate Governance is the application of best management practices,
compliance of law in true letter andspirit andadherence to ethicalstandards
for effective managemnent and distribution of wealth and discharge of socia
responsibility for sustainable development of all stakeholders."
The aforesaid principal emphasizes on:
'Sustainable development of all stakeholders' ensures growth of all
individuals associated with or affected by the enterprise on sustainable
basis.
Discharge ofsocialresponsibility'ensures that enterprise is acceptable
to the society in which it is functioning.
Effective management and distribution of wealth' ensures that en
terprise creates maximum wealth and judiciously uses the wealth
so created for providing maximum benefits to all stakeholders and
enhancing its wealth creation capabilities to maintain sustainability
02. Answer the following in brief; Board should have a proper blend of
skills for effective and good corporate governance.
Explaim.
[December 2016, 2 Marks]
1.1
GOVERNANCE
CONCEPTUAL
FRAMEWORK OF CORPORATE
1.2
of the Board. To be able
concern
Ans. Good governance is the prime Board must posseo.

eltectively, the
undertake its functions
cfficicntly and and experiencc. Each of
skills, knOwlcdge
the necessary blend of qualitics, contribution.
make quality
the directors should experience
knowledge and
A Board should haveamix of the followingskills,
commitment to establish leadershin
Operational o r technical expertise,
a
b. Financial skills
c Legal skills or subject
requirement
Government and regulatory
d. Knowledge of so as that company may
which the company
is in operation
expert in specialization.
benefit of director's
get the
statements; Independent Board is
comment on the following [June 2016, 2 Marks]
03. Briefly governance.
essential for sound corporate
constituted by appointing independent
board is
Ans. An independent e n s u r e that there
Independence of directors would
Board.
directors in the
conflicts of interest.
It also e n s u r e s that the
or perceived the
a r e n o actual where necessary, challenging
Board is effective in supervising and, of assessing the
The Board needs to be capable
activities of management.
of managers
with an objective perspective.
performance
members should be
independent of both
Accordingly, the majority
Board
of with the company
commercial dealings
team and any
the management board is essential for
Thus an independent
for ensuring good
governance.
sound corporate governance.
CORPORATE
GOVERNANCE so
ADVANTAGES OF
existence of a company.
is integral to the
[June 2014, 2 Marks]
governance
04. Corporate
culture of
a corporate
is needed to create
Governance
Ans. Corporate a r e the advantages
disclosure. Following
transparency,
accountability and
governance:
of good corporate and economic
ensures corporate s u c c e s s
1. Good corporate governance
growth. maintains investors'

confidence, as a
governance
2. Strong corporate effectively.
can raise capital efficiently and
result of which, company
impact on the share price.
3. There is a positive
CONCEPTUAL FRAMEWORK OF CORPORATE GOVERNANCE 1.3
4. It provides proper inducement to the owners as well as managers to

achieve objectives that are in interests of the shareholders and the
organization.
5. Good corporate governance also minimizes wastages, corruption, risks
and mismanagement.
6. It helps in brand formation and development.
7. It ensures organization is managed in a manner that fits the best in-
terests of all.
8. It reduces cost and aids in long term sustenance and growth of the
Company.
Thus Corporate Governance is integral to the existence of the company.
NEED FOR CORPORATE GOVERNANCE
Q5. Elucidate the following; Need for corporate governance.

[December 2016, 5 Marks
OR
How important is corporate governance for success of an organization?
OR
"Good Corporate Governance is about intellectual honesty and not just
sticking to rules and regulations. It has been observed that capital comfort-
ably flows toward companies that practice this type of goodgovernance.
Briefly comment. June 2018, 5 Marks
OR
Corporate governance extends beyond corporate law. Its fundamental
objective is not mere fulfilment of the requirements of law but in ensur-
ing commitment of the board of directors in managing the company in
transparent manner for maximizing stakeholder value.
In the light of this statement discuss the various factors which add greater
value through good governance. June2012, 10 Marks]
Ans. Corporate governance acts as a spirited move towards achievement
of excellence by a corporate not only in terms of increased profits and
revenue but also respectability for the laws of the land, protection of
interests of shareholders, creditors, employees and other stakeholders of
the organisation. Corporate Governance is needed to create a Corporale
Culture of Transparency, Accountability and Disclosure.
Good Corporate Governance is integral to the existence of the conmpany
and ensures the following
GOVERNANCE
1.4 CONCEPIUAL FRAMEWORk OF CORPORATE
MEANING
S cOMPONENTS
No.
1. Corporate Performance Improved governance structures and pro.
cesses ensure quality decision making, en-
courage eftective succession planning for
senior management and enhance long-term
prosperity of companies.
2. Enhanced Investor Trust Investors consider corporate governance as

important financial pertormance when eval
uating companies for investment.
3. Better Access to Global Corporate governance systems attracts invest.
Market ments from global investors.
4. Combating Corruption Companies that are transparent, provide en-
vironment where corruption would certainly
fade out, makes companies more efficient
and prevents malpractices.
5. Easy finance from Insti- The credit worthiness of a company can be
tutions trusted on the basis of corporate governance
practiced in the company.
6. Enhancing Enterprise Improved management accountability and
Valuation operational transparency increases the value
ofcorporation.
7. Reduced Risk of corpo- | Effective corporate Governance
rate crisis and scandals cient risk
ensures effi-
mitigation systems
place. in
8. Accountability Good Corporate Governance practices
create|
the environment whereby Boards cannot
ig.
nore their accountability to the stakeholders.
ELEMENTS/scOPE OF GOOD CORPORATE GOVERNANCE
06. Good corporate are not born but are made
of all stakeholder board of directors
by the combined efforts
In the light of this statement government and the at society large.
bring out the elements of good corporate
government in India.
Ans. Some of the important elements of
discussed as under:
good corporate governance are
1. Role and powers of Board: Good governance is decisively the manifes

tation of personal beliefs and values which
values, beliefs and actions of its
configure the organizational
Board.
2. Legislation: Clear and unambiguous legislation and regulations are
fundamental to eftective corporate governance.
CONCEPTUAL FRAMEWORKOF CORPORATE GOVERNANC 1.5
3. Management environment: Management environment includes

setting-up of clcar objectives and appropriate ecthical framework,
establishing due processes, providing for transparency and clear
enunciation of responsibility and accountability, implementing sound
business planning, encouraging business risk assessment, having right
pcople and right skill for the jobs, establishing clear boundaries h
acceptable behaviour, establishing performance evaluation measures
and evaluating performance and sufficiently recognizing individual
and group contribution within the organization.
4. Board skills: To be able to undertake its functions efficiently and
effectively, the Board must possess the necessary blend of qualities,
skills, knowledge and experience. A Board should have a mix of the
following skills, knowledge and experience:
Operational or technical expertise, commitment to establish
leadership.
Financial skills.
Legal skills.
Knowledge of Government and regulatory requirement.
5. Board appointments: A well-defined and open procedure must be in
place for re-appointments as well as for appointment of new directors.
The role of the board of directors was summarized by the King Report
(South African report on corporate governance) as:
To define the purpose ofthe company.
T o define the values by whichthe company will perform its daily
duties.
To identify the stakeholders relevant to the company.
To develop a strategy combining these factors.
To ensureimplementation of this strategy.
6. Strategy setting: The objectives of the company must be clearly docu
mented inalong-term corporate strategy including an annual business
plan together with achievable and measurable performance targets
and milestones.
7. Business and community obligations: Though basic activity of a
business entity is inherently commercial yet it must also take care of
community's obligations.
8. Financial and operatlonal reporting: The Board requires compre
hensive, regular, reliable, timely, correct and relevant information
to discharge its functions. Therefore, a clearly defined pertormance
measures - financial and non-financial should be prescribed.
OF CORPORATE GOVERNANCE
1.6 cONCEPTUAL FRAMEWORK
9. Monitoring the Board performance: The Board must monitor a.

evaluate its combined performance and also that of individuald and
rec.
tors at periodic intervals, using key pertormance indicators beside
peer review.
10. Audit Committee: Internal and statutory audits, reviewing the ad
cquacy of internal control and compliance with signiticant policies
and procedures, reporting to the Board on the key issues are to main
function of audit committee. The quality of Audit Committeessignifi
cantly contributes to the governance of the company.
(Note: This list is inclusive and not exhaustive)
07. Answer the following in briet; Discuss the role and powers of the
Board with respect to good corporate governance. [June 2018, 2
Marks
Ans.As an elementof goodcorporate governancethe role of the
be clearly documented in aBoard Charter. The Board as amain
Boardshould
is primary responsible to ensure value creation for its functionary
stakeholders.
The absence of clearly designated role and
powers of Board weakens
accountability mechanism and threatens the achievement ot organizational
Zgoals. Therefore, the foremost requirement of good governance is the clear
identification of powers, roles,
responsibilities and accountability of the
Board, CE0, and the chairman of the Board.
Role and powers of the Board
The board should retain full and
and monitor the executive
effective control over the company
Board should exhibit total
management.
and independent commitment to the company. An efficient
board
of all stakeholders
should be conscious of
protecting the interests
and should attend and
meetings. actively participates in the
The board should ensure a clearly
at the accepted division of
top level of a company, which responsibilities
and authority. will ensure a balance of pow
The Board should
ensure the company's prosperity by collectively
recting the company's affairs,
of its shareholders and whilst meeting the appropriate interest
stakeholders.
CONCEPTUAL FRAMEWORK OF CORPORATEGOVERNANCE 1.7
CONCEPT OF MANAGEMENT Vs. oWNERSHIP
08. Answer the following in brief; An owner selects the agent to work in
good faith to protect their interest and remain faithful to their goals. Who
do you think are the agents and owners in modern organisations?
Ans. Company law allows for the separation of ownershipand management.
Management and owners may have different views on various issues in
the company.
Owners of a Company
In modern organisations, the shareholders are the owners of the or-
ganisations. The owners set the central objectives of the corporation.
The company ought to work according to the dictates of the share
holders. However, it is not practically possible for each shareholder
to participate in the decision making process on a day-to-day basis.
Managers of a Company
Managers who are responsible for carrying out these objectives in
day-to-day work of the company are 'Agents' of the corporation.
Thus the owners authorise the mangers to act as Agents' and a contract
between owner/principal and agent is made. The agent should act in good
faith. He should protect the interest of the principal and should remain
faithful to the goals.
CONCEPT OF MAJORITY RULE vs. MINORITY INTEREST
0.9 Whether the rule of majority, was established in the case of Foss v.
Harbottle [(1843) 67 ER 189], is still relevant? Narrate your answer with
relevant provisions of the Companies Act, 2013 and in light of the decided
case law. June 2019, 5 Marks]
Ans. In the case of Foss v. Harbottle [(1843) 67 ER 189), it was held that:
The Courts would not generally interfere with the decisions of the company
which it was empowered to take in so far they had been approved of by the
majority and made exceptions to breaches of charterdocuments, fiduciary
dulies and frauds or oppression and inadequate notice to the
The
shareholders
principle is still relevant as the Court was right in ruling that every
shareholder is bound by the terms and conditions of incorporation ot the
company, which operated as a set of mutually binding obligations.
1.8
ONCETUAL FRAMEWORK OF CORPORATE GOVERNANCE
Interest of Minority shareholders

t h e proess of implementing the objectives of the company, one should
oveTide the legitimate expectations ol minority shareholders.
The tollowing ae the vauious sections which deal with the minority
sharcholders under the Companies Act, 2013.
Oppression & Mismanagenent [Scctions 241-246]
Class Action Suits |Section 245]
Appointment of director by small shareholders |Sectiorn 151|
Promoting the confidence ol minority shareholders [Schedule IV
Code for Independent Directors|
Judicial Precedent
S. Natarajan vs. S.v. Global Mills Ltd. and Others
In this the
case
minority shares owned by S Natarajan, one of the
are
original promoters of Binny, and his associates. This court, under
142 of the Constitution of India, Article
1950, directs that a sum of ? 100 crore be
paid, to the respondents (associates of Natarajan) for the
respondents'shares in the company. Justice RF Narimanbuy
out of all the
and Justice A MA
Sapre said in their order. The shares owned by the minority shareholders,
which aggregates to about 42.36 lakh
shares or about 196 of share
of the company, should be capital
the date of the order. purchased within a period of nine months from
Thus Supreme Court, ordered S V

out of the
Global (SVG) Mill, which was carved
200-year-old textiles major Binny, to pay ? 100 crore to
shareholders to buy them out. minority
DEVELOPMENT OF CORPORATE
(UK) GOVERNANCE IN UNITED KINGDOM
Q10. Write a note the
on
following; The Greenbury Report.
The [June 2010, 5 Marks]
Confederation of
British Industry constituted
chairnanship of Sir Richard Greenbury a group under the
Directors' Remuneration. The to make recommendations
findings were as under: group submitted its report in 1995, its o
majo
Constitution of Remuneration
a
utive Directors. Committee comprising ot
Non-Exc
Responsibility ol this committee in
CEO and executive
directors. determining the remuneration o'
Responsibility of the committee in determining the remuneration

policy.
Level of disclosure to sharcholders regarding the remuneration of
directors'.
Remuneration should be linked more explicitly to performance.
These findings were incorporated Directors
in Code of Best Practice on
Remuneration of the Report. The majority of the recommendations

incorporated in Listing Rules of London Stock Exchange.
were
Q11. Write short note on the following; The Turnbull report.

December 2010, 3 Marks]
Ans. The Turnbull Committee was established to provide direction on the
internal control requirements of the Combined Code, including how to carry
out risk management. The report informs directors of their obligations
under the Combined Code with regard to keeping good "internal controls"
in their companies, or having good audits and checks to ensure the quality
of financial reporting and catch any fraud before it becomes a problem.
Turnbull Committee published Tnternal Control Guidance for Directors
on Combined Code".
CORPORATE GOVERNANCE CODES IN MAJOR JURISDICTIONS

ACROSS THE WORLD
012. Discussin brief the following; Sarbanes-0xley Act, 2002.

edsa June 2012, 3 Marks]
Ans. In 2002, the United States Congress passed the Sarbanes-Oxley Act
(SOX) to protect shareholders and the general public from accounting
errors and fraudulent practices in enterprises, and to improve the accuracy
of corporate disclosures.
Sarbanes-Oxley Act, 2002 made fundamental changes in every aspect
of corporate governance in general and auditor independence, conflict
of interests, corporate responsibility, enhanced financial disclosures and
severe penalties for wilful default by managers and auditors. The act sets
deadlines for compliance and publishes rules on requirements.
The Act also created the Publc Company Accounting Oversight Board
(PCAOB) to oversee the activities of the auditing profession.
Following are the highlights of the most important Sarbanes-Oxley sections
for compliance
SOX Section 302: Corporate Responsibility for Financial Reports
GOVERNANCR
.10 ONCRPUAL
in Periolic Reports
Discosures
SOX Sectton 401:
Assessment ol lnternal Controls
SOX Sectlon 404: Management
Disclosures
Time Issuer
SOX Seetlon 409: Real Documents
for Altering
Criminal Penaltics
S O X Section 802:
Publicly Traded Com.
of
Protection tor Emplovees
S O X Sectlon 806:
Evidence of Fraud
panies wvho provicde Commit Fraud Offences
902:Atempts& Conspircies to
SOX Section
Responsibility tor
Financial Reports
S O X Section 906: Corporate
GOVERNANCE
OECD PRINCIPLES OF CORPORATE
framework
Corporategovernance
013. Brlefly comment on the following: of shareholder's rights.
should protect and facilitate
the exercise
[une 2014, 3 Marks
OR
Write short note on the following; Shareholder's rights

framework should protect and facilitate

Ans. The corporate governance
and e n s u r e the equitable treatment of
the exerecise of shareholders' rights
all shareholders, including minority and foreign shareholders.
should have the opportunity to obtain effective redress
All shareholders
for violation of their rights:
A. Basic shareholder rights should include the right to:
1. Secure methods of ownership registration

2. Convey or transter shares
3. Obtain relevant and material information on the corporation on
a timely and regular basis.
4. Participate and vote in general shareholder meetings
5. Elect and remove members of the board.
6. Share in the prolits of the corporation.
B. Shareholders should be sulficiently informed about, and have the
right to approve or participate in, decisions concerningtundanienta
corporate changes.
C. Shareholders shoulkd have the opportunity to participate ettectively
and vote in general shareholder meeting. They should be furnished
with sufficient and tinmely intormation concerning the date, location
and agenda ol general meetings.
CONCEPTUAL F'RAMEWORK OF CORPORATE GOVERNANCE 1.11
D. Sharcholders, including institutional shareholders, should be allowed

to consult with cach otheron issues concerningtheir basic shareholder
rights as defined in the Principles, subject to exceptions to prevent
abuse.
E. All shareholders of the same series of a class should be treated equally.
F. Related-party transactions should be approved and conducted in a
manner that ensures proper management of conflict of interest and
protects the interest of the company and its shareholders
G. Minority shareholders should be protected from abusive actions.
H. Markets for corporate control should be allowed to function in an
efficient and transparent manner.
Q14. The corporate governance framework should recognise the rights

of stakeholders established by law or through mutual agreements and
encourage active cooperation between corporations and stakeholders in
creating wealth, jobs, and the sustainability of financially sound enter
prises. Elucidate the statement. [June 2019, 5 Marks]
Ans. OECD has defined corporate governance to mean:
A system by which business corporations are directed and controlled".
Fourth princtiple of OECD Principles of Governance provides for the role
of stakeholders in corporate governance:
The corporate governance framework should recognise the rights of
stakeholders established by law or through mutual agreements and
encourage active co-operation between corporations and stakeholders in
creating wealth, jobs, and the sustainability of financially soundenterprises
This principlerecognizes the interest ofstakeholders and their contribution to
the long termsuccess of the company. The corporate governance framework
should consider interest of all stakeholders and include following:
A. The rights of stakeholders that are established by law or through
mutual agreements are to be respected.
B. Where stakeholder interests are protected by law, stakeholders should
have the opportunity to obtain effective redress for violation of their
rights.
C. Mechanisms for employee participation should be permitted to develop.
D. Where stakeholders participate in the corporate governance process,
they should have access to relevant, sufficient and reliable information
on a timely and regular basis.
GOVERNANCE
CORPORATE
OF
1.12 CONCEPTUAL
F'RAMEWORK
and their representative

individual employees
E.Stakeholders, including communicate
their concerns
abou
to freely
bodies, should be able and to thee competent public
to the board
negal o r
uncthical practices compromiscd for doingthis
should not be
and their rights
be complemented byan
authorities
framework should
governance
The corporate and by effectiveentorcement
effective,efficientinsolvency
framework
of creditor rights.
Governance with respect
Corporate
Q15.Highlight the OECD Principles of June 2019, 3 Marks]
to Disclosures and Transparency.
governance to
mean:
Answer. OECD has defined corporate
corporationsare directedandcontrolled"
A systemby which business
Governance with respect to Disclosures
The OECD Principles of Corporate
and transparency aregiven hereunder:
A. Disclosure should include, but not
be limited to, material information
on
1. The financial and operating results of the company.
information.
2. Company objectives and non-financial
3. Major share ownership, including beneficial owners, and voting
rights.
4. Remuneration of members of the board and key executives.
5. Information about board members, including their qualifications,
the selection process, other company directorships and whether
they are regarded as independent by the board.
6. Related party transactions.
7. Foreseeable risk factors.
8. Issues regarding employees and other stakeholders.
9. Governance structures and policies, including the content
corporate governance code or policy and the process by which
it is implemented.
B. Information should be prepared and disclosed in accordance
witn
high quality standards of accounting and financial and non-financial
reporting
C. An annual audit should be conducted by an independent, competent
and qualified, auditor in accordance with
dards in order to provide an high-quality
external and objective
auditing stan
assurance to the
board and shareholders that the financial statements fairly represent
the financial position and performance of the company in all material

respects.
D. External auditors should be accountable to the sharcholders and owe
a duty tothe company to exercisedue protessional care in the conduct
of the audit.
E. Channcls for disseminating information should provide for equal,
timely and cost-efficient access to relevant information by users.
ROOTS OF CORPORATE GOVERNANCE IN INDIAN ETHOS
Q16. Discuss briefly the following; Kautilya's four-fold duty of a king.

OR
Discuss briefly the following; Evidence of Corporate Government fromn
June 2012, 3 Marks]
Arthashastra
Ans. Kautilya's Arthashastra maintains that for good governance, all
administrators, including the king are considered servants of the people.
Good governance and stability are completely linked.If rulers are responsive,
accountable, removable, recallable, there is stability. If not there is instability.
These tenets hold good even today.
Kautilya's The substitution of the state with the corporation, the king with
fourfold the CEO or the board of corporation, and the subjects with the
a
duty of a shareholders, bring out the quintessence of corporate governance
king- because central to the concept of corporate governance is the be-
lief that public good should be ahead of private good and that the
corporation's resources cannot be used for personal benefit.
Raksha Protection, in the corporate scenario can be equated with the risk
management aspect.
Vriddhi Growth, in the present day context can be equated to stakeholder
value enhancement.
Palana Maintenance/compliance, in the present day context can be equated
to compliance to the law in letter and spirit.
Yogakshe- Well being and in Kautilya's Arthashastra is used in context of a
ma social security system. In the present day context it can be equated
to corporate social responsibility.
017. Discuss in brlef the following; Arthashastra talks of self discipline

for a king six enemies which a king should overcome.
GOVERNANCE
CORPORATE
1.16 OF
CONCEPTUAL FRAMEWORK
Since they have

the government.
society and
Customers, workers, r e s o u r c e s , they
should accept
COnsiderable authority o v e r
company's
actions.
decisions and
accountability for all their seems to
corporate governance
Independence: For ethical all deci.
reasons,
3. where
non-participatory body
independent, strong
and biases.
O business and not personal
Sion-making is based
on
involve adequate reporting
4. Reporting: Good corporate governance a company should
stakeholders, forexample,
to shareholders, other and opening
half yearly and yearly pertormance
publish quarterly, the functioning
ot various
results in newspapers. It should also report
efficient administrations,
Board of Directors for
committees set by the
It is important on ethical grounds of the society.
EXCELLENCE THROUGH GOVERNANCE

TASK FORCE ON CORPORATE
2000
022. Write short note on the following; Task

force oncorporate excellence
through Governance
June 2011, 3 Marks]
OR
Q. Elucidate the following; Corporate excellence through governance.
June 2016, 5 Marks]
Ans. Corporate excellence
Corporate excellence refers to a transformation from the status of
a good company to the status of a great company. The essence of
corporate excellence is to have a competitive advantage over other
firms in the industry.
Corporate excellence is about developing and strengthening the man-
agement system and process of a company to improve pertormance
and create value for stakeholders.
Corporate governance is the one
and only route to achieve corporate
excellence.
Corporate Excellence provides a structure through which the
tives of a company are set and how objec-
they are achieved and
monitored.
Good governance practice enhances the
etticiency of corporate sector
and helps achieving excellence in all areas in the
Task Force on Corporate Excellence
organization.
through Governance 2000D
In May 2000, the Department of
Company Affairs (now Ministry of Corporate
Affairs (MCA)] formed a broad-based study
of Dr. P. L. Sanjeev Reddy, Secretary, DCA. group under the chairmanship
CONCEPTUAL FRAMEWORK OF CORPORATE GOVEERNANCE 1.17
The groupwas giventhe ambitious task of examining ways to "operationalise

the concept ol corporate excellence on a sustained basis", so as to "sharpen
India's global competitive edge and to further devclop corporate culture
in the country".
In November 2000, a Task Force on Corporate Excellence set up by the
group prOduced a report containinga range of recommendations tor raising
governance standards among all companics in India such as:
Monitoring the Pertormance
Inculcate Moral Values and Principles in Business
Fair and Equitable Treatment of Sharcholders
Transparency and Full Disclosures
F a i r and Equitable Treatment of Employees and Workers
Strong Internal Control
Reduce Misconduct and Frauds
Satisfied Customers etc.
UDAY KOTAK COMMITTEE 2017
023. In year 2017, the SEBI has constituted a Committee on Corporate

Governance under the Chairmanship of Mr. Uday Kotak with the aim
of improving standards of Corporate Governance of listed companies in
India. List out the recommendations given by this Committee.
Ans. The recommendations of the Committee [on Corporate Governance
under the Chairmanship of Mr. Uday Kotak] were as follows:
Composition and Role of the Board of Directors ie. Minimum No.
of Directors on a Board, Gender Diversity on Board, Attendance ot
Directors, Quorum for Board Meetings, Minimum No. of Board Meet-
ings, Maximum No. of Directorships ete.
The Institution of Independent Directors ie. Minimum Nos. of In-
dependent Directors, Eligibility Criteria for Independent Directors,
Minimum compensation to Independent Directors, Lead Independent
Directors, Casual vacancy of Independent Directors etc.
Board Committees ie. Composition and Role of Audit Committee,
Nomination, Remuneration and Stakeholder Relationship Committee
etc.
1.18 OF CORPORATE GOVERNANCE
CONCEPTUAL FRAMEWORk
i.e. Obligation on the Board

Enhanced Monitoring of Group Companies
Secretarial Audit) ctc.
of the Listed Co. with respect to subsidiaries,
Promoters/Controlling Shareholders and Related Party Transactiong

ie. Disclosure and Approval of Related Party Transactions, Royalty
and Brand Payments to Related Party, Remuneration to Executive
Promoters Directors and Non-Executive Directors etc.
Disclosures and Transparency pertaining to Submission of Annual
reports, Disclosures pertainingto Credit Rating, Disclosures pertaining
to Directors, Disclosures pertaining to Disqualitication of Directors
Disclosures pertaining to Subsidiary Accounts, Prior Intimation of
Board meeting to discuss Bonus Issue, Disclosure on Website etc.
Accounting and Audited related issues ie. Audit Qualitications, Indepen.
dent External opinion by Auditors, Group Audits, Quarterly financial
controls, Internal financial control, IND-AS adoption, Disclosure of
Audit fees of Auditors etc.
Investors participation in Meetings of Listed Entities i.e. Timeline for
AGM in listed entities, E-voting and webcast of proceedings of meeting,
Treasure Stock, Stewardship code).
Governance aspects of Public Sector Enterprises.
Leniency Mechanism.
Capacity building in SEBI for enhancing Corporate Governance in
Listed Entities.
Inits board meeting on March 27,2018, SEBI, after detailed consideration and
due deliberation, accepted several recommendations of the Kotak Committee
without any modifications and accepted a few other recommendations
with certain modifications as to timelines for
thresholds among others.
implementation, applicability
Q24. Ebbers built WorldCom from a small telecommunications

into a global giant. It all started back in company
1984, when he invested in a local
long-distance phone company. Soon he was invited to manage it. He made
it grow through a series of
aggressive, even audacious mergers. Eventually,
it became a publically traded
corporation with annual revenues of $59
billion. As the company grew, so did Ebbers's
wealth, but his extravagant
spending forced him to use all of his World.Com stock as collateral tor
bank loans to pay his debts. If its price fell too
far, he would be
bankrupl.
About this time in 1990s, the dot-com investment
bubble burst. World
Com's revenue declined and expenses for its
network rose more than anticipated. Accordingworld-spanning
to later
fibre optic
investigations,
in 2000, Ebbers gave the first in a string of instructions to his Chief Finan
cial Officer to report false and tricks
revenues use accounting to disguise
rising expenses. The share prices held. However, internal auditors discov.
ered the deceit and reported it to the Securities and Exchange Commis-
sion (SEC). The agency started an investigation. WorldCom's Board of
directors forced Ebbers to resign. Soon the truth came out and WorldCom
shares lost 90% of their value. In 2002, WorldCom set a record in failure,
breaking Enron's previous total for the largest bankruptcy in American
history. Although the company ultimately survived, 17,000 workers lost
their jobs and investors lost billions.
The purpose of Corporate Governance is to improve governance in the
corporate but the story of World Com presented above puts a question
mark on the sanctity of Corporate Governance.
Analyse the failure of Corporate Governance and give recommendations
to keep future company operations in order and avoid others from fol-
lowing the footsteps of Ebbers even though he was forced by the Board
of directors to resign. [June 2015, 10 Marks]
Ans.
Facts:
Worldcom failure is one of the largest bankruptcy cases in American
history, breaking even Enron's record. Ebbers invested in a local
long-distancephone company in 1984, which he was invited to manage
later. He made it grow into a global giant through a series of mergers.
Ebbers played a major role in the fraud. His extravagant spending
orced him to take massive amount of bank loans by securing his
Worldcom shares.
When telecom industry was experiencing a down turn, at the same
time Worldcom stock prices also started falling. In order to avoid
margin call he needed company's stock to perform well. Ebbers used
unethical means to keep the company's stock price up. The fraud
was directed by Ebbers and it was implemented through his CFO by
reporting false revenues and using accounting tricks to disguise rising
expenses., It came out when internal auditors discovered the deficit
and reported the same to SEC.
Causes of Failure
There were major corporate governance failures in Worldeom which,
mainly, were:
Internal control failure
1.20 cONCEPTUAL FRAMEWORK OF CORPORATE GOVERNANCE
Ineffective board
Lack of transparency
Recommendations to keep future company operations in order and
avoid others from following the footsteps of Ebbers
1. An Active, Informed and Independent Board
A very high standard is required for the
appointment of inde.
pendent directors who should have adequate experience and
qualification. With the exception of the CEO, majority of the
members of the board be fully independent.
must
2. A Non-Executive Chairman of the Board of Directors
This recommendation requires
every company to create the
position of non-executive chairman of the board. The
ecutive chairman shall have defined non-ex
responsibilities relating to
co-ordinating the board's work, chairing meetings, coordinating
with committee chairs,
organizing CEO and board performance
reviews, and similar issues. The non-executive chairman shall
not be involved in the
day to day management duties. The CEO
remains fully responsible for all
to board oversight. The clear
management decisions, subject
separation of the role of Chairman
and CEO between two persons will maintain the
balance of power
and the CEO will be guided & reviewed
by the Board.
3. Independent Director
An independent director shall hold office for a term up to five
years on the Board of
a
company, but shall be eligible for reap-
pointment on passing of a special resolution by the company for
another five years. This recommendation will
ensure the inde-
pendence of Independent Director
4. Active Board Committees
This recommendation
prescribes that every company shall consti-
tute an Audit Committee,
Governance Committee, Nomination and
Remuneration Committee and a Risk
The CEO shall not serve as a member ofManagement Committee
any of these committees,
so that each committee is
directors.
composed entirely of indeperndent
5. Auditor Independence
The statutory auditor shall be
appointed for a maximum period
of 10 years which will ensure the audit
provide to the company only such
quality. An auditor shall
services as are approved by
the Board of Directors or the audit committee, which shall not
include non audit services. This recommendation will ensure the

independence of statutory auditor.
6. Compensation Limits
The Nomination and Remuneration Committee shall establish
a
maximum compensation level for any individual in any year
without shareholder approval. A substantial part of the compen-
sation shal not be linked to the share price, as this leads to the
manipulation of the financial statements by the top management
of the company to secure their own remuneration.
7. Enhanced Transparency, Internal Controls and Finance Depart
ment
The recommendations suggest that the Company should intensify

efforts to develop disclosure practices that will result in trans-
parency of financial information beyond legal requirements.
IMPORTANT QUESTIONS FOR EXAMINATION
EVOLUTION OF CORPORATE GOVERNANCE 8 5

01. Explain the theories which form the basis of evolution of corporates
governance?
Ans. Following theories elucidate the basis of evolution of corporate gov-
ernance
Agency Theory
According to this theory, managers act as 'Agents' of the corporation.
The owners set the central objectives ot the corporation. Managers
are responsible for carrying out these objectives in day-to-day work
of the company. Corporate Governance is control of management
through designing the structures and processes. In agency theory, the
owners are the principals. But principals may not have knowledge or
skill for getting the objectives executed. Thus, principal authorizes
the mangers to act as 'Agents' and a contract between principal and
agent is made.
Shareholder Theory
According to this theory, it is the corporation which is considered as
the property of shareholders. They can dispose off this property as
they like. They want to get maximum return trom this property. The
owners seek a return on their investment and that is why they invest in
a corporation. The directors are responsible for any damage or harnm
GOVERNANCE
1.22 ONCEPTUAL
is to
The role of managers
One to their propertv ic.. the corporation.

shareholders.
aXmise the wealth of the
Stakeholder Theory is seen as a n input-output
this theory, the
company
ACcording to creditors, employees,
which include
interest groups a r e to be
model and all the and the government
local-community
Customers, suppliers, exists for them
of view, a corporation
considered. From their point
alone.
and not the shareholders
Stewardship Theory another's property
m e a n s a person
who manages
The word 'steward' in relation
s e n s e of guardian
o r estate. Here,
the word is used in the and em-
(this theory is value based). The managers
to a corporation
of corporation and its property
the r e s o u r c e s
ployees a r e to safeguard absent. They are like a
caretaker. They
and interest when the o w n e r is
have to take utmost care of the corporation.
They should not use the
use of the social
selfish ends. This theory thus makes
property for their
approach to human nature.
GOVERNANCE PRINCIPLES AND RECOMMENDATIONS,

CORPORATE
AUSTRALIA-2019
The ASX Corporate Governance

02. Elucidate the Central Principles by
Council.
Governance
Ans. Following principles are laid down by the ASX Corporate
Council:
1. Lay solid foundations for management and oversight: A listed entity
should clearly delineate the respective roles and responsibilities of its
board and management and regularly review their pertormance.
2. Structure the board to be effective and add value: The board of a listed
entity should be of an appropriate size and collectively have the skills,
commitment and knowledge of the entity and the industry in which
it operates, to enable it to discharge its duties effectively and to add
value.
3. Instill a culture of acting lawfully, ethically and responsibly: A listed
entity should instill and continually reinforce a culture across the
organisation of acting lawfully, ethically and responsibly.
4. Safeguard the integrity of corporate reports: A listed entity should have
appropriate processes to veriky the integrity of its corporate reports.
Maketimely and balanced disclosure: Alisted entity should make timely
and balanced disclosure of all matters concerning it that a reasonable
CORPORATE GOVERNANCE
1.23
CONCEPTUAL FRAMEWORK OF
the price or value

material ettect on
person would expect to have
a
of its securities.
A listed entity should provide its
6. Respect therights of security holders: and facilities to allow
information
security holders with appropriate holders effectively.
them to exercise their rights as security
establish a sound
listed entity should
7. Recognise and manage risk: A
review the effectiveness
risk management framework and periodically
of that framework.
director
A listed entity should pay
8. Remunerate fairly and responsibly: directors
remuneration sufficient to attract
and retain high quality
remuneration to attract,
retain and motivate
and design its executive
interests with the
executives and to align their
high quality senior values and
creation of value for security
holders and with the entity's
risk appetite.
LEGISLATIVE FRAMEWORK OF CORPORATE
2 GOVERNANCE IN INDIA
CHAPTER
REGULATORY FRAMEWORK
which can
In Indian context, there is no single apex regulatory body
Q1.
but there exists a coordination
be said to be the regulator of corporate
mechanism among various functional regulators. Explain by providing
examples.
OR
framework supports transparency
and disclosure by
"Indian legislative [June 2014, 4 Marks]
corporate" explain.
areas. There is
Ans. In India there different regulators for different
are
of
which can be said to be the regulator
no single apex regulatory body
are the regulatory
authorities which function in co-
corporate. Following
ordination with each other:-
1. Companies Act and |4. Foreign Business: For- | 7.Intermediaries,Banking

Rules: Ministry of Corpo- eign Investment Promo- Companiesand Insurance
tion Board (FIPB) Business-Financial Intel-
rateAffairs (MCA) ligence Unit (FIU)
Market and |5. Imports and Exports: 8. Communication:Tele

2. Capital Man- com Regulatory Authority
Stock Exchange: Securi- | Foreign Exchange
Act (FEMA) of India (TRAI)
ties and Exchange Board agement
of India (SEBI)
investment 9. Professions (Profes-
3. Insurance: Insurance | 6. Foreign
Regulatory and Develop- | Reserve Bank of India | sional Institutes like ICSI,
ICAI, ICAI (CMA) etc.
ment Authority (IRDA) (RBI
Common law system in India
Companies Act, 2013
Companies the Act,
Entities incorporated as companies in terms of
are
2013 (as amended from
2013 and governed by the Companies Act,
administered by the Ministry of
time to time). The Companies Act is
Corporate Affairs.
2.1
OVERNAN IN INDIA
2.2 RPDAI
TG AI DR AMEVONK O
Board ol udin
(SEB)
Secuities and isehange
Board ol lndin (SEB)
is the prin
h e Secnitics andl h n g e secuities m1arke
authority which repulates allaspecis ol
gulato Act incuding the
Contracts (Regulation)
ntorees the Securities
the stock exchanges
stok esehanges. Companics
that a r c listed o
with SEBI (Listing Obligations & Disclosure
requircd to conply
Kequirements) Regulations, 2015.
2015: SEBI is thhe prime

Applicability of SEBI(LODR) Regulations,
ol sccuritics market
egulatory authority which regulates all aspects
and listed cntitics. ln order to cnsure god corpOrale gOVernance
SEBI had issucd cdetailed Corporate Governance Norms in lorm of
Clause 49 of Listing Agreenment which has since been repcaled and
notilicd as a separate regulation being the SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015.
02. India has been flooded with various Ponzi schemes that take advantage
of suspiclous investors looking for alternatebankingoptions. Lacking access
to formal banks, low income Indians often rely on informal banking. These
informal banks invariably consist of money lenders who charge interest
at inflated rates and replaced by more sophisticated methods of
are soon
cunning people through disguised Ponzi schemes. Fund raising is done

through legal activities such as collective investment schemes, non-con-
vertible debentures and preference shares, as well as
hoax financial instruments such as fictitious illegally through
ventures in construction and
tourism. The rapid spread of Ponzi schemes, especially in North India has
various causes, not the least of
which, include the lack of
banking norms, steadily falling interest rates, lack of awareness about
such activities and the legal action against
security of political patronage.
The Ponzi scheme run
by Saradha
by issuing redeemable bonds and Group, collected money from investors
secured debentures and
credulously high profits from reasonable promising in-
hired throughout the State of investments. Local agents were
from investor deposits to West Bengal and
given huge cash payouts
erate of expand quickly, eventually
more than 200
companies. forming a
conglom
SEBI first detected
I challenged Saradhasomething suspicious in the group's
because the activities in 2009.
provisions of Indian company
Companies Act, which had not
complied with the
money from more than 50 requires any
categorical permission from investors to have a formal company raising
Group sought to evade SEBI, the market prospectus, ana
prosecutionby expanding theregulator. Saradha
number of
companies,
EGISLATIVE FRAMEWORK OF CORPORATE GOVERNANCE IN INDIA 2.3
thus ereating a convoluted web of Interconnected players. This created

innumerable complications for SEBI, which laboured to investigate Sarad-
ha in spite of them. In 2012, Saradhadecidedto switch it up by resorting
to different fund raising activities, such as collective investment schemes
(CIS) that were disguised as tourism packages, real estate projects, and
the like. Many investors were duped into investing in what they thought
was a chit fund. This too, was an attempt
to get SEBI off its back, as
not SEBI.
chit funds fall under the jurisdiction of the State Government,
However, SEBI managed to identily that group was not, in fact, raising
Saradha to immediately
capital through a chit fund scheme and ordered
SEBI. SEBI had previously warned
stop its activities until cleared by
Saradha Group's hoax chit
the State Government of West Bengal about
Government as well as
fund activities in 2011 but to no avail. Both, the
went bust in
Saradha, generally ignored SEBI until the company finally
2013.
After the scandal broke, an inquiry commission investigated the groupP,
and a relief fund of approximately US $90 million was created to protect
low-income investors. In 2014, the Supreme Court transferred all investi
gations in the Saradha case to the Central

Bureau of Investigation (CBI)
amid allegations of political interference in the state-ordered investigation.
Inthe light of the above, you are required to answer thefollowing questions;
Ponzi scheme run by Saradha Group. Why chit funds or Ponzi
Explain
schemes still persists in India inspite of many scams? Comment
Ans.
Facts of Ponzi scheme of Saradha Group
The Ponzi scheme run by Saradha Group collected money from
investors by issuing redeemable bonds and secured debentures and
investments. Local agents
promising high returns trom reasonable
were hired throughout the state of West Bengal and given huge cash
payouts from investor deposits to expand quickly, eventually forming
a conglomerate of more than 200 companies.
Potential investors Ponzischemes are when investors are promised huge
returns which are unrealistic and at very low risk. The Ponzi schemes
generally targets low income individuals luring them by high
returns
available to
in short span of time. Rural p0or have very few options
schemes.
invest and often end up falling prey to dubious investment
Reasons for survival of such schemes
A combination of widespread corruption, low financial literacy, greed
rural
of investors demanding highreturns andaweak bankingsectorin
2.4 EGISLATIVE IRAMEWORK OF CORPORATE GOVERNANCE IN INDIA
arcas results in the survival ofl Ponzi schemes in India. There is also
an urgent need for regulatory syslem thal quickly spots any scheme
secking to raise money from large numbes of people by promisino
CXCeptional returns, and treats it as prima facie suspect and fit for
quick investigation and regulatory action.
Provisions to curb Ponzi schemes
SEBIchallenged Saradha Groupfor not complying with the provisions
of the Companies Act but the
group escaped prosecution by expanding
the number of companies creating a web of
interconnected players,
In April
2013, the scheme collapsed completely
causing a loss of ap.
proximately US $5 billion and bankrupting many of its low-income
investor's.
03. Discuss Indian legislations and provisions to curb Ponzi schemes.

Ans. Following are the laws applicable to schemes like Ponzi schemes:
Chit Funds Act, 1982
Chit funds in India are
governed by the Chit Funds Act, 1982 and other
Statelaws. Under the Act, the Central
the Act in different states on Government can choose to notiBy
different dates. States are
for notifying rules and have
the power to responsible
from the exempt certain chit funds
provisions of the Act.
SEBI (Collective
It
Investment Schemes) Regulations, 1999
provides details of compulsory
registration, business activities and
obligations, trustees and their obligations,
general obligations, inspection and audit, collective investment scheme,
etc., of Collective Investment
Management Company.
SEBI Act made it
excess of7 100
mandatory for money pooling schemes
with another
crore to
register with SEBI unless alreadycollecting in
regulatory agency and also registered
such schemes
operate without SEBI prescribes penalties where
The expanded definitionof registration.
SEBI to curb, control and "collective inmvestmentscheme'now enables
prevent such schemes.
Protection of Interests of
Act, 2018 Depositors (In Financial
Establishments)
Other than the above, most of the
tion of Interest of States in India have
Depositors in enacted Protec
States have also started State Financial Establishments Act. Many
information on fraudulent fund level co-ordination for exchange ot
raising.
LEGISLATIVE FRAMEWORK OF CORPORATE GOVERNANCE IN INDIA 2.5
PRINCIPLES FOR PERIODIC DISCLOSURES AND FOR CORPORATE Gov

ERNANCE
SEBI (Listing Obligations and
04. Discuss the rights of shareholder under
2015.
Disclosure Requirenment (LODR)) Regulations,
June 2018, 5 Marks]
SEBI Listing Obligations

Ans.Following are the rights of shareholder under
2015:
and Disclosure Requirement (LODR) Regulations,
RIGHTS MEANING
facilitate the exercise
The rights of The listed entity shall seek to protect and
shareholders of the following rights shareholders:
of
informed of,
a Right to participate in, and to be sufficiently
fundamental corporate changes.
decisions concerning
b. Opportunity to participate effectively and vote in general
shareholder meeting5.
procedures
C. Being informed of the rules, including voting
that govern general shareholder meetings.
to ask questions to the board of directors,
d. Opportunity
and to
to place items on the agenda of general meetings,
limitations.
propose resolutions, subject to reasonable
e. Effective shareholder participation in key corporate gov-
and election of
decisions, such as the nomination
ernance
members of board of directors.
f.Exercise rights by all shareholders, including

of ownership
institutional investors.
Adequate mechanism to address the grievances of the

g.
shareholders.
from abusive actions by, or
Protection of minority shareholders
shareholders acting either directly
in the interest of, controlling
redress.
orindirectly, and effective means of
and timely information
Timely Thelisted entity shall provide adequate
to shareholders, including but not limited to the following:
information
a. Sufficient and timely information concerning the date, lo-|
cation and agenda of general meetings, as
well as full and
issues to be discussed at
timely information regarding the
the meeting.
structures and arrangements that enable certain
b. Capital
shareholders to obtain a degree ofcontrol disproportionate
to their equity ownership.
c. Rights attached all series and classes of shares, which
to
shares.
shall be disclosed to investors before they acquire
IN INDIA
2.6 LEGISLTIVE FRAMEWORK OF CORPORATE
GOVERNANCE
The listed entity shall ensure equitable treatment of all

Equitable sharcholders, including minority and toreign shareholders, in
treatment
the following manner:
a All shareholders ofthe same series of a class shall be treated
equally.
b Effective shareholder participation in key corporate gov.
ernance decisions, such as the nomination and election of
members of board of directors, shall be facilitated.
c. Exercise of voting rights by foreign shareholders shall be
facilitated.
d The listed entity shall devise a framework to avoid insider
trading and abusive self-dealing.
e. Processes and procedures for
shall allow for
generalshareholder meetings
equitable treatment of all shareholders.
f.Procedures of listed entity shall notmake it unduly difficult
or
expensive to cast votes.
GANGULY COMMITTEE RECOMMENDATIONS
04A. Dr. Ganguly Committee recommended

norms which are applicable only to
some
Corporate Governance
private sector bank. What were these
recommendations?
Ans. Dr.Ganguly June 2019, 5 Marks]
Committee's recommendations on
applicable only to private sector bank are as under: corporate governance
1) Eligibility criteria and fit and
tors: proper' norms for nomination of
direc
a The Board of Directors
of the banks while
directors should be
guided certain broadnominating/co-opting
for directors, viz. formal by 'fit and
proper' norms
integrity etc. qualification, experience, track record,
b. The
following criteria, which are
public sector banks, considered for the boards of
may also be followed for
pendent/non-executive
The candidate
nominating inde
directors on private sector
should banks:
be relaxed while normally be graduate
a
selecting
farmers, depositors, directors for the (which ca
He/she artisans, etc.) categories o
should be
between 35 and 65
years of age.
He/she should not be a

Member of Parliament/Member of
Legislative Assembly/Member of Legislative Council.
(1) Commonality of directors of banks and Non-Banking Finance Com-
panies (NBFC): In case, a director on the board ot an NBFC is to be
considered for appointment as director on the board of the bank, the
following conditions must be followed:
He/she is not the owner of the NBFC, [ie, share holdings (single
Or jointly with relatives, associates, etc.) should not exceed 50%}
He/she is not related to the promoter of the NBFC.
He/she is not a full-time employeein the NBFC.
The concerned NBFC is not a borrower of the bank.
(I1I) Composition of the Board: The composition of the Board should be
commensurate with the business needs of the banks and should be
blend of professionals having skills such as, marketing, technology and
systems, risk management, strategic planning. treasury operations,
credit recovery etc.
cORPORATE GOVERNANCE GUIDELINES FORINSURANCE COMPANIES
05. Now the days, protection of the Investors' wealth is big challenge
before the Government. In insurance sector, under IRDAs Regulation,
various committees are mandatorily required to be constituted by the
Companies. Highlight the name of the committees and describe the role
of with Profit Committee. [December 2019, 3 Marks]
OR
Write short note on the following; With Profits Committee.
Ans. IRDA advises all insurersthat it is mandatory to establish Committees for
Audit, Investment, Risk Management, Policyholder Protection, Nomination
and Remuneration, Corporate Social Responsibility (only for insurers
earning profits).
Following are the names of the committees:
a Audit Committee(mandatory)
b. Investment Committee (mandatory)
c.Risk Management Committee
a.
(mandatory)
Policyholder Protection Committee (mandatory)
e. Nomination and
Remuneration Committee (mandatory)
IN INDIA
2.8 FRAMEWORK OF CORPORATE
GOVERNANCE
LEGISLATIVE
Committee ('CSR COmmittee') (man.

Corporate Social Responsibility
datory)
& With Profits Committec:
With Profits Committee
The Authority has issued IRDA (Non-Linked Insurance Products
Regulations, 2013, which lay down the framework about the With Profit
Fund Management and Asset sharing, among other things. In terms of these
Regulations, everyInsurer transacting lifeinsurance business shall constitute
a With Profits Committee comprising of an Independent Director, the CE0,
The Appointed Actuary and an independent Actuary. The Commitlee shall
meet as often as is required to transact the business and carry out the
functions of determining the following:
The share of assets attributable to the policyholders.
Theinvestmentincome attributable to the participating fund of pol
icyholders.
The expenses allocated to the policyholders.
The report of the With Profits Committee in respect of the above matters
should be attached to the Actuarial Report and Abstract furnished by the
insurers to the Authority.
WHISTLE BLOWER POLICY

,
06. Write short note on the following; whistle blower

policy.
Ans. Following are the key points on Whistle blower:
Whistle blower'is one who exposes
wrongdoing, fraud,
mismanagement in an organization. A whistle blower is corruption
a person who
or
publicly complains/discloses the concealed misconduct on the

ofan part
organization or body of people, usually from within that same
organisation.
Who can be a Whistle blower: Whistle
blower may be an
former employee,
vendor, customer or other stakeholder.employee,
Whistle
blowers are important stakeholders
as they can
authorities to get information of deviant work as a tool
tou"
organizations. behaviour or
practices
Protection of Whistle blower: Whistle blower
needs protection again
retaliation/misbehaviour by superiors. At the
companies can proOvide corporate level, tn
prolection to whistle blowers by
a well documented "Whistle establishi
Blower Policy"and
ensuring its effective
ness practically. Just making a documented policy is not sufficient to

develop confidence among the employees; examples should be set by
taking action against the wrongdoing reported.
Whistle blower Policy: "Whistle blower" policy is a mechanism for
cmployees to raise concerns internally about possible irregularities,
weaknesses, financial reporting issues or other such
mat-
governance
ters. These could include employee reporting in confidence directly
to the Chairman of the Board or of a Committee of the Board or to
the Statutory Auditor.

The Policy illustratively covers the following aspects:
Awareness of the employees that such channels are available, how to
use them and how their report will be handled.
Handling of the reports received confidentially, for independent

as-
sessment, investigation and where necessary for taking appropriate

follow-up actions.
Arobust anti-retaliation policy to protect employees who make reports
in good faith.
Briefing of the board of directors.
CORPORATE GOVERNANCE IN PUBLIC SECTOR ENTERPRISES
Guidelines on
07. Discuss briefly the Department of Public Enterprises
for Central Public
Corporate Social Responsibility and Sustainability
Sector Enterprises.
Ans. DPE has issued New Guidelines on Corporate Social Responsibility
for Central Public Sector Enterprises with effect from
and Sustainability
lst April 2013. Following one its key points:
with the National Voluntary
The guidelines issued are in consonanceEconomic of
Guidelines for Social, Environmental & Responsibilities
Business issued by the Ministry of Corporate Affairs in July 2011.
I n the revised guidelines the thrust and Sustainability is

of CSR
inclusive
clearly on capacity building, empowerment of communities,
socio-economic growth, environment protection, promotion of green
and energy efficient technologies, development of backward regions,
and upliftment of the marginalized and under-privileged sections of
the society.
It is mandatory for CPSEs to take up at least one major project for
development of a backward district.
2.10 LEGISLATIVE FRAMEWORK OF CORPORATE GOVERNANCE IN INDIA
C P S E s are expected to formulate their policies with a balanced em

phasis on all aspects of CSR and Sustainability - cqually with regar
to their internal operations, activities and processes, as well as in their
response to externalities.
Public Sectorenterprises are required to have aCSR and Sustainabilit
Boards of Directors.
policy approved by their respective
Each CPSEshall havea Board level committee headed by the Chairmar
and/or Managing Director, or an Independent Director to oversee the
implementation of the CSR and Sustainability policies of the Company
Thepublic sectorenterpriseshall have to disclose reasons for not being
able to spend the entire budget on CSR and Sustainability activities
as planned for that year, and shall make every endeavor to spend the
unutilised budget of any year within the next two financial years.
I n case the CPSEs are unable to spend the unutilised budget within the
next two financial years, the unspent amount would be transferred to
Sustainability Fund' to be used for CSR and Sustainability activities.
08. "The controlled mis-governance is a type of fraud that is perpetrated
by the person(s) running the company in such situations. The management
deceptively leads all the stakeholder to believe that the company is being
run superbly successfully while in reality it is led to bankruptcy."
With reference to the statement examine the issues and
challenges in
corporate governance citing relevant case(s) of corporate scams.
June 2011, 10 Marks]
Ans. Controlled
mis-governance is a type of fraud that is perpetrated by
the person(s) running the
company. In such a situation the management
deceives all the stakeholders into believing that they run
asuperbly successtul
business but in reality it is
heading toward bankruptcy. It then becomes
impossible for us to believe that the governance of firm could have
all its stakeholders. duped
SATYAM SCAM: INDIA'S BIGGEST
ACCOUNTING FRAUJD
It is about corporate
governance and fraudulent auditing practices
allegedly in connivance with auditors and chartered
The company misrepresented its accounts both to its board, accountantsS.
stocs
exchanges, regulators, investors and all other
It isfraud, which misled the market and
a
stakeholders.
about the company's financial health. other stakeholders by lying
Even basic facts such as revenues,
operating profits. interest liabilities
and cash balances were grossly inflated to show the
health. company in go
The Satyam ease mis-governance highlighted the lack of independent

directors interest in the Board processes, they did not play thcir role in
efficient mannerandtheconscquenceproceeded.The mere meetingof
citeria of independence does not ensure that an independent dircctor
is acting independently. They should play a vigilant role byattending
the meetings, studying and analyzing the agenda papers, ask the right
question at the right time, insist that dissent if any is recorded and
have separate sessions ofindependent directors and act with integrity.
On the other hand the auditors in this case have tried to distance
themselves from the fraud perpetrated by the management by issuing
a statement that
"The representations made by the chairman and other management
to the auditors during the audit now appear to be false and therefore,
are no longer reliable.
Some issues and challenges that need scrutiny in cases of mis-gover
nance are as follows:
(i) Role of independent directors

The independent directors are guardians of the interest of all
shareholders and stakeholders specially in the areas of potential
conflict.Independent Directors bring a valuable outside perspec-
tive to the deliberations.
(ii) Tenure of independent directors

As per Regulation 25(2) of the SEBI (Listing Obligations &k
Disclosure Requirements) Regulations, 2015, the maximum
tenure of independent directors shall be in accordance with the
Companies Act, 2013 and rules made thereunder, in this regard
from time to time.
in audit committee
(iii) Role of Independent directors
Independent directors play a crucial role in Audit Committee. The
audit committee is responsible to ensure the integrity of tinancial
reporting. Therefore, each independent director who is a mem-
ber of audit committee should be able to read and understand
financial statements.
(iv) Flow of information to the board
Companies should ensure that timely, relevant and complete
information is made available to independent directors so that
they are able to make informed decisions.
2.12
LEGISLATIVE FRAMEWORK OF CORPORATE GOVERNANCE IN INDIA
(v)
Recording of dissent
tis
important that where an independent director is not in agree.
ment with the decision of the
majority, he should insist that his
dissent be recorded.
(vi) Role of auditor
Auditors are a
reassurance to all who have a linancial
interest in
companies, quite apart from their value to board of directors.
role of the auditors is not just to The
go by the numbers presented
the account and sign bogus accounts in
rather. They need to
the facts presented by the verify
company.
STEWARDSHIP CODE FOR INSURERS IN INDIA
09. What is the Code for
Stewardship for the insurers?
Ans. The IRDAI has urs[June
2019, 5 Marks
implemented code for stewardship for the
The code is in the form a
of a set of insurers,
need to adopt. The principles, which the insurers
principles may be would
investors, like Mutual Funds, Pension uniformly adopted for institutional
(FPls), Alternative Funds, Foreign Portfolio Investors
Investment
the insurers to have a Funds (AIFs), etc. The code broadly
of the investee policy
as
regards their conduct at requires
was made companies and the general meetings
disclosures relating thereto. The
applicable from FY 2017-18. code
Stewardship Principles provided in the Code:
Principle 1: Insurers should formulate a
their
stewardship responsibilities and policy on the
discharge of
Principle 2: Insurers should have a publicly disclose it.
conflicts of interest in clear policy on how
publicly disclose it. fulfilling their stewardship they manage
Principle 3: Insurers should monitor responsibilities and
Principle 4: Insurers should have their investee companies.

investee companies. clear policy on
a
intervention in ther
Principle 5:Insurers
other institutional should have a clear policy for
of the investors, where collaboration with
required, to preserve
policyholders (ultimate investors), the interest
Principle6:Insurers
of voting activity. should which
have a clear should be
policy on voting and
disclosed.
disclosure
IMPORTANT QUESTIONs FOR EXAMINATION
GANGULY COMMITTEE RECOMMENDATI1ONS ON cORPORATTE

GOVERNANCE IN BANKS
the
List out the recommendations by the Ganguly Committee
on
01.
following; Responsibilities of the Board of Directors.
Ans. Following are the Recommendations which may be implemented
by all banks:
Responsibilities of the Board of Directors
a A strong corporate board should fulfil the following four major
roles viz
Overseeing the risk profile of the bank
mecha-
monitoring the integrity of its business and control
nisms
ensuring the expert management,
maximising the interests of its stakeholders.

b. The Board of Directors should ensure that responsibilities of di-
rectors are well defined and every director should be familiarised
on the functioning of the bank before his induction, covering the
following essential areas:
Delegation of powers to various authorities by the Board
Strategic plan of the institution

Organisational structure
Financial and other controls and systems
Economic features of the market and competitive environ-
ment
Role and responsibility of independent and non-executive directors

a. The independent/non-executive directors have a prominent role
in inducting and sustaining a proactive governance ftramework
in banks.
h. In order to familiarise the independent/non-executive directors
with the environment of the bank, banks may circulate among
the new directors a brief note on the profile of the bank, the
sub-committees of the Board, their role, details on delegation of
powers, the profiles of the top executives etc.
IN INDIA
2.14 LEGSLATIVE FRAMEWORK OF CORPORATE GOVERNANCE
C.It would be desirable for the banks to take an undertaking from

director to the effect tha
cach independent and non-executive
he/she has gone through the guidelines defining the role and
responsibilities and enter into covenant

to discharge his/her
responsibilities to the best of their abilities, Individually and coj.
lectively
GOVERNANCE
BASEL COMMITTEE ON CORPORATE
Basel Committee.
02.Explain any five principles of corporate governance by
Ans. Basel Committee on Banking Supervision (BCBS) released Guidelines
on Corporate Governance for banks which were released in July 2015,
The principles of corporate governance of these guidelines are as under:
Principle 1: Board's overall responsibilities
The board has overall responsibility for the bank, including approving and
overseeing the implementation of the bank's strategicobjectives, governance
frameworkand corporateculture. The board is also responsible for providing
oversight of senior management.
Principle 2: Board qualifications and composition
Board members should be and remain
for their
qualified,individually and collectively,
positions. They should understand their oversight and corporate
governance role and be able to exercise sound, objective judgment about
the affairs of the bank.
Principle 3: Board's own structure and practices
The board should define
itsown work, and
appropriate governancestructures andpracticestor
in
put place the means for such practices to be followed
and periodically reviewed for
ongoing effectiveness.
Principle 4: Senior management
Under the direction and oversight of the
board, senior management
carry out and manage the bank's activities in should
business strategy, risk appetite, remuneration
a
consistent with the
manner
and other policies approved
by the board.
Principle 5: Governance of group structures
In group structure, the board of the parent
a
company has the overall
responsibility for the group and for ensuring the establishment and operation
of a clear governance framework
appropriate to the structure, business
and risks ol the group and its entities. The board and senior management
should know and understand the bank group's operational structure and
the risks that it poses.
RESERVE BANK OF INDIA ('FIT AND PROPER' CRITERIA FOR ELECTED

DIRECTORS ON THE BOARDS OF PSBs) DIRECTIONS, 2019
03.What is the criteria to be considered Fit and Proper' for being elected
as Directors on the Boards of State Bank of India and Nationalised Banks?
What are its disqualifications.
The Reserve Bank of India on August 2, 2019 has notified and specified
the authority, manner, procedure and criteria for determining the 'tit
and proper status of a person to be eligible to be elected as a director on
the Board of Public Sector Banks, and issued the Directions hereinafter
specified. These Directions are called the:
"Reserve Bank of ndia (Fit and Proper' Criteria for Elected Directors on
the Boards of PSBs) Directions, 2019"
The Committee shall determine the 'fit and proper' status of the proposed
candidates based on the broad criteria mentioned hereunder:
1. Age: The candidate's age should be between 35 to 67 years as on the
cut-off date fixed for submission of nominations for election.
2. Educational qualification: The candidate should at least be a
3.
grad
Experience and field of expertise: The candidate shall have special
knowledge or practical experience in respect of mattersenumerat
ed in Section 19A(a) of the SBI Act. Section 9(3A)(a) of the Banking
Companies (Acquisition and Transfer of Undertakings) Act and RBI
Circular DBR dated November 24, 2016.
4. Tenure: An elected director shall hold oftice for three years and shall
be eligible for re-election:
Provided that no such director shall hold office for a period exceeding
six years, whether served continuously or intermittently.
5. Professional Restrictions:
a The candidate should neither have any business connection (in-
cluding legal services, advisory services etc.) with the concerned
bank nor should be engaged in activities which might result in a
conflict of business interests with that bank.
GOVERNANCE IN INDIA
2.16 LEGISLATIVE FRAMEWORK OF
CORPORATE
The candidate should be having any prolessional relationship

not
b other bank.
with a bank or any NOFHC holding any
. Track record and integrity: The candidate should not be under
er
adverse notice of any regulatory or supervisory authority/agency, or
law enforcement agency and should not be a delaulter of any lendina
institution
Following are the disqualifications:
a. The candidate should not be a member of the Board of any bank
or the Reserve Bank or a Financial Institution (Fl) or an Insurance
Company or a NOFHC holding any other bank.
A person connected hire
purchase, financing, money lending.
with
investment, leasing and other para banking activities shall not be
considered for appointment as elected director on the board ofa PSB.
c. No person may be elected/re-elected on the Board of a bank if he/
she has served director in the past on the board of
as
any bank/FI/
RBI/Insurance Company under any category for six years.
d. The candidate should not be
engaging in the business of stock
e. The candidate should not be broking.
holding position of a Member of Par
liament or State Legislature or
the
or other local
bodies.
Municipal Corporation or Municipality
f.The candidate should not be
tant firm which is
acting as a partner of a Chartered Accoun-
of any nationalisedcurrently engaged as a
bank or State Bank of Statutory Central Auditor
g The candidate should
India.
not be
Accountant firm which is acting as a partner of a Chartered
currently engaged as Statutory Branch
Auditor or Concurrent Auditor
election is filed. of the bank in
which nomination tor
STEWARDSHIP CODE FOR INSURERS IN
INDIA
04."All insurers shall comply with
and submit all the principles given in the
Annual Certificate of
an
to the IRDAI as
per Compliance approved
guidelines
by CEO and Annexure B referred in the by the Board
the light of theCompllance Officer on or before guidelines, duly certifiea
above statement 30th June every
discuss the In
year".
Ans. Following the principles to be
are principles.
1. Insurers should formulate complied by the insurers:
ship responsibilities and policy on the
a
publicly disclose it.discharge of their steward

2. Insurers should have a clear policy on how they manage contlicts

of interest in fulfilling their stewardship responsibilities and publicly
disclose it.
3. Insurers should monitor their investee companies.
4. Insurers should have a clear policy on intervention in their investee
companies.
5. Insurers should have a clear policy for collaboration with other in-
stitutional investors, where required, to preserve the interests of thec
policyholders (ultimate investors), which should be disclosed.
6. Insurers should have a clear policy on voting and disclosure of voting
activity.
7. Insurers should report periodically on their stewardship activities.
3 BOARD EFFECTIVENESS
CHAPTER
ROLE OF THE BOARD OF DIRECTORS
01.The board of directors play apivotal role in ensuring good governance.

In the light of this statement discuss the role of directors in a company.
Ans. The contribution of directors on the Board is critical to the way a
corporate conducts itself. A board's responsibilities derive from law, custom,
tradition and prevailing practices.
The Boards have to respond to the explosive demands of the marketplace.
The role of the Board of Directors is the cornerstone in evolving a sound,
efticient, vibrant and dynamic corporate sector for attaining of high
standards in integrity, transparency, conduct, accountability as well as
social responsibility.
The role of Board in particularincludes:
Providing direction for management.
Demonstrate ethicalleadership, displaying-and promoting throughout
the company-behaviour consistent with the culture and values it has
defined for the organization.
Create a culture that drives value creation without
performance ex-
posing the company to excessive risk of value destruction.

clear line
Make well-informed and high-quality decisions based on a
of sight into the business.

Create the right framework tor helping directors meet their statutory
duties under the Companies Act, 2013, and/or other relevant statutory
and regulatory regimes.
Being accountable, particularly
to those that provide the company's
capital.
Think carefully about its governance arrangements and embraces
evaluation of their effectivenesS.
3.1
3.2 BOARDEFFECTIVENESS
02. "Board and executlve leaders need to work together based on m

respect, trust and commitment".
In the light of this statement discuss in brief the relationship between t
the
Board and Executive Management.
June 2018, 5 Marks
OR
Write short note on the following; Relationship between directors and
managers. June 2014, 3 Marks
Ans. The Board and Exccutive leadership need to work together based
on mutual respect, trust and commitment. The Board provides counsel
to management and should not get involved in the day-to-day affairs of
the organization. Clear expectations for the board and the director need
to be established and maintained, because a board that is
overly active in
management can inhibit the organization's effectiveness.
The Executive Management can help the board govern more and manage
less by adopting the following three methods:
Usea comprehensive strategic plan that has
beendeveloped in conjunc
tion with the board, and supplement it with
regular progress reports.
This will keep the board's sights focused on the
long term goals and
mission of the organization. Regular will
reports keep
board members
apprised of progress toward organizational goals, and provide part ot
the basis for evaluation of the executive
management.
Provide the board with relevant materials before
board
explain why the materials are coming to the attention meetings,
and
of the board.
Let board members know how
specific agenda items relate to the
organization's larger mission, and what kind of action or discussion
is desired of the board on each item.
Facilitate board and board committee discussions so that the boara
stays focused on the larger issues. Refer to set
limits of the board's policies that detine tne
decision-making power, and strive to engage tne
board in adialogue among themselves that
leads to consensus-buidl
03. Write short notes on the following; nel
Key Managerial Personne
(KMP). December 2018, 2 Marks]
Ans. According to section 2(51) of the
Companies Act, 2013, key managera
a
personnel in relation to a company means:-

() The Chief Executive Officer or the
managing director or the manesger
(ii) The company secretary
(i) The whole-time director
BOARD EFFECTIVENESS 3.3
(1) The Chicl Financial Officer

helow the directors who
(1) Such olher ollicer, not more than one level
is in whole time employment, designated as key managerial personnel
by the Board
(1vi) Such other ollicer as may be prescribed
TYPES OF DIRECTORS UNDER COMPANIES ACT, 2013
04. What are different types of directors on a Corporate Board?

means a
Ans. As per Section the Companies Act, 2013, Director
2(34) of
director appointed to the Board of a Company.
under:
Various types of directors on a Corporate Board are as
term executive director

i Executive Director/Managing Director:The
member of the board
is usually used to describe a person who is both a
of the affairs
and who also has day-to-day responsibilities in respect
of the company.
According to Section 2(54) of the Companies Act, 2013 "managing
director" means:
"A director who, by virtue of articles of a company or an agree
ment with the company or of a resolution passed by the company
is entrusted with
in general meeting or by its Board of directors,
substantial powers of management of the aftairs of the company
and includes a director occupying the position of a managing
director, by whatever name called."

of the
ii Non Executive Director: They are not in the employment
members of the Board, who normally do not
company. They are the
take part in the day-to-day implementation of the company policy.
ii. Shadow Director: Shadow Director is a person who is not formaliy
appointed director, but in accordance with whose directions or

as a
accustomed to act.
instructions the directors ot a company are
iv. Woman Director: Second Proviso to section 149 of the Companies
and Qualifi.
Act, 2013 read with Rule 3 of Companies (Appointment
cation of Directors) Rules, 2014, prescribes that every listed company
share capital of one
and every other public company having paid-up
or more; or turnover of three hundred crore
hundred crore rupees
or more shall appoint at least one Woman director.
rupees
has provided for resi-
V. Resident Director: Section 149(3) of the Act
shall
dence of a director in India as a compulsory i.e. every company
have at lecast onedirector who has stayed in India for aa total

total
of not less than 182 days in the previous calendar ycar. period
the
1i
Independent Directors: Section 149(4) of Companies
Act, 2013
read with Rule 4 of the Companies (Appointment and Qualificatio
of
Directors) Rules, 2014 provides every listed company shall ave
that h
at least one-third of the total number of directors and the foll
class or classes of Companies shall have at least two directors as wing
n-
dependent Directors:
The Public Companies having paid up share capital of ten rore
rupees or more.
The Public Companies turnover of one hundred crore

rupees or
more.
The Public Companies which have, in

aggregate,
loans, debentures and deposits, exceeding fifty croreoutstanding
rupees.
1ii Nominee Director A nominee director
belongs to the
non-executive director and is appointed on behalt of ancategory of
interested
party
vii Lead
Independent Director: A director who coordinates the
activities
of other non-employee directors and advises the chairman on issues
ranging from the schedule of board
tention of advisors and consultants tomeetings recommending
to re-
the management.
ix. SmalI Shareholders Director. A
listed Company have one di-
rector elected
by small shareholders. Such director may
upon notice of not less than 1000 may be appointed
shareholders or 1/10th of the total
shareholders, whichever is lower.
x.
Additional
vides that
Director: Section 161(1) of the Companies Act, 2013
any person, other than a
person who fails to get
pro
as a director in a general appointed
director at any time who meeting may be appointed as an additional
shall hold office up to the date of the
annual general next
meeting or the last
date on which the annual
meeting should have been held, genera
whichever is earlier.
wOMAN DIRECTOR
Q.5 Briefly explain the

legal provisions regarding
director in a public
company, appointment of won
TDecember 2015, 2 Marks]
OR
Answer the following in brief; Which type of a company should have at

least one woman director? December 2016, 2 Marks]
Ans. Proviso to Section 149(1) of the Companies Act, 2013 provides that
certan classes of companies must havc at least onc wonan director. Rule
3 of the Companies (Appointment and Qualification of Directors) Rules,
2014 prescribes that the following class of companics shall have at least
one Woman Director from 1st April 2015
Every Listed Company

Every other Public Company having
a. Paid-up capital of 100 crore rupees or more
b. Turnover of 300 crore rupees or more
06."Corporate Boards are also involved in women empowerment." Com

ment. June 20116, 5 Marks]
OR
"Women can play a significant role in the board of directors" Comment
on the rationale for having a woman director on a company's board.
OR
Write short note on the following; Woman director.
Ans. Women directors can play a significant role in decision making
Companies Act, 2013 has taken a positivestepin this direction by providing
for mandatory appointment of women director on corporate boards.
Proviso to Section 149(1) of the Companies Act, 2013 provides that
certain classes of companies must have at least one woman director.
Rule 3 ofthe Companies (Appointment and Qualification of Directors)
Rules, 2014 prescribes that the following class of companies shall have
at least one Woman Director from Ist April 2015:
EveryListed Company
Every other Public Company having:
a. Paid-up capital of 100 crore rupees or more
b. Turnover of 300 crore rupees or more
Regulation 17(0) of the SEBI(LODR) Regulations requires theat at
Teast one woman director shall be appointed on the board of all listed
entities.
3.6 BOARD EFFECTIVENESs
2018
SEBI (LODR) (Amendment) Regulations,
ne top 500 listcd companics shall have atleast one independent woma
an
du'ector by Ist April 2019 and for the top 1000 listed entities by 1 April
within a period
020. A company shall comply with abovc provisions of
SIx months fronm the date of its incorporation.
SHADOw DIRECTOR
Q7. Is shadow director equally liable with the other directors for obliga.
tions of the firm? [December 2015, 2 Marks
OR
Write short note on the following; Shadow Director.
Ans. Shadow Director is a person who is not formally appointed as a
Director, but in accordance with whose directions or instructions the
directors of a company are accustomed to act. However, a person is not
a Shadow Director merely because the Directors act on advice given by
him in a professional capacity.
Shadow Director is a holder of controlling or majority share of a private
firm who is not technically a director and does not openly participate in
the firm's governance, but whose directions or instructions are routinely
complied with by the employees or other Directors.
In the eyes of law, he or she is a De-facto Director and is held equally liable
for the obligations of the firm with the other De-factoand De-jure Directors
cOMPOSITION AND STRUCTURE OF BOARDcneost o
08. How is the board size of companies determined?

June 2015, 2 Marks]
Ans. Board size is an important determinant of board effectiveness. The
composition and structure of the Board as prescribed under the law s
given hereunder:
cOMPANIES ACT, 2013 SEBI (LODR) REGULATIONS, 2015

Section 149(1) of Companies Act, 2013, Regulation 17(1)(a) of SEBI (LOD
provides that every company shall Regulations, 2015 provides that Boar
have a Board of Directors consisting of of directors shall have an optimunt
individuals as directors and shall have -combination of xec-
executiveand noran
A minimum number of three utive directors with at least one wOnid
directors in the of director and not less than hfty per cen
case a public of the board of directors shall comprise
company.
of non-executive directors.
BOARDEFFECTIVENESS 3.7
A t least Iwo direetors in the case Regulation 17(1)(b) of SEBI (LODR)

of a privale company Regulations, 2015 provides that the
directors of
Atleast onedircctor in the case of Ccomposition of board of
a One Person Company. the listed entity shall be as follows:
the board of
A maximum of fifteen dircctors Where the chairperson of
dircctors is a non-cxccutive director, at
provided that a company may
lcast one-third of thc board of directors
appointnmorethan tilteendirectors| shall comprise ofindependent directors;
alter passing a special resolution.
where thelisted entity does not have a
Section 149(4) of Companies Act, 2013,regular non-executive chairperson, at
providesthatevery public listed compa- least half of the board of directors shall
ny shall haveatleast one third of total comprise of independent directors.
number of directors as independent
Regulation 17(1)(c) of SEBI (LODR)
directors and Central Government 2015 that the
provides
the minimum number Regulations,
may prescribe ot directors of the top 1000 listed
of independent directors for any class board
from April 1, 2019)
entities (with effect
or classes of companies. and the top 2000 listed entities (with
effect from April 1,2020)shall comprise
of not less than six directors.
SELECTION AND APPoINTMENT OF DIRECTORS

listed company,
09. Pawan, carrying 5.23% shares of Combo Ltd., a was
offered directorship in the company. What will be the consequences of

accepting the offer on his holdings? [December 2015, 5 Marks]
Ans. As per Section 184(1) of the Companies Act, 2013:
Every director shall at the first meeting of the Board in which he participates
as a director and thereafter at the tirst meeting of the Board in everv
linancial year or whenever there is any change in the disclosures already
made, then at the first Board meeting held after such change, disclose his
concern or interest in any company or companies or bodies corporate, tirms,
or other association of individuals which shall include the shareholding, in
Such manner as may be prescribed.
As per Rule 9 of the Companies (Meetings of Board and its Powers) Rules,
2014 following are to Disclosures by a director of his interest:
(1) Every director shall disclose his concern or interest in any company
or companies or bodies corporate (including shareholding interest),
firms or other association of individuals, by giving a notice in writing
in Form MBP 1.
3.8
BOARDEFFECTIVENESS
I t shall be the duty of the dircctorgiving noticeof interest to cause i

be disclosed at the mceting held immediately alter the date of the
notice.
(3) All notices shall be kept at the registered office and such notices shall
be preserved for a period of eight years trom the end of the financial
year to which it relates and shall be kept in the custody of the com.
n
pany secretary of the company or any other person authorised by the
Board for the purpOse.
As per Regulation 7(1) ofSEBI(Prohibition ofInsiderTrading) Regulations,,
2015:
Every person on appointment as a Key Managerial Personnel or a Director
of the Company or upon becoming a promoter shall disclose his holding
of securities of
the company as on the date of appointment or
a promoter, to the company within seven days of such appointment or
becoming
becoming a promoter.
Thus, in light of the aforesaid laws on the disclosure requirements, Mr.
Pawan shall disclose his shareholding under above laws and
regulations
in the Combo Ltd. on accepting the offer of Directorship.
INDEPENDENT DIRECTORS FOR BETTER BOARD EFFECTIVENESS
010. "Independent directors are directors who apart from receiving direc
tor's
remuneration do not have any other material pecuniary relationship
or transactions with the company, its promoters, its management or its
subsidiaries". Elucidate. June 2018, 5 Marks
Ans. Section 149(6)(c) of Companies Act, 2013 states that "Independent
Director". An independent director in relation to a company, means a
director other than a managing director or a whole-time director or a
nominee director, who has or had no pecuniary relationship, other than
remuneration as such director or having transaction not exceeding ten per
cent of his total income or such amount as may be prescribed, with the
company, its holding, subsidiary or associate or their
company, promoters
or directors, during the two immediately preceding financial years or during
the current financial year.
MCA vide a General Circular in 2014 has issued the following clarification
with respect to Pecuniary Relationship' of Independent Director:
In case, a company carries out transactions in the

ordinary cours
of business at arm's length price with an Independent Director,
suc
Independent Director would not be said to have 'pecuniary relation"
ship' with the company.
BOARDEFFECTIVENFSS 3.9
In case of Independent Dircctors, Pecuniary Relationship' does not
include reccipl of remuneration by way of sitting fees, reimbursement
of expenses lor participation in the Board and other meetings and
remuneralion in the lor ol commission.
The matter has been examined in consultation with SEBI and it is clarificd
that 'pecuniary relationship' provided in section 149(6)%c) of the Act does
not include receipt of remuneration, from one or more companies, by
way of fee provided under sub-section (5) of section 197, reimbursement
of expenses for participation in the Board and other meetings and profit
related commission approved by the members, in accordance with the
provisions of the Act.
Q11. In Pramod Ltd., vacancy of an independent director arose on 15th
June, 2014. In the Board meeting held on 14th October, 2014, the Board
of directors unanimously passed a resolution to appoint one of the nom
inee directors as an independent director for next two consecutive terms.
Enumerate the selection criteria of an independent director.
Ans. Section 149(6) of Companies Act, 2013 defines independent director
as under:
other
"Independent Director" in relation to a company, means a director
than a managing director or a whole time director or a nominee director, -
a Who, in the opinion of the Board, is a person of integrity and possesses

relevant expertise and experience.
b. (i) Who is or was not a promoter of the Company or its Holding, Sub-
sidiary or Associate Company
is not related to Promoters or Directors in the company, its
(i) Who
holding, subsidiary or associate company.
c. Who has or had no pecuniary relationship, other than remuneration
as such director or having transaction not exceeding ten per cent of
his total income or such amount as may be prescribed, with the com-
assockate company, or ther promoters,
pany, its holding, subsidiary or
or directors, during the two immediately preceding financial years or
during the current financial year;

d. None of whose relatives
in the conpany, its holding,
( Is holding any security of or interest
subsidiary or associate company during the two immediately
years or during the
current financial year:
preceding financial
3.10
BOARD EFFECTIVENESS
Provided that the relative may hold security or interest in

the
of
company face value not exceeding fifty lakh rupees or two per
cent of the paid-up capital of the
company, its holding, subsidiar
or associate such
company or
higher sum as may be prescribed
(i) Is indebted to the company, its
holding, subsidiary or
company ortheirpromoters, or directors, in excess ot such
associate
amount
as may be prescribed during the two
immediately
financial years or during the current financial preceding
year.
(iit Has given a
guarantee or
with the indebtedness of provided any security in connection
any third person to the
holding, subsidiary or associate company company, its
or their
directors of such holding promoters, or
company, for such amount as may be
prescribed during the two immediately preceding financial
or
during the current
financial year. years
(iv) Has any other pecuniary transaction
company, or its subsidiary, or its
or
relationship with the
amounting to two per cent or moreholding associate company
or
of its gross turnover
income singly in
combination with the transactions
or total or
to in sub-clause
(), (i) or (iî) referred
e. Who, neither himself nor
any of his relatives
i Holds or has held
the position of a
is or has been Key Managerial Personnel or
employee of the company or its
or associate company in any of the
three
holding, subsidiary
diately preceding the financial years imme-
be appointed.
financial year in which he is
proposed
to
ii Is or has been
an
the three financial employee
or
proprietor or a partner, in any ot
in which he is years immediately precedingthe financial year
proposed
to be
appointed, of-
A firm of
auditors or
cost auditors of company secretaries in practice
the or
associate company. company or its
holding, subsidiary or
Any legal or a
tion with the consulting firm that has or had any
company, its holding, transac
company amounting to ten subsidiary or associate
per cent
turnover of such or
more of the
firm. gross
iii Holds together with his
voting power of the relatives two per cent or more of the
iv. Is a Chief company. tota
Executive or director,
non-profit organisation that by whatever name called, of any
of its receipts trom the receivestwenty-five
company, any of its
per cent or mot
promoters, directO
BOARDEFFECTIVENESS 3.11
or its holding, subsidiary or associate company or that holds two

per cent Or more of the total voting power of the company.
Who possesses such other qualifications as may be prescribcd.

Conclusion
of
In the given case, Board of Directors of Pramod Ltd. has appointed one
the nominee directOrs as an independent director. The Director so appointed

Further,
cannot be considered independent as he is a Nominee Director.
Schedule IV of the Companies Act, 2013, provides that the appointment ot
[ndependent Director(s) of the Company shall be approved at the mectingot
Board of Directors
the Shareholders. Hence, the appointment made by the
of Pramod Ltd. is not valid.
MEANING OF INDEPENDENT DIRECTOR UNDER REGULATION 16(1)(b)

OF SEBI (LODR) REGULATIONS
Q12. "Independent directors known to bring objective view in board

are
one individual
deliberations, they also ensure that there is no dominance of
or the stifling of healthy debate. They
act as the
or special interest group
guardians of the interest of all shareholders and stakeholders, especially

in the of potential conflict'.
areas
Discuss the above statement in the light of Regulation 16(1)(b) of the

SEBI. 2404
Ans. As per Regulation 16(1)(b) of SEBI (LODR) Regulations, Independent
non-executive director, other than a nominee director
director' means a
of the listed entity:

1. Who, in the opinion of the Board, is a person of integrity and possesses
relevant expertise and experience.
2. Who is or was not a promoter of the listed entity or its holding, sub-
or member of the promoter group of
sidiary or associate company
the listed entity.
3. Who is not related to promoters or directors in the listed entity or its
holding, subsidiary or associate company.
has or had no
4. Who, apart from receiving director's remuneration, its
material pecuniary relationship with
the listed entity, holding, sub.
or their promoters, or directors, during
sidiary or associate company, the current
linancial or years during
the two immediately preceding
financial year.
3.12 BOARD EFFECTIVENESS
5. None of whose relatives has or had pecuniary

relationshiportransacti
with the listed entity, its holding, subsidiary or associate company
their promoters, or directors, amounting to two per cent or mor
its gross turnover or total income or fifty lakh rupees or such of
hioh.
amount as may be prescribed, whichever is lower, during the
immediately preceding financial years or during the current wo
year.
financial
6. Who, neither himselt nor any of his relatives:
A. Holds or has held the position of a key
is or has been employee of the listed
managerial personnel or
entity or its holding, sub.
sidiary or associate company in any of the three financial ycars
immediately preceding the financial year in which he is proposed
to be appointed.
B. Is or has been an
employee or proprietor or a partner, in any of
the three financial years
immediately preceding the financial year
in which he is proposed to be appointed, of -
i A firm of auditors or company secretaries in practice or
cost auditors of the listed
entity or its holding, subsidiary
or associate company.
ii Any legal or a
consulting firm that has had any transac
or
tion with the listed
entity, holding,
its subsidiary or associate
company amounting to ten per cent or more of the gross
turnover of such firm.
C. Holds together with his relatives two per cent or more of the total
voting power of the listed entity.
D. Is a Chief Executive or director, by whatever
name called, of any
non-profit organisation that receives twenty-five per cent or more
of its receipts or corpus from the listed
entity, any of its promot-
ers, directors or its holding, subsidiary or associate company or
that holds two per cent or more of the total voting power of the
listed company.
E. Is a material supplier, service provider or customer or a lessor
or lessee of the listed company.
7. Who is not less than 21
years of age.
8. Who is not a non-independent director of another company on tne
board of which any non-independent director of the listed entity is a"
independent director.
ROLE AND FUNCTIONS OF INDEPENDENT DIRECTORS e

013. Independent directors bring valuable outside perspective and have
objective view in Board deliberations. What are the various roles of an
independent director? [December 2016, 5 Marks]
OR
Write short note on the following; Role of independent director.
June 2014, 3 Marks each]
OR
directors known to bring objective view in board
"Independent are an
deliberations. They act as guardians of the interest of all stakeholders,
especially in the areas of potential conflicts". Discuss
Ans. Schedule IV of the Companies Act, 2013 provides that, independent

directors shall:
in bringing an independent judgment to bear on the Board's
1. Help
deliberations especially on issues of strategy, performance, risk man-
standards of conduct.
agement, resources, key appointments and
of board
2. Bring an objective view in the evaluation of the performance
and management.
3. Scrutinise the performance of management in meeting agreed goals
and objectives and monitor the reporting of performance.
4. Satisfy themselves the integrity of financial information and that

on
robust and
financial controls and the systems of risk management are
defensible.
5. Safeguard the interests of all stakeholders, particularly the minority
shareholders.
6. Balance the conflicting interest of the stakeholders.
directors,
appropriate levels of remuneration of
executive
7. Determine
senior management and have a prime
key managerial personnel and
recommend removal of ex-
role in appointing and where necessary
ecutive directors, key managerial personnel
8. Moderate and arbitrate in the interest
of the company as a whole, in
and shareholder's interest.
situations of conflict between management
manifestation of personal beliefs
Q14."Good governance is decisively the
beliefs and actions of
and values which configure the organizational values,
the board, A properly structured board capable
of taking independent and
3.16 BOARD FFECTIVENESS
hdependent Director shall be on the basis of report of his

evaluation. performan.
ance
. An dependent Director who
of
resigns or is removed from the Bo0ae
the company shall be
a
replaced by a new Independent Director with
period of not more than one hundred and from eighty days the
Such resignation removal, the
date f
or as case may be.
014A. Good governance is a hallmark of the
and values. A properly structured board organizational objectives
and Object decision is the
capable of talking
independent
pivot corporate governance a board
of
therefore be a mix of executive and should
of experience and code independent directors with a
variety
competence so that it may effectively fulfil its
responsibilities by laying down policies and
strategies,
agement performance objectively. In the monitoring man-
discuss the role of light of the above statement
independent directors in the
specific reference to the code of conduct of corporate governance with
provisions of the Companies Act, 2013. independent directors as the
Ans. Section
149(8) of the Companies Act, 2013 mandates
Directors to abide by the Code for Independent
has been detailed in Schedule IV to theIndependent Directors. The said Code
a guide to Companies Act, 2013. The Code is
professional conduct for Independent Directors.
Following are the Role and Functions of
Schedule IV of the Companies
Act, 2013:
Independent Directors as per
1. Help in
bringing an independent judgment to bear on the
deliberations especially on issues of
Boards
agement, resources, key strategy, performance, risk man
2. Bring an
appointments and standards of conduct.
objective view in the evaluation of
the
and management. performance of board
3. Scrutinize the
and performance of management in meeting
objectives and monitor the reporting of agreed goas
4. Satisfy themselves on the performance.
financial controls and the integrity of financial information and
defensible. systems of risk that
management are robust an
5. Safeguard the interests of all
shareholders. stakeholders, particularly the minorn
(Note: This list is inclusive and not
Following are the exhaustive)
Guidelines for
Directors as per Schedule V of the professional conduct of Independe
Companies Act, 2013:
Uphold ethical standards of integrity and probity.

2. Act objectively and constructively while exercising his duties.
3. Exercise his responsibilities in a bona fide manner in the interest of
the company.
4. Devote sufticient time and attention to his professional obligations tor
informed and balanced decision
making
5. Not allow any extraneous considerations that will vitiate his exercisee
of objective independent judgment in the paramount interest of the
company as a whole, while concurring in or dissenting from the col
lective judgment of the Board in its decision making.
6. Not abuse his position to the detriment of the company or its sharehold-
ers or for the purpose of gaining direct or indirect personal advantage
or advantage for any associated person.
Refrain from any action that would lead to loss of his independence.
8. Where circumstances arise which make an independent director lose
his independence, the independent director must immediately intorm
the Board accordingly.
9. Assist the company in implementing the best corporate governance
practices.
SEPARATE MEETINGS OF INDEPENDENT DIRECTORSS
015. What are qualifications of an Independent Director (ID)?

Describe provisions under Companies Act, 2013 about separate meetings
of Independent Directors (1Ds). [December 2018, 5 Marks]
OR
Are there any separate provisions of the meetings of the Independent
Directors? If yes, state such provisions and also their rationale.
June 2017, 5 Marks]
Ans.
Qualification of an Independent Director
Section 149(6) of the Companies Act, 2013 read with Rule 5 of
Companies (Appointment and Qualitication of Directors) Rules,
2014 provides that an independent director shall posess appropriate
Skills, experience and knowledge in one or more fields of finance, law,
management, sales, marketing, administration, research, corporate
governance, technical operations or other disciplines related to the
Company's business.
3.18
BOARDEFFECTIVENESS
None of the relatives of an independent dircctor, lor the purposcs f

Sub-clauses (i) and (i) of clause (d) ol sub-section (6) ol section 149
.Is indcbted to the company, its holding, subsidiary or associate
company or their promoters, or directors; or
. Has given a guarantee or provided any sccurity in connection
with the indebtedness of any third person to the comnpany, its
holding, subsidiary or associate company or their promoters, or
directors of such holding conmpany,
for an amount of lilty lakhs rupees, at any time during the two imme.
diately preceding inancial years or during the current linancial year.
Separate meetings of the Independent Directors
Companies Act, 2013 and SEBI (LODR) Regulations mandates the
separate meeting of independent directors for all the listed companies.
Schedule IV of the Companies Act, 2013 provides the
following:
The independent directors of the company shall hold at least one
meeting in a year.
Such meeting will be without the attendance of non-independe
directors and the members of management.
All the independent directors of the company shall strive to be
present at such meeting to undertake following:
a Review the performance of non-independent directors and
the Board as a whole.
b. Review the
performanceof the Chairpersonof the company,
taking into account the views of executive directors and
non-executive directors.
Assess the quality, quantity and timeliness of flow of
information between
the company management and the Board that is
necessary for the Board
to effectively and
reasonably perform
their duties.
Regulation 25(3) of SEBI (LODR) Regulations, 2015 provides the following
obligations with respect to independent director:
The independent directors of the listed entity
shall hold at least one meel
ing in a financial year, without the presence of
and members of the management and all the non-independent directo
independent directors sha
strive to be present at such meeting. The term financial has
been inserte
by the SEBI (LiSting Obligations and Disclosure
Amendment) Regulations, 2021 w.e.f. 5.5.2021. Requirements(Secon
137
APPOINTMENT OF LEAD INDEPENDENT DIRECTOR
016. Write short note on the following; Lead independent director.

|December 2014, 3 Marks] [June 2014, 3 Marks
OR
directors.
Discuss and elaborate the following; Senior independent
director or
Ans. Designating an independent dircctor as a lead independent
internationally
senior independent director is considered as a good practice
Following are the roles of the lead independent directors:
of the
Acts as
the principal liaison between the independent directors
Board and the Chairman of the Board.
the
Develops the agenda for and preside at executive sessions of
Board's independent directors.
for
Advises the Chairman of the Board as to an appropriate schedule can
directors
Board meetings, seeking to ensure that the independent
tlow
performtheir duties responsibly while not interfering with the
of Company operations.
for Board and
Approves with the Chairman of the Board the agenda
of the
Board Committee meetings and the need for special meetings
Board.
EXECUTIVE OFFICER
SEPARATION OF ROLE OF CHAIRMAN AND CHIEF
017. What are the primary responsibilities of the Chairman for leading
its effectiveness? June 2017, 5 Marks]
the Board and ensuring
OR
is to lead the board and ensure
The chairman's primary responsibility
its effectiveness". Elucidate this statement.
June 2010, 5 Marks]
Ans. The role of the Chairman includes:

1. Demonstrating ethical leadership.
is tocused on strategy, per-
.Setting a board agenda which primarily and
ensuring that issues
formance, value creation and accountability, decision.
reserved for board
relevant to these areas are
. Ensuring a timely flow of high-quality supporting information; regularly

and the composition of the board etc.
Considering succession planning
4. Encouraging active engagement by all members of the Board.

5. Taking
Taking the lead in providing a comprehensive, formal and tailored
induction programme for new Directors, and in addressing the
tailored
development necds of individual Directors to ensure that they have
the skills and knowledge to fullil thecir role on the Board and on Board
Committees.
6.
Evaluating annually the performance of each Board member in his
her role as a Director, and ensuring that the performance of the
Board
as a whole and its Committees is evaluated
annually.
7. Holding meetings with the non-executive Directors without
the
executives being present.
8. Ensuring effective communication with shareholders and in particular
that the company maintains contact with its
matters relating to strategy,
principal shareholders on
governance and Directors' remuneration.
Ensuring that the views of shareholders are communicated to
Board as a whole. the
Q18. Describe briefly the following; Chief Executive Officer (CEO).

Ans. As per Section
June 2012, 3 Marks
2(18) of the Companies Act, 2013, "Chief Executive
Officer" means an officer of a
by it. company, who has been designated as such
The Board appoints the CEO
based on the criterion of his
competence manage the company
to capability and
aspect of the company's effectively. He is involved with every
performance.
by a skilled board and CEO is
The CEO is
supported and advised
actions. ultimately accountable to the board for his
His main
responsibilities include:
Developing and implementing high-level
Making major corporate decisions. strategies.
Managing the overall operations and
Acting the main point of
as resources of a company.
directors and the communication between the board o
corporate operations.
CEO should be able to,
and authority keep the by
the virtue of his
ability, expertise, resource
company
change whether external or prepared to avail the benefit ot ay
internal.
019. Explain the following; Separation of role of chairman and chief

executive. [December 2014, 3 Marks]
Ans. The first proviso of Section 203(1) of Companies Act, 2013 states that
an individual shall not be appointed or reappointed as the chairperson of
the company, in pursuance of the articles of the company, as wel as the
managing director or Chief Executive Officer of the company at the same
time after the date of commencement of this Act unless:
a. The articles of such a company provide otherwise.
h. The company does not carry multiple businesses.
Need for separation of Chairman and Chief Executive Officer
It is perceived that separating the roles of chairman and chief executive
officer (CEO) increases the effectiveness of a company's board.
It is the board's and chairman's job to monitor and evaluate a company's
performance. A CEO, on the other hand, represents the management
team. If the two roles are performed by the same person, then it's an
individual evaluating himself. When the roles are separate, a CEO is far
more accountable.
A clear demarcation of the roles and responsibilities of the Chairman of the
Board and that of the Managing Director/CEO promotes balance of power.
Benefits of separation
The benefits of separation of roles of Chairman and CEO can be:
Direct Communication: A separate chairman provides a more effective
channel for the board to express its views on management.
Guidance: A separate chairman can provide the CEO with guidance
and feedback on his/her performance.
Shareholders' interest: The chairman can focus on shareholderinter
ests, while the CEO manages the company.
Governance: A separate chairman allows the board to function more
effectively and fulfil its regulatory requirements.
Long-Term Outlook: Separating the position allows the chairman to
focus on the long-term strategy while the CEO focuses on short-term
profitability.
Succession Planning: A separate chairman can more eftectively con-
centrate on corporate succession plans.
020. Describe the key role of Chief Executive Officer (CE0) and the
oenefits of separation of roles of Chalrman and the CE0.
BOARD EFFECTIVENESS
3.22
Ans. No. 18
Officer: Refer to
Ans. Role of
Chief Executive
and the CEO: Reter to Ans. No. 19
Separation of roles of Chairman
DEVELOPMENT AND FAMILIARISATION

DIRECTORS TRAINING,
of directors.
021. Discuss briefly the following; Training
Ans. Board effectiveness can be achieved by paying appropriate attention
to development and training of directors. Director orientation/induction
should be seen as the first step of the board's continuing improvement.
Following are the key points on training of directors:

PURPOSE EXPLANATION
S
No.
1. Need fortraining | Since the Board composition is getting more diverse,
ofdirectors a system of formal training and evaluation is very im-
portant to foster trust, cohesion and communication
among board members.
2. Benefits ofTrain- Investing in board development strengthens the board
ing of directors and individual directors. As the Board of Directors is
primarily responsible for good governance practices,
which is quite different from management, it calls for|
new areas of knowledge and different skills.
3. Training pro-|It should encompass both a thorough induction pro-
grammee gramme and an
ongoing training and development
opportunities for the board members.
4. Purpose of Train-| Training should focus on improving the knowledge
ing and skills of the board and individual members and on
overall board performance.
5. Training of all | Training should be required for each board member
board members and
compliance with the requirement used to asses
individual board member
ment to additional terms
performance for reappom
of board service. Requiremens
should be set forth in a board policy that describes tne
focus and type of
education available.
Q22. Answer the following; Should there be
Directors? Discuss.
an induction progranmnne for
December 2017, 2 Marks
Ans. Director orientation/induction should be the
seen as the first step ot
board's continuing improvement. Since the Board etting
more diverse, a system ot formal

composition 15 tto
training andevaluation is very importa
fostertrust, cohesionand communication among board members. Investing

in board devclopment strengthens the board and individual directors.
As the Board of Directors is primarily responsible for good governance
practices, which is quite different from management, it calls for new areas
of knowlcdge and different skills.
Common methods of induction
Brieting papers
Internal visits
Introductions
An induction programme should be available to enable new directors to
gain an understanding of:
The company's financial, strategic, operational and risk management
position.
h e rights, duties and responsibilities of the directo
The roles and responsibilities of senior executives.
The role of board committees.
An induction kit should be given to new directors which should contain
MOA, AOA, brief history of the company, Current business plan, market
analysis and budgets, Protocol, procedures and dress code for various
meetings, Annual report for last three years, Board's meeting schedule and
Board committee meeting schedule, description of Board procedures, etc.
023. Write short notes on the following; Training of Independent Direc

tors. [December2018,2 Marks]
Ans. As per Regulation 25(7) of SEBI (LODR) Regulations, 2015 the
listed entity shall familiarise the independent directors through various
programmes about the listed entity, including the following:
a Nature of the industry in which the listed entity operates.
b. Business model of the listed entity.
c. Roles, rights, responsibilities of independent directors.
d Any other relevant information.
Schedule IV of the Companies Act, 2013 provides for Code for Independent
Directors, wherein the Independent Directors shall undertake appropriate
induction and regularly update and refresh their skills, knowledge and
familiarity with the company.
024. Discuss briefly the following; Directors development programme.
Ans. Directors Development should not be treated as mercly another

trainingschedule rather it should be structured so as to sharpen the existing
skills and knowledge of directors. It is good practice tor boards to arrange
tor an ongoing updation of their members with changes in governance,
technologies markets, products, and so on through:
1. Ongoingeducation
2. Site visits;
3. Seminars;
4. Various short term and long term courses.
PERFORMANCE EVALUATION OF THE BOARD AND MANAGEMENT
025. Write short note on the following; Performance evaluation of direc.

tors. June 2014, 3 Marks]
OR
RST Ltd. recently issued the Equity Shares on basis of
right issue. Due to
this, the paid-up capital of the Company has been increased from? 7.5
crore toR 15 crore. The
Company Secretary in the Board Meeting put
up the proposal for constitution of various committees
Committee and Nomination & Remuneration including Audit
the Committee were Committee. All members of
proposed
of Nomination & Remuneration
to be
Independent Directors. In the scope
the Committee shall also evaluate Committee, it was inter alia added
that
the performance of
aging Director (CMD)) of the company. The Directors Chairman & Man-
meeting strictly objected on the said proposal. CMDpresent in the Board
has also
dissent on the proposal. expressed
In view of this, check the validity of the
proposal of the Company Secre
tary. [December 2019, 5 Marks]
Ans. In order to check the
validity of the proposal of the
one needs to understand the
following: Company Secretary,
As per Rule 6 of the Companies
Rules, 2014 read with Rule 4 of (Meeting
of Board and its
the Power)
Companies
Qualification of Directors) Rules, 2014: (Appointment and
Every listed company public company having the
or
constitute an Audit Committee and Nomination following shall
and Remuneration
Committee:
i Paid up capital of 7 10 crore or more,
or
ii. Turnover of ? 100 Crore or more,

or
ii. Aggregate outstanding loan, debenture and deposit exceeding

50 Crore.
Role of Nominations and Remuneration Committee in performance
evaluation of directors
Under Section 178(2) of the Companies Act, 2013:The Nomination and
Remuneration Committee shall identify persons who are qualified to
become directors and who may be appointed in senior management in
accordance with the criteria laid down, recommend to the Board their
appointment and removal and shall specify the manner for ettective
evaluation of performance of Board, its committees and individual
directors to be carried out either by the Board, by the Nomination
and Remuneration Committee or by an independent external agency
and review its implementation and compliance.
Performance of the Chairperson
The performance of the Chairperson is linked to both the functioning
of the Board as a whole as well as the performance of each director.
The Nomination and Remuneration Committee provides that the
Independent Director should review the performance of the Chair-
person of the company taking into account the views of the executive
directors and non-executive directors.
In view of the above, the proposal of the Company Secretary is valid
as per the law.
026. "The Board of directors plays a pivotal role in ensuring good gov
ernance. The role of the Board is two-dimensional; as a cornerstone in
evolving sound, efficient, vibrant and dynamic corporate for attaining of
high standards in integrity, transparency, code of conduct, accountabil.
ity as well as in promoting social responsibility. The contribution of the
directors on the Board is critical to the way a corporate conducts itself.
An effective Board evaluation requires the right combination of dynam-
ic factors of performance of the Board as entrepreneurial leader of the
company within the framework of prudent and effective controls, which
enables risk to be assessed and managed." [December 2010, 10 Marks]
Ans. As per the Companies Act, 2013 or SEBI (Listing Obligations and
Dsclosure Requirements) Regulations, 2015, Board evaluation would
include following
. Evaluation of the Board as a whole
2. Evaluation of the Committees

3. Evaluation of Individual Directors
Director/Executive Director
Managing Director/Whole time
Independent Directors
Non- executive Directors
4. Evaluation of the Chairperson

Board's evaluation:
Following are the provisions on
Provisions under Companies Act, 2013

that there has to
Section134(3)(p) of Companies Act, 2013, provides
own pertormance and
be aformal annual evaluation of Board of its
directors.
that of its committees and individual
evaluation either in accordance
The Company may undertake annual
with calendar year or financial year, as there is no clarity on this
Ideally, the same should be as per financial year.

Provisions under the SEBI (Listing Obligations and Disclosure
to conduct
Requirements) Regulations, 2015: It requires Boards
an
annual performance evaluation and its disclosure in the annual report

through the following provisions:
1. Regulation 17(10) -The evaluation ofindependent directors shall
done by the entire board of directors which shall include
a Performance of the directors
b. Fulfilment of the independence criteria as specified in these
regulations and their independence from the management
Provided that in the above evaluation, the directors who are
subject to evaluation shall not participate.
2. Regulation 19(4) read with Part D of Schedule II - Role of Nomi
nation and Remuneration Committee shall include the following
a. Formulation of the criteria for determining qualifications
positive attributes and independence of a director and rec
ommend to the board of directors a policy relating to, the
remuneration of the directors, key managerial personnel
and other employees.
b Formulation of criteria for evaluation of performance «
independent directors and the board ofdirectors.
C. Devising a policy on diversity of board of directors.
d Identifying persons who are qualitied to become directors
and who may be appointed in senior management in accor
dance with the criteria laid down, and recomnend to the

board of directors their appointment and removal.
e. Whether to extend or continue the term of appointment
of the independent director, on the basis of the report ol
pertormance evaluation of independcnt directors.

Substituted by the SEBI (Listing Obligations and Disclosure Require
ments) Second Amendment) Regulations, 2021 w.e.f. 5.5.2021.
BARRIERS TO VISIONARY LEADERSHIP
027. How can an organization facilitate visionary board leadership?

OR
Discuss the barriers to visionary leadership. [Decenber 2012, 5 Marks]
OR
Describe briefly the following; Barriers to Visionary leadership.
Ans. According to Frank Martinelli an organisation can facilitate visionary
board leadership by identikying the following barriers and removing them:
1. Lack of Time Management: Lack of time to attend meetings, read
materials and maintain contact with each other in between meet
The board members need to organize themselves for maximum
ings.
effectiveness and avoid wasting time on trivial matters.
2. Resistance to risk taking: In order to be innovative and creative in its
decision making, boards must be willing to take chances, to try new
things, to take risks. Board leadership must strikea balance between

traditional stewardship role.
taking chances and maintaining the
3. Lack of Strategic Planning: Strategic planning offers boards an
to think about changes and trends. Some boards
are not
opportunity
involved in strategic planning at all; others are involved in a superficial
important opportunity to exercise
way. Therefore, the boards lose
an
VIsionary leadership skills

4. Complexity: Board members frequently lack a deep understanding
critical changes, trends and developments. This lack of knowledge
results in a lack of confidence on the part of the board to act decisively
and authoritatively.
. Micro Management: It is necessary that the board focuses its attention
items of critical importance to the organization. If the boardis
3.28
BOARD EFFECTIVENESS
Tempted to micro managc or to meddle in lesser maters, an oppor.

uity to provide visionary leadership s s t .
.
Clinging to Tradition: Boards often resist change in order to presery
tradition. However, changing environment requires the Boards to be
Open to change This human tendency to hold on to the known Dro
vents boards from considering and pursuing new opportunities which
contlict with the old rules.
7. Confused Roles: Some boards assume that it is the job of the exe.
cutive director to do the visionary thinking and that the board will sit
and wait for direction and inspiration. This lack of clarity can resul
in boards that do not exercise visionary leadership because they do
not think it is their job.
8. Past Habit Time was when clients, members and consumers would
just walk in the door on their own and boards did not consider market
place pressures, or for that matter a competitive marketplace. All that
s changed, yet for many boards their leadership style has not kept
pace with this new awareness.
028. Describe various mandatory Board Committees for Insurance Com

panies in India with reference to the Insurance Regulatory and Develop
nent Authority of India (IRDAI) Corporate Governance Guidelines on
Delegation of Function Committees of the Board.
Ans. The Insurance Regulatory and
has revised the existing
Development Authority of India (IRDA)
CorporateGovernance Guidelines for Insurance
Companies in the light of changes brought in by the Companies Act, 2013
vide Circular Dated 18th May 2016.
As per the said Guidelines, with a view to
provide adequate Board time for
discharge of the significant corporate responsibilities, the Board can consider
setting up of various Committees of Directors by
delegating the overall
monitoring responsibilities after laying down the roles and
of these Committees to the Board. responsibilities
IRDAI advises all insurers that it is
committees:
mandatory to establish the following
() Audit Committee.
(ii) Investment Committe.
(ii) Risk Management Committe.
(iv) Policyholder Protection Committee.
(Nomination and Remuneration Committec.

(v) Corporate Social Responsibility Committec (only for insurers carning
profits).
Regulation 34 of the IRDA (Non-linked Insurance Products) Regulations,
2019 requires constitution of a With Profits' Committee by Life Insurance
Companies comprising of one Independent Director of the Board, the
Chief Executive Oficer, the Appointed Actuary of the Company and an
Independent Actuary.
CONFERENCE BOARD COMMISSION ON PUBLIC TRUSTS AND PRIVATE

ENTERPRISES
Q29."The Board of Directors is ultimately responsible for its firm's success

or failure, as well as for the ethical climate and practices of its company."
In the light of this statement, mention the areas of oversight by Board as
suggested by Conference Board Commission on Public Trustsand Private
Enterprises. December 2018, 5 Marks]
Ans. The actions and attitudes of the board greatly influence the ethical
climate of an organization. The directors on a company's board assume
legal responsibility for the firm's resources and decisions. Board members
have a fiduciary duty, ie, a position of trust and confidence.
Duetoglobalization and enhanced role ofmedia andtechnology the demand
for accountability and transparency has increased greatly. This calls for
ethical decision-making as well as an ethical decision making framework.
Areport by the Conference Board Commission on Public Trust and Private
Enterprise suggested the following areas of oversight by a Board:
Designation of a Board Committee to oversee ethical issues.
Designation of an officer to oversee ethical practices and employees
compliance with the code of ethics.
Inclusion of ethics-related criteria in employees' annual pertormance
reviews and in the evaluation and compensation of management.
Representation by senior management that all known ethical breaches
have been reported, investigated, and resolved.
Disclosure of practices and processes the company has adopted to
promote ethical behaviour.
dchedule IV of the Companies Act, 2013 prescribes Code for Independent
Irectors which cast duty on Independent Directors to report concerns
aDout unethical behaviour, actual or suspected fraud or violation of the
company's code of conduct or ethics policy.
management responsibility
029A. "Investor Relations (IR) is a strategic &t securities law com.
communication, marketing
at integrates finance, between a
pliance to enable the most effective two-way communication
mpany, financial community
and other constituencles
of Investor Relations Officer (IRO
Blucidate the role and responsibilities December 2018, 5 Marks
In the light of the above statement.
Ans. Investor Relations (IR) is a strategic managcment responsibility that

sccurities law compliance
communication, markcting and
ntegrates finance, c o m m u n i c a t i o n between a company
to enablethe most effective two-way which ultimatelv
the financial community,
and other constituencies,
securities achieving fair
valuation.
contributes to a company's
They have the following roles and responsibilities:

mostaspects of shareholder meetings,
press conferences,
To oversee
nmeetings with investors, (known

as "one-on-one" briefings).
private
investorrelations sections of company websites, and company annual
reports.
to intangible values
Responsible for transmission ofinformation relating
such as the company's policy on corporate governance or corporate
social responsibility.
Managing the interactive data and the management of company fil.
XBRL or other forms
ings through streaming-data solutions such as
of electronic disclosure.
T o be aware of current and upcoming issues that an organization

may face, particularly those that relate to fiduciary duty and have an
organizational impact.
Must be able to assess the various patterns of stock-trading thata
public company may experience as the result of a public disclosure
(or any research reports issued by financial analysts).
Must work closely with the Company Secretary on legal and regulatory
matters that affect shareholders.
MODEL B0ARD CHARTER

Q30. Write short note on the following; Board Charter.
June2014, 3 Marks
OR
As a company secretary of ABC Ltd. prepare a board note listing out the
items that should be included in the board charter.
June 2013, 6 Marks
Ans.
To
The Board of Directors
ABC Ltd.
Subject: Contents of a Board Charter
Dear Sir
ABoard Charter is a tool to assist directors in fulfilling their responsibilities
out the respective roles, responsibilities and
as Board members. It sets
authorities of the Board and of Management in the governance, management
and control of the organization. This charter should be read conjunction
in
with the Company's Memorandum and Articles.
A Model Charter may include the following:
The Role of the Board

The Role of the CE0 and Chairman
The Role of the Company Secretary
Directors Code of Conduct
Conflicts ofInterests
Related Party transactions
Board Members Qualifications, skills,
etc.
Board Meetings
the Board
Delegation of Authority by
Role & power of Committees
Committee Meetings
and comment
Protocol for media contact
Hospitality and Gifts
Board Evaluation
Directors liability insurance
familiarization
Director Induction, training and
Non-Executive Director Remuneration
Reimbursement of expenses.
Thanking you
Your faithfully
Company Secretary
ABC Ltd.
EXAMINATION
IMPORTANT QUESTIONS FOR
MEANING OF BOARD OF DIRECTORS
O1. Who are Directors and Board of Directors under Companies Act,20132
Ans.
Directors
certain natural persons
A Company beingan artificial person requires
it
various fronts. The position of directors
to represent the company at
is not only as the agents, but also
in their relationship to the company
trustees of the company.
2013 'director' means a
As per Section 2(34) of the Companies Act,
director appointed to the Board of the Company.
Board of Directors
Board of directors is a body of elected or appointed persons who
jointly o v e r s e e the activities of a company. They are also referred to
board of governors, board of managers, board of regents, board
as
of trustees, or simply referred to as "the board".
As per Section 2(10) of the Companies Act, 2013 "Board of Directors
or "Board", in relation to a company means the collective body of
directors of the company.
DUTIES OF THE DIRECTORS 29

02. Write a short note on the following; The duties of a director under
Section 166of the Companies Act, 2013.
Ans. The following duties of the directors have been provided under section
166 of the Companies Act, 2013 which apply to all types of directors including
Independent Directors:
1. Subject to the provisions of this Act, a director of a company shall act
in accordance with the articles of the
company.
2. A director of a company shall act in good faith in order to promote the
objects of the company for the benefit of its members as a whole, and
in the best interests of the company, its
employees, the shareholders,
the community and for the protection of environment.
3. A director of a company shall exercise his duties
with due and reason"
able care, skill and diligence and shall exercise
independent judgment.
4. A director of a company shall not involve in a situation in which he

may have a direct or indirect interest that conflicts, or possibly may
conflict, with the interest of the company.

5. A director of a company shall not achieve or attempt to achieve any
undue gain or advantage either to himself or to his relatives, part
ners, or associates and if such director is found guilty of making any
undue gain, he shall be liable to pay an amount equal to that gain to
the company.
6. Adirector of a company shall not assign his office and any assignment
so made shall be void.
7. If a director of the company contravenes the provisions of this section
such director shall be punishable with fine which shall not be less than
one lakh rupees but which may extend to five lakh rupees.
POWERS OF THE BOARD

03. Briefly explain the following; Powers of the board that can be exercised
only by means of a resolution passed at a meeting of the Board
Ans. As per Section 179(3) read with Rule 8 of Companies (Meetings of
Board and its Powers) Rules, 2014, the Board ot Directors ot a company
shall exercise the following powers on behalf of the company only by means
of resolutions passed at meetings of the Board, namely-
1. To make calls on shareholders in respect of money unpaid on their
shares.
2. To authorise buy-back of securities under section 68.
3. To issue securities, including debentures, whether in or outside India.
4. To borrow monies.
5. To invest the funds of the company.
6. Togrant loans or give guarantee or provide security in respect of loans.
7. To approve financial statement and the Board's report.
8. To diversify the business of the company.
. To approve amalgamation, merger or reconstruction.
10. To take over a company or acquire a controlling or substantial stake
in another company.
11. To make political contributions.
12. To appoint or remove Key Managerial Personnel (KMP).
13. To appoint internal auditors and secretarial auditor.
BOARD EFFECTIVENESS
3.34
DUTIES OF INDEPENDENT DIRECTORS
the following;
The duties of an independenht
04. Write a short note on
director.
the independent
2013 provides that
Ans. Schedule IV ofthe Companies Act,
nt
directors shall have following duties

induction and regularly update
and refresh
1. Undertake appropriate
with the company.
their skills, knowledge and familiarity
of intormation and
clarification or amplification
2. Seek appropriate
follow appropriate professional advice and
where necessary, take and
at the expense of the company.
opinion of outside experts
3. Strive to attend all meetings
of the Board of Directors and of the Board
committees of which he is a
member.
and actively in the committees of the Board

4. Participate constructively
members.
in which they are chairpersons or
5. Strive to attend the general meetings of the company.
6. Keep themselves well informed about the company and the external
environment in which it operates.
7. Not to unfairly obstruct the functioning of an otherwise proper Board
or committee of the Board;
SUCCESSION PLANNING
05. Write a note on the following; Succession planning.

Ans. 'Succession planning'is a strategy for identifying and developing future
leaders. Succession plans are used to address the inevitable changes that
occur when directors resign, retire or die.
A well-prepared board should develop a succession plan. It is an ongoing
process of identifying, assessing and developing people to ensure the
continuity of the Board.
Some leading practices for board succession planning are:
Using a skills matrix to proactively shape board
composition tna
incorporates strategic direction and opportunities, regulatory and
industry developments, challenges, and transformation.
Conducting robust annual performance evaluations, including faci
tation by an independent third party.
evolving commitlce and board leadership needs, including

Reviewingcommilmcnts
the time requircd.
dircctor clection results and gagement by investors
Considering
diversity.
regarding board compOSilion, independence, lcadership and
Legal
Provisions Succession planning.
on
Companies Act, 2013
specific provision. It is usually included in terms of refer-

There is no
ence of NRC.
SEBI (LODR) Regulations, 2015

Regulationl7(4) The Board of the listed entity shall satisfy itself that
are in place for orderly succession for appointments to
the Board
plans
and to senior management.
COMPANY SECRETARY
BOARD EFFECTIVENESS AND THE ROLE OF THE
the role of the
06. Briefly explain the following; Board effectiveness and
companysecretary.
Ans. As per Section 2(24) of the Companies Act, 2013, "company secretary'
()
in clause of
or 'secretary" means acompany secretary as defined
Secretaries Act, 1980 who is
sub-section (1) of section 2 of the Company
a company to pertorm the functions
ofa company secretary
appointed by
under this Act.
As per Section 2(60) of the Companies Act, 2013, the company secretary
of the company and
has also been included in the category of the ofticer
of
shall be considered to be in default in complying with any provisions
the Companies Act, 2013.
Role of Company Secretary
Acts as a vital link between the company and its Board of Directors,
shareholders and other stakeholders and regulatory authorities.
the Board procedures are followed
Plays akey role in ensuring that
and regularly reviewed.
and
Provides the Board with guidance as to its duties, responsibilities
powers under various laws, rules
and regulations.
in-house legal counsel to
Acts as a compliance officer as well as an
the company on
advise the Board andthe functional departments of
laws.
Various corporate, business, economic and
tax
I s an important member of the corporate management team and acts
as conscience keeper of the company.
4 BOARD PROCESSES THROUGH
SECRETARIAL STANDARDS
CHAPTER
SECRETARIAL STANDARDS
Law India, in the Compa-

01. "For the first time in the history of Company Standards
has given statutory recognition to the Secretarial
nies Act, 2013Institute of Secretaries of India." Discuss.
issued by the Company
June 2017, 5 Marks]
time in the history of Company Law in India, the
Ans. Yes, tor the first to the Secretarial
Act, 2013 has given statutory recognition
Companies Secretaries of India (ICSD).
the Institute of Company
Standards issued by
Act, 2013, provides that:
Section 118(10) of the Companies
with respect to
shall observe secretarial standards
"Every company the Institute of Comnpany
and Board meetings specified by
general constituted under section
3 of the Company
Secretaries of India Central Government."
as such by the
Secretaries Act, 1980,
and approved
its
Board of Directors and
Standards-1 applies to Meetings ofthe
Secretarial for convening and conducting
a set of principles
Committees. prescribes
It matters related thereto.
Directors and
Meetings of the Board of Shareholders.
to General Meetings of the
Standards-2 applies General
Secretarial
for convening and conducting
t prescribes a set of principles related thereto.
and matters
Shareholders
Meetings of the by the ICSI assumes special
Standards issued with
Therefore, Secretarial ensure that there is compliance
have to
companies
relevance and
these standards on their part.
DIRECTORS
BOARD OF
S-1. MEETINGS OF THE financial
to review the
Directors is to be held dividend. Draft a
of of
4. A meeting of Board declaration
as well
as
PErtormance of the
company
4.1
4.2 THROUGH SECRETARIAL STANDARDS
BOARD PROCESSES
notice and agenda of this meeting to be circulated to the Board of Directo.

tors
in accordance with the relevant provisions of Companies Act, 2013.
June 2017, 5 Marks
Ans.
Delhi
XYZ Co. Lid. New
Board Meeting
Notice of (Serial Number of Meeting)
12th June 2017
(Serial Number of Meeting) mceting of the Board of Director
The
will be held on (Day) the 22nd day of June 2017 at Meeting Lounge
of the registered office of the Company situated at
(Complete
Address) at 10:00 am. All directors are hereby requested to kindly make it
convenient to attend the same.
The agenda for the meeting are as follows:
1. To elect a Chairman of the Meeting.
2. To grant leave of absence to Directors not present at the Meeting.
3. To take note of the minutes of the previous meeting.
4. To note the action taken in respect to earlier decisions of the Board.
5. To note the minutes of meetings of Board's Committee(s).
6. To discuss the financial performance and decide on dividend decla-
ration.
7. Any other matter, with the permission of the Chairman and majority
of directors.
Annexure:
(a) Audited financial statements of last three
quarters
(b) Copy of minutes of last meeting
(c) Action Taken Report (ATR) as received from the
sion Administrative Divi
(d Resolution on dividend policy and
report on dividend payment and
declaration of the company of last three
financial years
(e) Copy of minutes of the meeting of Audit
Committee, Remuneration Committee and Committee, Investment
Research Committee
Sd/ Sd/
Company Secrelary Chairman, Board of Directors
BOARD PROCESSES THROUGH SECRETARIAL STANDARDS 4.3
AGENDA
Answer the following in successful Board meeting it is

brief; For a
Q3. for
have a proper Board agenda. What are the key factors
important to December 2016, 2 Marks]
setting the Board agenda?
agenda determines the issues to be discussed in the Board

Ans. The board
meeting of an organisation.
the agenda include:

Key success tactors for setting
between reviews of past pertormance
1. Agendas should strike a balance
and forward-looking issues.
so it is a good practice
more time for debate
2. Strategic issues require
indicated in the agenda.
that the allocated discussion time is minutes
in the Board Meeting should include the
3. Normally the agenda
of the last meeting.
approval/confirma-
proposals which require the Board's
4. Any specitic
included in the agenda.
tion should be
how will you
of a large scale company,
Being the company secretary will follow for circu
04. and what are the steps you
board agenda
prepare a une 2015, 5 Marks]
and agenda?
lation of notice
Ans.
Preparation of Agenda to be discussed. The items
determines the issues
The board agenda collected from
heads of all the departments.
should be that the
for agenda can request
director: Any director
the request of the chairman's
a
Agenda at the board agenda. It is
m a t t e r on which
chairman
include a to suggest items,
the opportunity
offer directors it is each
director's respon-
obligation to denied. In the end,
reasonably tabled. It should
be taken
c a n n o t be matters are
ensure
that the right between
reviews of past
sibility to should strike
a balance
c a r e of
that agendas issues.
for each item,
forward-looking
pertormance
and allocated
amount of time
the mat-
should show
administrative
Routine o r
An agenda discussion.
without unduly restricting of board's time.

consume
too much
not
ters should Agenda
Circulation of Notice &
Steps for
of the
the members
Notice scheduled in advance, them to
have been sent notice
to enable
Even if meetings adequately and timely
be
Board should
plan accordingly.
4.4 BOARD PROCESSS THROUGH SECRETARIAI.STANDARDS
E a c h itcm of business requiring approval al the Mecting shall
Supported by a note setting out

the dctails ol the proposal, rele.
material facts that cnable the Directors to understand the meani.
the proposal and the nature of conc
scope and implications of or
interest, if any, of any Dircctor in the proposal, which the Director ho
ha d
carlicr disclosed
Agenda
The agenda should be made available to the Board along with sup.
porting papers at least seven days betore the date of the meeting.
sup-
Mode of circulation of agenda: The mode of circulation of agenda
should ensure that all directors receive the agenda notes on time.
Material information: All the material information should be sent to
all Directors simultaneously and in a timely manner to enable them
to prepare for the Board Meeting.
Clarifications on the agenda: A system should exist for seeking and
obtaining further information and clarifications on the agenda items
before the meeting. Directors, including nominee directors, requiring
any clarification before the meeting may be asked to contact the Sec.
retary for additional inputs.
Board Briefing Papers: Board materials should be summarized and
formatted so that board members can readily grasp and focus on the
most significant issues in preparation for the board
meeting.
Board papers associated with a particular agenda item should be set
out as an executive summary with further detail provided in annexes.
Information should be distributed at least seven business days before
the meeting.
Anyitem not included in the Agenda may be taken up for consideration
with the permission of the Chairman and with
the consent of a majority of the Directors
present in the Meeting.
MINUTES
Q5. Write a note on Secretarial Standard related to minutes of
meeting
June 2017, 5 Marks]
Ans. Section 118(10) of the
Companies Act, 2013 introduces Secretarial
Standards and provides statutory recognition to Secretarial Standards
issued by ICSI as under:
EBOARD PROCESSES THROUGH SECRETARIAL STANDARDS 4.3
SS-I:Applies to Meetings of the Board of Directors and its Committees,

SS-2: Applies to General Meetings.
its Committees,
Ss-1. Applies to Meetings of the Board of Directors and
Highlights of Secretarial Standards are as under:
Every company shall keep Minutes of all Meetings (Board, Committee
and General Meetings) in Minutes Books.
Minutes shall be preserved permanently in physical or electronic torTn.
Min-
Minutes in electronic form shall be maintained with Timestamp.
utes Books shall be kept in the custody of the Company Secretary.
Minutes shall contain a fair and correct summary ot the proceedings
of the Meeting. Minutes shall be written in clear, concise and plain
language.
numbered.
The pages of the Minutes Books shall be consecutively
Minutes shall not be pasted or attached to the Minutes Books, or
tam-
with in any manner. Minutes, if maintained in loose-leaf torm,

pered
shall be bound periodically.
Minutes of the Board & Committee Meeting shall be kept at the
Registered Office of the company or at such other place as may be
approved by the Board. However, Minutes of General Meetings shall
be kept at the Registered Office.
06.Ayesha Ltd. is engaged in managing events. A Board meeting is recently

held at the head office of the company to expand its business operations
to new areas. As a Company Secretary of the company, you are required
to prepare minutes of this Board meeting June 2016, 5 Marks]
Ans. Specimen Minutes of a Board Meeting

Minutes of the 2nd Meeting of the Board of Directors of Ayesha Ltd. held
on 3rd June, 2016 at A/16, CP, New Delhi from 9AM till IPM
PRESENT
Mr. A.B. Chairman
Mr. C.D. Directors
Mr. E.F. LJ. K.L. Managing Director
IN ATTENDANCE
Mr. X. Secretary
4.6 STANDARDSs
BOARD PROCESSES THROUGH SECRETARIAL
INVITEEs
Chicf Financial Officer
Mr. Y..
Designation and Organisation
Mr. Z.
1. Chairman for the Meeting
Mr/Ms.... ..was elected as the Chairman for the Meeting
ing
2. Leave of absence
Meeting was granted to Mr M
the
Leave of absence from attending
their inability to attend the Meeting o
and Mr.O.P. who expressed ing
to their preoccupation.
3. Quorum
The business before the Meeting was taken up after having established
d
that the requisite quorum was present.
4. Minutes of the previous Board Meeting
The Minutes of the.... ...
Meeting of the Board
Directors of of
the company held on .... .., as circulated, were noted by the
Board and signed by the Chairman.
5. Minutes of the Committee Meetings
The Minutes of the.. .. Meeting of the ............ Committee
held on . . . . . a s circulated, were noted by the Board.
6. Resolution passed by circulation since the last Meeting
The following Resolution was passed by circulation o n . . . .
(date
ofpassing of the Resolution) in terms of the provisions of Section 175
of the Companies Act, 2013.
RESOLVED THAT.. ********************************.
Mr. '****** Director dissented on the Resolution.

7. Action Taken Report
The following action taken was noted by the Board: Item No. Item
Action Taken
8. Register of Contracts
The Register of Contracts in which Directors are interested under
Section 189 of the Companies Act, 2013 and the Rules thereunder
was signed by all the Directors present.
9. Notices of Disclosure of Interest of Directors
a
Thetollowing Notices received from the Directors of the compal
noutying their interest in other bodies corporate pursuant tot
provisions of Section 184 of the Companies.Act, 2013, were rea
and recorded: Name of the Director Nature of Interest Date ot

Notice
b. A Notice dated.. . . received from Mr. IJ. pursuant to the

provisions of Section 170 of the Companies Act, 2013, disclosing
his shareholding and the shareholding of Mrs. IJ. in the company
was read and recorded.
10. Expansion of business operations in new areas
The Chairman informed the Board that it was proposed to expand
business operations in other states like. The matter was dis-
cussed in this connection and it was decided to expand operalionsin
11. Conclusion of the Meeting

There being no other business, the Meeting concluded with a vote of
thanks to the Chair.
... Chairman
Date....************e***
Place **********************
Entered on
(To be initialled by the Company Secretary)
07. A meeting of Board of Directors of Ashoka Business Corporation
Ltd. is held on 30th June, 2017 at its registered office, 1, Ashoka Marg
New Delhi, in which board considered and approved company's financial
statement for the F/Y ending 31st March, 2017 and made declaration of
20% dividends on its equity shares.
You being the Company Secretary, draft the minutes of Board meeting
Ans.
Minutes of the 3rd Meeting of the Board of Directors of Ashoka Business
Corporation Ltd, held on Friday, the 30th June, 2017 at 9AM at Registered
Office of the Company ie. 1, Ashoka Marg,. New Delhi.
PRESENT:
Mr. A, Chairman
Mr. B, Director
Mr. C, Director
Mr. D, Managing Director
STANIDARDS
4.8 ROARD PROCESSRS THROUGHSECRETARIAL
IN ATTENDANCE:
Mr. X Company Secretary
INVITEES:
Chicf Financial Officer
Mr. Y
1. Chairman for the Meeting
Board chaired the Meeting.
Mr. A being the Chairman of the
2. Leave of absence
Leave of absence from attending the Meeting was granted to
and . . who expressed their inability to attend the Meeting to the
Company Secretary owing to their pre-occupation.

3. Quorum
The business before the Meeting was taken up after having established
that the requisite quorum was present.
4. Minutes of the previous Board Meeting
The Minutes of the ... Meeting of the Board of Directors of the
company held on .....
. at . . as circulated along with
the agenda, were noted by the Board.
5. Minutes of the Committee Meetings
The Minutes of the.. Meeting of the. ... Committee(s)
heldon.... . , as circulated along with the agenda, were noted
by the Board.
6. Financial Statements
The draft balance sheet as at 31st March 2017, the statement of
profit
and loss for the year ended 31st March 2017 and the cash flow
ment for the year ended 3 1st March 2017 of the
state
Company were placed
before the Board for its approval.
Mr. Y made a detailed presentation to the Board on the financial
statements. The Chairman ot the Audit Committee confirms that
there were no adverse remarks/observations of auditor on financial
statements.
The Board, after discussion, passed the following Resolution:
"RESOLVED THAT pursuant to the provisions of Section 134 of the
Companies Act, 2013, the Financial Statements for the year ended
31st March 2017 comprising the Balance Sheet as at 31st March 2017,
Statement of Profit and Loss for the year ended31st March 2017 along
with the Notes to the Financial Statements and Cash Flow Statemen
derived from the Financial Statement for the year ended 31st Mare
OARD PROCESSES THHROUGH 4.9
SECRETARIAI.STANDARDSs
2017, as recommended by the Audit Committee at its rneeting held
on May 2017 be and are hereby approvecd.
RESOLVED FURTHER THAT the Balance Shect as at 31st March 201/,
the Statement of Profit & Loss lor the year ended 31st March 201
and the Cash Flow Statement derived from the Accounts tortheyear
ended 31st March 2017 be and are hercby signed on behall ot the
Board by Mr._ Managing Director
(DIN: ), Director, Mr.
(DIN:), Mr. Chief Financial Officer and Mr. Company
Secretary.
The meeting was adjourned for receipt of Auditors'Report. Thereatter,
the Statutory Auditor submitted his report on the Financial Statement
for the year ended 3 1st March 2017 and the meeting resumed. The
in the
Board noted that there were no qualification/adverse remarks
Resolution:
said Report and after deliberation passed the following
RESOLVED THAT the Annual Financial Statements of the Company
2017, as approved by the Board and
for the year ended 3lst March
be presented to the shareholders for
the Auditors' Reports thereon,
adoption.
7. Dividend
31st March 2017 was
The payment of Dividend for the year ending
Statements of the
considered on the basis of the audited Financial
from Ist April 2016 to 31st March 2017. The
company for the period r e s e r v e s to
Directors opined that there were adequate profits/free
permit payment of
Dividend.
of final dividend
The Board,after discussion, recommended payment
the following Resolution:
@20% per equity share and passed
"RESOLVED THAT pursuant to
the provisions of Section 123 of the
the rules made thereunder, final Dividend @
Companies Act, 2013 and
share is and hereby recommended
20% amounting to .. per equity for
of the
out of the profits company
to be paid on all equity shares,
after providing for depreciation in
the year ending 31st March 2017,
of the Companies Act, 2013, whose
accordance with the provisions
the
of Members of the company on
. . .
names appear in the Register
of. date). of
RESOLVED FURTHER THAT
the transfer books and the Register
tO the.. of
Members be closed from the.. . O
of payment of such
both days inclusive, for the purpose
"(dates),
dividend.
Dividend Distribution Tax shall be
RESOLVED FURTHER that the
borne by the Company.

4.10 BOARDPROCESSES THROUGH SECRETARIAL STANDARUS
8. Opening of a Bank Account for payment of Dividend
The Board passed thec following resolutionJor openinga bank ace
for the purpose ol payment of Dividend: COunt
"RESOLVED THAT a Bank Account be opened in the narnc and stvicst
'Ashoka Business Corporation Ltd. - D i v i d e n d . . . . . (Bank Acce
for of Dividend for the

ount
with the .... ...
payment financi
vcar ending 31" March 2017.
RESOLVED FURTHER THAT the said Bank be and is herebv auth
rised to honour cheques/ bank advices etC. drawn, accepted or
made
on behalf of the company and to act
any instruction(s) so given
on
concerning the said Account by any two of the following signatories
RESOLVED FURTHER THAT the said Bank be and is hereby autho

riscd to change the name and style of the Bank Account to 'Ashoka
Business Corporation Ltd. Unpaid Dividend
..
.. on and from
RESOLVED FURTHER THAT the authorised signatories be and are

hereby authorised, in the manner stated above, to give instructions
to the said Bank to close the Bank Account on disbursement of the
Dividend.
RESOLVED FURTHER THAT the authorised signatories be and are
hereby authoriscd, in the manner stated above, to sign and execute
such documents, letters etc., as may be required by the said Bank.'
9. Conclusion of the Meeting
There being no other business, the Meeting concluded at..(Time) with
a vote of thanks to the Chair.
Dale. ************
.Chairman
Place...
******************.
Entered on
(To be initialled by the Company Secreta
08. You have been appointed as a Company Secretary of a Company

What would you ensure to comply with the provisions of CompaniesAC
2013 regarding Ouorum for Board Meeting? Narrate the Decision Making
Process at Board as enunciated in the Act. [December 2018, 5 Marks
ROARDPRONESSES THROUGI CRARIAL STANDARIS 4.11
section 174 of the Companien Act, 2013 and Secretarial

Ans. As per as per
Standard on Meetlngs ol the Bonrd of Directors (SS-1) proviles 1h.at:
One third ol total stremth
Two dircetors,
whichever is higher, shall be the quuorum for a mecting.

1f due to resignations or removal ol dircctor(s), the number of directors
of the company is reduced below the quorum as fixed by the Artiches of
Associatio1n ol the company, then, the continuing Directors may act lor
the purpose of increasing the number of Director's to that requircd for the
or tor summoning a gencral mecting of the Company. It shall not
quorum
act for any other purpose.
participation by a director through Video Conferencing
For the purpose of determining the quorum, the participation bya director
through Video Conferencing or other audio visual means shall also be
counted. If at any time the numberofinterested directors excecds oris cqual
to two-thirds of the total strength ofthe Board of directors,thenumber of
directors who are not interested and present at the meeting, being not less
than two shall be the quorum during such time.
The meeting shall be adjourned due to want of quorum, unless the articles
provide shall be held to the same day at the same time and place in the
next week or if the day is National Holiday, the next woking day at the
same time and place.
Decision making process at the Board Meeting
The Chairman and/or Managing Directorshould explain the proposal
put up before the Board, the background and the expectation of the
proposal in the short as well as the long-term to contribute to the
growth of the company. If needed, a presentation may be made by the
executive concerned for easing the considerations and discussions of
the Board as they tend to highlight the key elements within the written
data.
The criticality and viability of the proposal should be explained and
their views should be elicited from all angles.
The Board could then deliberate all these issues and come to a deci-
sion.
STANDARDS
SECRETARIAL
THROUGH
4.12 BOARD PROCESSES
meeting held on 30th June, 2019 ha

Board
09. KLM Lid. in its 64th of mitigation
with objective of mitigation
Committee
constituted Risk Management measures
comprising of two
of preventive
and r e c o m m e n d a t i o n the first Meeting
or risk Whole Time Director. ln
Independent Directors and
one
2019, Whole
Time Director could no
held on 6th July,
of the Committee The Board proposal abot
the leave of absence.
be present and sought to C h a i r m a n or
the Committee
was silent with respect
the constitution
remaining two members
of the Meeting of Committee. The
and quorum in the Meeting was
and the Senior most Director present
held the Meeting Committee also approved
selected as Chairman of
the Committee. The
the decision of the
Management. Whether,
the policyfor Systematic Risk issued
Secretarial Standards as
Committee is valid in light of
the approved
by the ICSI?
1 (SS-1) deals with the Meetings of the Board
Ans. TheSecretarial Standard
of Directors.
1 (SS-1) which relates to the Meetings
Clause 3.5 of Secretarial Standard
of Committees provides as under:
the Articles or under any other
Unless otherwise stipulated in the Act or
Committee constituted by the Board
law, the Quorum for Meetings of any
Board. If no such Quorum is specified, the
shall be as specified by the of to form
presence of all the members any such Committee is necessary
the Quorum".
In the given case of the company KLM Ltd., it is mentioned in the question
itself that.
The Board proposal about the constitution was silent with respect to
Chairman of the Committee and quorum of the Meeting of Committee

Since the quorum was not specified, hence as per the clause 3.5 of SS-1,
where no such quorum is specified, the presence of all the members of
such committee is necessary to form the quorum. Therefore, the meeting
was held by the Risk Management Committee (RMC) without the presence
of adequate quorum and in view of this the decision taken by the RMC 15
also invalid.
010. Board of directors of IT Solutions Ltd. conducted its adjourned

meeting on a public holiday in the month of October, 2015. The Board
meeting was adjourned due to lack of quorum. Can the articles of assoct
ation of a company fix such a quorum? December 2015, 5 Marks
Ans. Following are the key points on quorum of a Board meeting-
According toSection 174 of the Companies Act, 2013,one third of total

strength or two directors, whichever is higher, shall be the quorum
for a meeting.
Directors who participate by way of Video Conferencing or other
visual means shall also be counted for the purposes of quorum.
Any lraction ot a number is to be rounded oft to one.
Total strength does not include directors whose places are vacant.
I f the number of continuing directors is reduced below required
quorum, continuing Directors may act for the purpose of increasing
directors to such number which is required as quorum or tor sum-
moning a General Meeting and for no other purpose.
Where at any time the number of interested directors exceeds or is
equal to two thirds of the total strength of the Board of Directors, the
number of directors who are not interested directors and present at
the meeting, being not less than two, shall be the quorum during such
time.
Thus where a board meeting could not be held due to absence of quo-
rum then the meeting shall be adjourned to the same day at same time
and place in the next week, if that day is a National Holiday then at the
next day which is not a National Holiday at same time and place. This
provision is not applied if the Articles of Company provide otherwise.
Further, the Articles of Association of Company can stipulate a higher
quorum.
MEETING THROUGH VIDEO CONFERENCING
011. Answer the following in briet; What are Companies (Meeting of

Board and its Powers) Second Amendment Rules, 2017? Briefly explain.
Ans. The details of Companies (Meeting of Board and its Powers) Second
Amendment Rules, 2017 are as under:
Meeting through electronic mode: Any director who intends to par-
ticipate in the meeting through electronic mode nmay intimate about
Such participation at the beginning ot the calendar year and such
declaration shall be valid for one year. Such declaration shall not
debar him from participation inthe meeting in person in which case
he shall intimate the company efficiently in advance of his intention
to participate in person.
4.14 BOARD PROCESSES THROUGH SECRETARIAL
STANDARDS
Preservation of draft minutes of video conferencing: When a Boar

meeting is held through videoconferencingorother audio visual meane
the draft minutes recorded shall be preservcd by the company till the
contirmation of the draft minutes in accordance with rule 3(12).
Committees of the Board: The Board of directors of every listed com
pany and a company covered under rule 4 of the Companies(Appoint.
ment and Qualification of Directors) Rules, 2014 shall constitute an
'Audit Committee' and a 'Nomination and Remuneration Committee
of the Board.
012. CSB Lid. a Listed Company is holding a Meeting of Board of
Directors. The Agenda Items inter alia include the item for approval with
respect to declaration of Interim Dividend for current fiscal. However
information of the Meeting as well as for closing of the trading window
has already been intimated to the Stock Exchange. There are 7 members
on the Board of Directors. On the date of Meeting, 2 Directors were out of
Country, whereas the remaining Directors were present in the Meeting. The
Directors in abroad were willing to participate through video
conferencing.
One of the Independent Directors objected that the item for declaration
of Interim Dividend can't be discussed through video
should be deferred for ensuing physical
conferencing and
of Board of
meeting Directors
Examine in the light of the provisions of the
Companies Act, 2013 and list
out the matters which shall not be dealt with in
any meeting held
video conferencing or other audio visual means. (June 2019, 3 through
Marks)
Ans. Sec. 173(2) of the
Companies Act, 2013 read with Rule 4 of the
Companies (Meetings of Board and its Powers) Rules, 2014
restriction on following matters which shall not prescribes
be dealt with in any
held through video conferencing or other audio visual meeting
a. The approval of the annual means
b. The approval of the Board's
report.
c. The approval of the
prospectus.
d. The Audit Committee
Meetings for consideration of financial state-
ments including consolidated
financial statements to be
the Board; approved by
e. The approvalof the
matterrelating to
acquisition and takeover. amalgamation, merger, demerge
Provided that where there is quorum in a
of directors, any other director meeting through physical presence
may participate through video
or other audio visual means but
he shall not be conferencing
counted in quorum.
BOARD PROCESSES THROUGH SECRETARIAL STANDARIDS 4.15
As per he rule discussed above, there is no restriction on discussing

declaration of interim dividend through vidco conferencing. Also, it tne
majority ol directors are present in the mecting physically, other directors
can participate through video conferencing even though they shall not be
counted in quorum.

DAY, TIME, PLACE, MODE AND SERIAL NUMBER OF MEETING
Q1. Write a note on the following; Day, time, place, mode and serial num
ber of a board meeting.
Ans. Following are the key points on day, time, place, mode and serial
number of a board meeting:
Every Meeting shall have a serial number.
A Meeting may be convened at any time and place, on any day.
Notice of the Meeting shall clearly mention a venue, whether regis-
tered oftice or otherwise,to be the venue of the Meeting and all the
recordings of the proceedings of the Meeting, if conducted through
Electronic Mode, shall be deemed to be made at such place.
Any Director may participate through Electronic Mode in a Meeting
unless the Act or any other law specifically prohibits such participation
through Electronic Mode in respect of any item of business.
MINUTES
02. Briefly explain the contents of minutes of a meeting.

Ans. According to Secretarial Standards 1, following are the contents of a
minutes of a meeting:
The names of Directors present and their mode of attendance, if
through Electronic Mode.
I n case of a Director participating through Electronic Mode, his parti-
culars, thelocation from where he participated and whereverrequired,
his consent to sign the statutory registers placed at the Meeting.
The name of Company Secretary who is in attendance and Invitees,
if any, for specific items and mode of their attendance through
Electronic Mode.
Record of election, if any, of the Chairman of the Meeting.
Record of presence of Quorum.
4.16 BOARD PROCESSES THROUGH
SECRETARIAL STANDARDs
The names of Dircctors who sought and were granted leave of absen.
sence
Noting of the Minutes of the preceding Meeting.
Noting the Minutes of the Meetings of the Committees.
The text of the Resolution(s) passed by circulation since the last Meea
ing, including dissent or abstention, if any.
eet
AGENDA
03. Write a note on the following; List of items of business for the Agenda
of the First
Meeting of the Board of the company.
Ans. Following are the list of items of business for the Agenda for the
First
Meeting of the Board of the company:
1. To appoint the Chairman of the Meeting.
2. To note the Certificate of
Incorporation of the company, issued by the
Registrar of Companies.
3. To take note of the Memorandum and Articles of Association of the
company, as registered.
4. Tonote the situation of
the Registered Office of the company and ratify
the registered document of the title of the
premises of the registered
office in the name of the company or a Notarised
copy of lease/rent
agreement in the name of the company.
5. To note the first Directors of the
company
6. To read and record the Notices
of disclosure of interest given by the
Directors.
7. To consider appointment of Additional
Directors.
8. To consider
appointment of the Chairman of the Board.
9. To consider
appointment of the first Auditors.
10. To adopt the Common Seal of the
(Note: This list is inclusive and not
company,. if any.
exhaustive)
04. Write a note on the
following; list of items of business which shall no
be passedby circulation and
shall beplaced before the Board atits Meeting
Ans. Following is the list of items of business which
shall not be passed by
irculation and shall be placed before the Board at its
Meeting
BOARD
PROCESSES THROUGH SECRETARIAL STANDARDS 4.17
General Business Items

1. Noting Minutes of Meetings of Audi Committee and other Com-
mittees.
2. Approving financial statements and the Board's Report.
3. Considering the Compliance Certificate to ensure compliance
with the provisions of all the laws
applicable to the comparny.
4. Specitying list of laws applicable specifically to the company.
5. Appointment of Secretarial Auditors and Internal Auditors.
Specific Items
1 Borrowing money otherwise than by issue of debentures.
2. Investing the funds of the company.
5. Granting loans orgiving guarantee orprovidingsecurity in respect
of loans.
4. Making political contributions.
Corporate Actions
1. Authorise Buy-Back of securities,
2. Issue of securities, including debentures, whether in or outside
India.
3. Approving amalgamation, merger or reconstruction.
4. Diversify the business.
5. Takeover another company or acquiring controlling or substantial
stake in another company.
Additional list of items in case of listed companies
1. Approving Annual operating plans and budgets.
2. Capital budgets and any updates.
3. Information on remuneration of Key Managerial Personnel.
4. Show cause, demand, prosecution notices and penalty notiees
which are materially important.
5. Fatal or serious accidents, dangerous occurrences, any material
effluent or pollution problems.
Note: This list is inclusive and not exhaustive)
5 BOARD COMMITTEES
CHAPTR
cOMMITTEES
01. To enable better and more focused attention on the atfairs of the
company, the Board delegates partieular matters to conmittees of he
Board set-up for the purpose but the ultimate reaponsibility les with the
Board." In the light of the statement, discuss the need and advantages of
committee management. /une 2011, 5 Murksj
OR
Describe brietly the needl and advantages of comnittee nmanagement,
Name the committees which are to be constituted for good corporate
SOvernance. June 2012, 5 Marks
OR
With the globalization and the complex regulatory requirenients, the need
to delegate oversight of certain areas to a apeclalist Bourd Coumittee has
become inmperative". In the light of this statenment discuss the necd and
advantages of such commitees. June 201.3, 5 Masks
OR
The comnmittees are a sub-set of the Board, derivlng their authority from
the powers delegated to them by the Board." u the light of above
state.
ment, discuss the need and advantage of connmittee nmanagement.
OR
Discuss the rationale behind compositlon of Board Conmittees.
OR
The committees are formed as means of inproving Board'a effectiveness
eiticiency in the areas wheremore focused, apecialized and technical
CSCussions are required". Evaluate the statenment by bringlng out the
Beeds and significance of commitlees December 2018, 5 Marks
5.1
BOARD COMMITTEES
5.2
OR
committees. (December 2016, 5 Marke
Elucidate the following; Board
formed in an organization as a improvin
means of
Ans. Committees are
m o r e tocused, specialize
arcas where
board effectiveness and efficiency, in
and technical discussions are required.
governance. Board committec
Board committees are pillars of corporate
criteria for appointment, life
with formally established terms of reference,
constitute an important element
of the governance
span, role and function
process and should be established with clearly agreed reporting procedures
and a written scope of authority.
Board can either delegate some of its powers to the committee, enabling
it to act directly, or can require the recommendations of thee committee to
be approved by the Board. Committees thus enable better management of
the board's time and allow in-depth scrutiny and focused attention.
Significance of Board Committees

Board committee plays a vital role in the following manner:
To improve Board effectiveness and efficiency.
More members become involved.
Specialized skills of members can be used to best advantage as minor
details needs to be evaluated/analysed to arrive at a logical conclusion.
Insulate Board from potential undue influence of controlling share
holders and managers.
Committees prepare groundwork for decision making and submit
their recommendations to the Board for decision
making.
Enables better management of Board's time and allows in-depth
scrutiny of proposals.
Establishing committees is one way of managingthe work of the Board
and strengthening the Board's governance role.
Matters may be examined in more detail by
committee. a
Inexperienced members gain contidence while

serving on the com
mittee.
Following are the mandatory Committees of the Board prescribed under:
Companies Act, 2013 SEBI (LODR) Regulations, 2015
|Audit Committee Audit Committee
Nomination and Remuneration Com-| Nomination and Remuneration
mittee
Com
mittee
5.3
BOARD COMMITTEES
Companies Act, 2013 SEBI (LODR) Regulations, 2015

Stakeholders Relationship Committee
Stakcholders Relationship Committee
Corporate Social Responsibility Com- Risk Management Committee
MANDATORY COMMITTEES OF THE BOARD

under
02. Write short note following; Mandatory committees
on the
the SEBI (Listing Obligations & Disclosure Requirements) Regulations,
3 Marks]
2015. [December 2012,
OR
under the SEBI
Describe briefly of the following; Mandatory committees
Disclosure Requirements) Regulations, 2015.
(Listing Obligations & 3 Marks]
[December 2010,
committees under the SEBI (Listing
Ans. Following a r e the mandatory
Regulations, 2015:
Obligations & Disclosure Requirements)
1. Audit Committee
& Disclosure
Regulation 18 of the SEBI (Listing Obligations
As per shall constitute
Regulations, 2015, Every listed entity
Requirements) committee in
with the
accordance
a qualified and independent audit

therein.
terms of reference specified of
remuneration
committee: As per Regulation 19
2. Nomination and directors shall consti
2015 The board of
SEBI (LODR) Regulations, committee as follows:
remuneration
nomination and
tute the
shall comprise of at least three directors
a The committee n o n - e x e c u t i v e directors
committee shall be
b. All directors of the
directors shall be independent
of the
c.At least fifty per centlisted outstanding SR equity
of entity having
directors and in
case
remuneration committee
nomination and
the
shares, 2/3rd of directors.
of independent
shall comprise of the
Committee: As per Regulation 20
3. Stakeholders Relationship
2015
SEBI (LDR) Regulations, Stakeholders Relationship
Commit-
constitute a
The listed entity shall of interest of
shareholders,
look into various aspects
tee to specifically holders.
debenture holders
and other security
committee
4. Risk management deals with the
Regulations, 2015
the SEBI (LODR) the board of directors
Regulation 21 of provides that
Committee and
Risk Management Committee.
Management
constitute a Risk
shall
BOARDCOMMITTEES
5.4
the following; A company can manyn.

have as
03. Briefly comment on
nt
for efficient oversight
oversight of
of
committees as it would
require
mandatory December 2014, 2 Markel
company. COnmilces as itt swould
non-maidalory
havc as many
Ans. A company may We will discuss ahu
oversight ol the company. the
Tcquirc lor eflicicnt constituted by corporate.
COmmittces which are generally
of the Board
mandatcd by the ComDoni.
In addition to the Committecs
Commiltce, Nomination and
Committee
Kemuneration
Act, 2013 viz Audii CSR Committee, Board
Committee and the
Stakcholders Relationship
Committees to oversce a specifi
also constitute other
of Directors may
The nomenclature, composition
and role of Such
o r project.
objective the specitic objectives of the company
Committees will vary, depending upon
committees depending upon
the need like:
The non-mandatory
1. Strategies Committee
Committee
2. Capital Expenditure
3. HR Committee
Committee
4. Project Appraisal
Committee
5. Science, Technology & Sustainability
Government Affairs Committee.
6. Regulatory, Compliance &
in corporate governance practices.
04. Infowin Ltd., has been pioneer
mix of independent and executive
The board is comprised of appropriate
and management. The
directors to separate board functions of governance
executive directors and
board comprised of fifteen members with seven
of the chairman, CEO and
eight independent directors. Responsibilities
make periodic presen-
COO have been clearly defined and they have to
tations before the board on the responsibilities, targets and performance
the
The board is responsible for selection of new directors and delegates
it
selection of the new board members to the nomination and remuneration
committee. The nomination and remuneration committee recommends to
the board the induction of any new board member. The board also regular
works with the chairman, CE0 and CO0 to determine the plans of interna
succession of these posts in any emergency. The board meets to revie
the quarterly results, discuss the issues related to the company's finaneia
are
performance and shareholder's independent directors
interests. The
always kept up to the date with the information regarding the comp
The
by the board through separate meetings arranged at regularinterva
ngation ation
board currently has five committees namely Audit Committee, Nomn ittee,
and Remuneration Committee, Stakeholders Relationship comm nittee.
Corporate Social Responsibility Committee and Investment Commi

OARD COMMITTES 5.5
The CO0 and CEO deal with interactlons of the board with the clients,
employees, institutional investors, the government and press. The risk man
Agement is dealt witlh by the board with the help of the audit committee. n
the light of the above you are required to answer the following questions
() How do Independent directors on the board help Infowin Ltd. to
formulate best business policles?
() What are the different committees formed as part of corporate gov
ernance of Infowin Ltd. and what role do these committees play?
June 2016, 5 Marks]
Ans.
() ln the given case, out of fiftcen dircctors in the company, eight are
independent directors. The responsibilities ol chairman, CEO, CO0,
CFO are clearly delincd and they are requircd to make presentations
to the board on their responsibilities,
targets and pertormances.
Independent directorsare required because they perform the lollowing
important role:
1. Balance the often conflicting interests of the stakcholders.
2. Facilitate withstanding and countering pressures from owners.
3. Fulfil a useful role in succession planning.
4. Act as a coach and mentor for their full time colleagues.
5. Provide independent judgment and wider perspectives.
Thus, the presence of independent director on the board of Infowin
Ltd. will lead to greater transparency in company's dealings and for
mulation of best policies.
(i) The Board of Infowin Ltd. has constituted following five committees
to play effective role in the defined arcas. These committees with their
respective role are given below
1. Audit Committee: The role of the Audit Committee includes
oversightof thecompany's linancial reporting process,disclosure,
review of financial statements etc.
2. Nomination and Remuneration Committee: Identilying persons
who are qualified to become Directors and who may be appointed
in senior management in accordance with the criteria laid down;
recommend to the Board their appointment and removal; carry
out evaluation of every Director's pertormance; tormulate the
criteria for determining qualifications, positive attributes and
independence of a Director and recommend to the Board a
policy, relating to the remuneration for the Directors, KMP and
other employees.
5.6 BOARD COMMITTEES
Committee: To look into the rel

3. Stakeholders Relationship
debenturc holders and ot.
sal of gricvances of
shareholders, ther
security holders.
Committee: Formulate and rec
4. Corporate Social Responsibility
ommend to the Board, a Corporate SOCial Responsibility licy
which shall indicate the activities to be undertaken by the coom-
of the CSR policy frOm
pany and monitor the implementation
time to time.
Investment Committee: For lay1ng down an overall investment
framework for the nvestment operations
policy and operational
etc.
AUDIT COMMITTEE
Q5. Elaborate the provisions in respect

of the composition of audit com
mittee under the following;
i. SEBI(Listing Obligations and Disclosure Requirements) Regulations,
2015 as prescribed by SEBL.
ii. Section 177 of the Companies Act, 2013.

June 2011, 3 Marks each]
OR
Discuss in brief the following; Every listed company shall constitute a
committee of the Board to be known as audit committee.
June 2014, 2 Marks]
OR
Which categories of companies are required to have Audit Committee of
Board (ACB) as per the Companies Act, 2013 and as per the SEBI (LODR
Regulations, 2015. June 2019, 3 Marks]
OR
Your Company is planning to get listed in the stock exchange of India.
As a Company Secretary, provide constitution of Audit Committee under
the Section 177(2) of the Companies Act, 2013 and the changes as per
Regulation 18 of SEBI (Listing Obligations and Disclosure Requirements
(LODR)) Regulations, 2015, for the consideration of Chairman of vour
company. [December 2018, 5 Marks
Ans. The constitution of Audit Committee is mandated under the Compa
Act, 2013, and the SEBI (Listing Obligations and Disclosure Requiremet
(LODR)) Regulations, 2015 is as under:
5.7
BOARD COMMITTEES
Companies Act, 2013
Section 177(1) of the Companies Act, 2013 read with Rule 6 of the
Companies (Meetings of Board and its Powers) Rules, 2014 provides
that the Bard of directors of following companies are requircd to
constitute a Audit Commiltee of the Board:
All public listed companies

A l l public companics with a paid up capital of 10 crore rupecs or
more
A l l public companics havingturnover of 100crorerupeesor more
A l l public companies, having in aggregate, outstanding loans or

borrowings or debentures or deposits exceeding 50 crore rupees
or morC.
Section 177(2) of the Companies Act, 2013 provides that:

Audit Committec shall consist of a minimum of three directors
Independent directors should form a majority.
Majority of members of Audit Committee including its Chair-
understand the
person shall be persons with ability to read and
financial statement.
ii. SEBI (LODR) Regulations, 2015
Regulation 18(1) of the SEBI (LODR) Regulations, 2015 provides
that cvery listed entity shall constitute a qualified and independent
audit committee in accordance with the terms of reference, subject
to the following:
members.
Audit Committceshall haveminimumthreedirectors as
Two-thirds of the members of audit committee shall be indepen-
dent directors and in case of a listed entity having outstanding
of
SR cquity shares, the audit committee shall only comprise
independent directors.
All members of audit commiltee shall be financially

literate and
have accounting or related financial
at least one member shall
management expertise.
The chairperson of the audit committee shall be an independent
at AGM to answer share-
dircctor and she/he shall be present
SEBI (Listing Obligations and
holder queries. |Inserted by the
Disclosure Requirements) (Second Amendment) Regulations,
2021 w.e.f. 5.5.2021]
the secretary to the audit
The Company Secretary shall act as
committee.
BOARD COMMITTEES
5.8
committce at its discretion shall invite the finance

the fir
The audit lunction, head of intcrnal
director orhead of the finance audit
auditor and any other.
and a representative of the statutory Such
the meclings ol the committee
Cxecutives to be at
prescnt
of ABC Ltd. the turnover of vo
Q6. You are the company secretary
financial statement has crossed 100 CHo
company as per last audited
of section 177(1) of the Companies Act, 2013
rupees. As per requirement
to constitute an audit committee.
your company is required
asked you to draft the composition
Board of directors of the company has
the provisions of Companies Act.
of audit committee. Keeping in view
2013 and listing obligations and disclosure requirement (LODR), 2015.
committee.
Prepare a note for the composition of audit
Committee
Ans. Resolution for the appointment of Audit
"RESOLVED THAT pursuant to the provisions of Section 177 of the
SEBI (LODR) Regulations
Companies Act, 2013, Regulation 18(1) of the
2015 and Article No. o f the Articles of Association of the Company
the Board hereby constitute the Audit Committee consistingof the following
directors of the company:
S. No. Name Designation Position in the committee
1. Mr. X Director (Independent Director)| Chairman

Mr. Y Director (Independent Director) Member
3. Mr. Z Managing Director Member
RESOLVED FURTHER THAT the Audit Committee shall have theterms ot
reference in accordance with the provisions of Section 177 of the Companies
Act, 2013 and Regulation 18(1) of the SEBI (LODR) Regulations, 2015.
RESOLVED FURTHER THAT the quorum of Audit Committee shall eithet
be two members or one third of the members of the audit committe
whichever is greater, with at least two independent directors."
07.Discuss the role of qualified and independent audit committee ingoo

governance. June 2015, 5 Marks]
the
Ans. As per Regulation 18(3) of the SEBI Listing Regulations, 2015,
role of the Audit Committee shall include the following
1. Oversight of the
company's financial reporting process and the dl clo
sure ot its financial information to
ensure that the financial
is correct, sufticient and credible. sta
BOARD COMMITTEEs 5.9
remuneration and teris

,Recommendalion lor appointment,
ppontment ol auditors ol the
company.
other services
3. Approval
ol payment to
statutory auditors for any
rendercd by the statutory auditors.
and
4, RevicWIng, with the management, the annual financial statements
auditor's report thereon before submission to the board for approval,
with particular reference to:
a. Matters required to be included in the Director's Responsibility
Statement to be included in the Board's report in terms of clause
2013.
(c) of sub-section (3) of section 134 of the Companics Act,
reasons
b. Changes, il any, in accounting policies and practices and
for the same.
the
Major accounting entries involving estimates based on
exer-
C.
cise of judgment by management.
d. Significant adjustments made in the financial statements arising
out of audit findings.
Compliance with listing and other legal requirements relating
to
e.
tinancial statements.
f. Disclosure of any related party transactions.

g Qualifications in
the draft audit report.
financial statements
5. Reviewing, with the management, the quarterly
before submission to the board for approval.
the statement of uses/application
Reviewing, with the management,
6. of funds raised through an issue (public issue, rights issue, prefer-
of funds utilized for purposes other
ential issue, etc.), the statement
and the
than those stated in the offer document/prospectus/notice
report submitted by the monitoring agency
monitoring the utilisation
of proceeds of a public or rights issue, and making appropriate
rec-
ommendations to the Board to take up steps in this matter.

and pertormance,
.Review and monitor the auditor's independence
and effectivencss of audit process.
6. Approval or any subsequent modilication ot transactions ot the com-
pany with related parties.

and investments.
Scrutiny of inter-corporate loans
the company, wherever it is
Valuation of undertakings or assets ot
necessary.
advances trom/investment
Reviewing the utilization of loans and/or 100 crore
by the holding company in the subsidiary exceeding rupees
or 10% of the asset size of thec subsidiary, whichever is lower incl

CXistingloans/advances/investnents existingas on the dateof c g
comingg
nto lorce of this provision. |Inserted by the SEBI (Listing Obliga
and Disclosure Rcquircments)(Amendment) Regulations,201R. w.ef.
1.4.2019]
12. Consider and comment on rationalc, cost-benefits and imDact
of
schemes involving merger, demerger, amalgamation etc., on the listd
entity and its shareholders. [Inserted by the SEBI (Listing Obligati
and Disclosure Requirements)(Second Amendment) Regulations.2021
w.e.f. 5.5.2021.]
(Note: This Regulations is of inclusive functions and not exhaustive)
08. What is mandatory review of information by the audit committe?

Discuss the information required by the audit committee.
June 2014, 4 Marks
Ans. The audit committee shall mandatorily review the following information
1. Management discussion and analysis of financial condition and results
of operations.
2. Statement of significant related party transactions (as defined by the
audit committee), submitted by management.
3. Management letters/letters of internal control weaknesses issued by
the statutory auditors.
4. Internal audit reports relating to internal control weaknesses
5. The appointment, removal and terms of remuneration of the chief
internal auditor shall be subject to review by the audit committee.
6. Statement of deviations:
a Quarterly statement of deviation(s) including report of monitoring
agency, if applicable, submitted to stock exchange(s) in terms or
Regulation 32(1).
b. Annual statement of funds utilized for purposes other than those
stated in the offer
ulation 32(7).
document/prospectus/notice in terms of KCE
DISCLOSURE IN BOARD'S REPORT
09. With the increasing use of internet, the listed entities have arted
siaxt
adopting a functional website for publication of information. In the con
of this, analyze the major elements to be considered in Website Disclo
Regulations. e June 2018, 5 Marks
BOARD COMMITTEES
5.11
ulation 46 of SEBI (Listing

Regulation
nents) Regulations, 2015 requiresObligations

and Disclosure
A a listed entity to maintain a
:al website. The listed entity shall ensure that the contents of the
func
bsiteare cor corect and shall update any change in the
itebs
content of its website
Nwithin two
wo work king days trom the date of such change in content:
The listed entity shall maintain a functional website containing the
basic intormation about the listed entity.
,The listed entity shall disseminate the following information under a
separate section on its website:
a. Details of its business.
b. Terms and conditions of appointment of independent directors.
c Composition of various committees of board of directors.
d Code of conduct of board of directors and senior management
personnel.
e. Details of establishment of vigil mechanism/Whistle Blower
policy.
f. Criteria of making payments to non-executive directors, if the
same has not been disclosed in annual report
g. Policy on dealing with related party transactions.

h. Policy for determining 'material' subsidiaries.
i The email address for grievance redressal and other relevant
details.
iSchedule of analysts or institutional investors meet and pre
sentations made by the listed entity to analysts or institutional
investors.
Explanation: For the purpose of this clause 'meet' shall mean
group meetings or group conterence calls conducted physically
or through digital means
[Substituted by the SEBI (Listing Obligations and Disclosure
2021 w.e.f.
Requirements) (Second Amendment) Regulations,
5.5.2021
k. Audio or video recordings and transcripts ot post earnings/
conducted physically
quarterly calls, by whatever name called,with submission to the
or through digital means, simultaneously
in the following manner:
recognized stock exchange(s),
audio/video recordings shall be
( The presentation and the
made available on the website and in any case,
promptly
o r within twenty-tour hour.

before the next trading day is
of such calls,
whichever carlier,
Irom the conclusion
calls shall be made available on tho

(i) The transcripts of such
of the conclusion of such
website within five working days
calls:
Provided that-
sub-clause () shall be hosted on
a. The information under
for a minimum period
the website of the listed entity
as per the archival policy
of five years and thereafter
disclosed o n its website.
of the listed entity, a s
information under sub-clause (i)
shall be hosted
b. The
on the website of the listed entity and preserved in
accordance with clause (a) of regulation 9.
The requirement for disclosure(s) of audio/video recordings and

from April 01, 2021 and man-
transcript shall be voluntary with effect SEBI
datory April 01, 2022; [Inserted by the
with etfect from (Listing
Amendment)
Obligations and Disclosure Requirements) (Second
Regulations, 2021 w.e.f. 5.5.2021]
3. The listed entity shall ensure that the contents of the website are
correct.
4. The listed entity shall update any change in the content of its website
within two working days from the date of such change in content.
NOMINATION AND REMUNERATION COMMTTEEaa

010. Write short note on the following; Nomination Committee.
eEJune 2014, 3 Marks]
As per Section 178(1) of the Companies

Act, 2013, read with Rule 6 of the
Companies (Meetings of the Board and its Powers) Rules, 2014 and Rule
4 of the Companies (Appointment and Qualification of Directors) Rules.
2014, provides that:
The board of directors of following classes of companies is required t
constitute a Nomination and Remuneration Committee of the Board-
1. Every listed public companies.
2. All public companies with a paid up capital of 10 crore rupees or more.
3. All public companies having turnover of 100 crore
rupees or more
BOARD COMMITTEES 5.13
4. All public companies, having in aggregate, outstanding loans or bor

rowings or debentures or deposits exceeding 50 crore rupees ormore
Note: Section 178 shall not apply to Section 8 companies and specilied
IFSC public companies.
Regulation 19) of the SEBI

Under SEBI (LODR) Regulations, 2015:
shall
Listing Regulations, 2015 provides that the Board of all listed entity
constitute the Nomination and Remuneration Committece.
'remuneration
Q11. Describe composition of the 'audit committee' and
committee as per Regulation 18(1) of the SEBI (Listing Obligations &
Disclosure Requirements) Regulations, 2015. June 2010, 5 Marks]
Ans. Composition of the audit committee: Refer Ans. No. 5
Composition of the remuneration committee: Refer Ans. No. 10

committee.
Q12. Discuss the duties of the nomination and remuneration
OR
Committee.
Discuss the functions of Nomination and Remuneration
June 2018, 5 Marks]
OR
Why do companies set up remuneration committee and what is its role
in companies? 2015, 5 Marks]
June
Ans. As per Section 178(2), (3) and (4) of the Companies Act, 2013,
the Nomination and Remuneration Committee shall pertorm tollowing
functions:
accordance
1. Identify personswhoare qualified to become directors in
with the criteria laid down and recommend to the Board their appoint-
ment and removal.
2. Performance evaluation of every director.

3. Formulate the criteria for determining qualifications, positive attri-
recommend to the Board a
butes and independence of a director and
tor the directors, key managerial
policy, relating to the remuneration
personnel and other employees.
consider the fol-
4. While formulating the policy, the Committee shall
lowing:
remuneration is reasonable and
The level and composition of
sufficient to attract, retain and motivate directors of the quality
required to run the company successfully.

Relationship of remuneration to pertor'mance is clear and rm

appropriate performance benchmarks.
Remuneration to directors, key managerial personnel and sen.
managementinvolvesa balance between tixed and incentive pa
enior
pay
reflectingshort andlong-termpertormanceobjectivesappropriat
to the working of the company and its goals.
Additional functions under Regulation 19(4) of SEBI(LODR)
2015 are:
Regulations
1. Formulation of criteria for evaluation of pertormance of
directors and the board of directors.
independent
2. Designinga policy on diversity of board of directors.
3. Whether to extend continue the term of
or
appointment of the inde.
pendent director, on the basis of report of pertormance evaluation of
independent director.
Q13. Mr. Allen has recently joined Delta Limited as the

been asked by the Board of Directors to draft secretary and has
the charter of the Nomina
tion and Remuneration Committee for its
approval in the BOD meeting.
Provide a sample draft which Mr. Allen would be
BOD meeting in the light of supplementing to the
2013.
provisions of LODR and
Companies Act,
June 2017, 5 Marks]
Ans. The charter of the
Nomination and Remuneration Committee of
Delta Limited may contain
information under the following heads:
Purpose and Objective
Constitution and Organisation
Responsibilities
Compensation policies including performance related
options plans and other beneficial pay and stock
plans
Nomination of Directors
Performance Evaluation and Leadership
Development
Coordinating with Committees of the Board
ernance for good corporate gov
Advisors at forums of the
Any other responsibilities
organisation
Meetings and Report- Details
regarding meetings
quorum, reporting at adequate torums and to beconductea.
other disclosures
Compensation of Committee Members
5.15
BOARDCOMMITTEES
STAKEHOLDERS RELATIONSHIP COMMITTEE
are the applicable legal/regulatory provisions

regarding Stake
014. What Secretary,
Committee? You, as practicing Company
holders Relationship to the Composition
the board mentioning the provisions relating
advise [December 2018, 5 Marks]
of the Committee.
and Functions
Ans. Committee
Provisions regarding Stakeholders Relationship
that the Board
Section 178(5) of the Companies Act, 2013 provides Stakeholders
shall constitute a
of Directors of following companies
Relationship Committee:
sharehold-
one thousand
Company which consists of more than
ers, debenture holders, deposit
holders and any other security
holders at any time during a financial year.
Regulation 20 of SEBI (LODR) Regulations,

2015 provides that every
Stakeholders Relationship Committee
listed entity shall constitute a of
mechanism of redressal of grievances
to specifically look into the
holders.
shareholders, debenture holders and other security
Composition ofthe Committee
2013 and Regulation 20 of SEBI
Section 178(5) of the Companies Act,
2015 provides that-
(LODR) Regulations,
Stakeholders Relationship Committee shall consist of a chairper-
who shall be a non-executive director
son
be decided by the Board.
Other members of the committee shal
other member
of the committees or, in his absence, any
The chairperson
him in this behalf is required under
by
of the committee authorised
the section to attend the general meetings of the company.
Functions of the Committee

committee is to consider and resolvee
T h e main function of the
of security holders of the company.
the grievances
Committee shall be
The role of the Stakeholders Relationship
to consider and resolve the grievances
of the security holders
related to transfer of
of the listed entity including complaints
and non-receipt of declared
shares, non-receipt of annual report
dividends.
O15. Briefly explain the following terms and their relevance to good cor
POrate governance practices; Stakeholders relationship committee.
[June 2014, 2 Marks
5.16 BOARDCOMMITTEES
Ans. Section 178(5) of the Companies Act, 2013 and Regulation 20..
(LODR) Regulations, 2015 provides that-
Stakeholders Rclationship Committec shali consist of a chairn.
who shall be a non-cxecutive director nairpersor
Other members of the committee shall be decided
by the Board
016. Priya Ltd. declared dividend but failed to pay the
which created grievances among shareholders and
dividend in t.time
debenture holde
Describe the provisions of law available for the beneficiaries. s.

Ans.
Section 127 of the Companies Act, 2013 provides for
punishment for the
failure to distribute dividends
Where dividend has been declared by a company but has not
a
or the warrant in respect thereof has not been
been paid
posted within thirty davs
from the date of declaration to any shareholder
entitled to the payment
of the dividend, every director of the
company shall, if he is knowinglya
party the default, be punishable with
to
imprisonment which may extend
to two years and with fine which shall not be
less than one thousand
for every day during which such default continues rupees
and the company shall
be liable to pay simple interest at the rate of
eighteen
during the period for which such default continues: per
cent
per annum
Provided that no offence under this section shall be

deemed to have been
committed:
a Where the dividend could not be
any law.
paid by reason of the operation ot
b. Where shareholder has given directions to the
a
payment of the dividend and those directions cannot be regardig

the company
with
and the same has been complieu
communicated to him.
C.Where there is a dispute
regarding the right to receive the dividend
d. Where the dividend has
been lawfully adjusted by the
any sum due to it from the company agau
shareholder.
e. Where, for
any other reason, the failure to
the warrant within the pay the dividend or to post
p
period under this section was not due to a
default on the part of the
company.
Hence, in the given case, after the nd, it
becomes the liability on the part of the declaration of the dividelh
company to pay the
eligible shareholders and if it is not paid within the dividenmi limit
the directors and company are liable

for
prescribed
such failure.
BOARDCOMMITTEES 5.17
cORPORATE SOCIAL RESPONSIBILITY cOMMITTEE
Q17. Every company is required to constitute a CSR committee under the

Companies Act, 2013. Do you agree? Explain with the relevant provísions
of the law. December 2015, 5 Marks each]
OR
Answer the following in brief; Discuss the composition of Corporate
Social Responsibility Committee with reference to the statutory provisions
applicable. [June 2018, 2 Marks]
Ans. According to Section 135(1) of the Companies Act, 2013 read with
Rule 3 of the Companies (Corporate Social Responsibility Policy) Rules,
2014 mandates that every company which fulfils any of the following
criteria during the immediately preceding financial years shall constitute
a CSR Committee:
Companies having net worth of rupees five hundred crore or more.
Companies having turnover of rupees one thousand crore or more.
Companies having a net profit of rupees five crore or more.
Companies (Corporate Social Responsibility Policy) Rules, 2014, provides
that:
Unlisted public company or a private company covered under sub-sec-
tion (1) of section 135 which is not required to appoint an independent
director, shall have its CSR Committee without such directo.
constitute
Private company having only two directors on its Board shall
its CSR Committee with two such directors.
Foreign company covered under these rules, the CSR Committee shall
comprise of at least two persons of which one person shall be the per-
son resident in India authorized to accept on behalt ot the company
service of process and any notices or other documents and another
person shall be nominated by the toreign company.
It can be stated that a CSR Committee shall consist of three or more
directors. Atleast one director shall be an independent director. The
composition of the CSR Committee shall be disclosed in the Board's
report.
RISK MANAGEMENT COMMITTEE

018. Write short note on legal provisions on risk management under
the SEBI (Listlng Obligations & Disclosure Requirements) Regulations
2015.ot
Ans. Regulation 21 of the SEBI (LODR) Regulations, 2015 deals with

th !the
Risk Management Committe which provides as under:
(1) Theboard ofdirectorsshall constitute a Risk Management Committo
ttee.
(2) The Risk Management Committee shall have minimum three em
bers with majority of them being members of the board of directors
including at least one independent director and in case of a listed
entity having outstanding SR equity shares, at least two thirds of the
Risk Management Committee shall comprise independent director
Substituted by the SEBI (Listing Obligations and Disclosure Require
ments) (Second Amendment) Regulations, 2021 w.e.f. 5.5.2021]
(3) The Chairperson of the Risk management committee shall be a mem.
ber of the board of directors and senior executives of the listed entity
may be members of the committee.
(3A) The risk management committee shall meet at least twice in a vear
Earlier it had to meet atleast once a year however, by the SEBI
(List.
ing Obligations and Disclosure Requirements) (Second Amendment
Regulations, 2021 w.e.f. 5.5.2021, the committee has to meet atleast
twice in a
year.
(3B) The quorum for a meeting of the Risk Management Committee shall
be either two members or one third of the members of the
committee
whichever is higher, including at least one member of the board of
directors in attendance. [Inserted by the SEBI (Listing Obligations and
Disclosure Requirements) (Second Amendment) Regulations, 2021
w.e.f. 5.5.2021].
(3C) The meetings of the risk management committee shall be conductedin
such a manner that on a continuous basis not more than one hundred
and eighty days shall elapse between any two consecutive
meetings.
(4) The board of directors shall define the role and responsibility of the
Risk Management Committee and may
delegate monitoring
and
viewing of the risk management plan to the committee and such other
re
functions as it may deem fit such function shall specihically cover
cyber security:
Provided that the role andresponsibilities of the Risk Management
Committee shall mandatorily include the performance of functions
specified in Part D of Schedule II. [Inserted by the SEBI (Listing Ob-
ligations and Disclosure Requirements) (Second Amendment) Regu
lations, 2021 w.e.f. 5.5.2021].
(5) The provisions of this regulation shall be applicable to top 1000listed
entities, determined on the basis of market capitalisation, as attheenu
of the immediate previous financial year. [Substituted for "500" by
BOARD COMMITTEES 5.19
the SEBI (Listing Obligations and Disclosure
Amendnen) Kegulations, 2021 w.el. 5.5.2021Requircments) (Second
Risk Management Committee shall
(6 The have to scek intor-
n1ation Irom any employce, obtain outside legalpowers
or other
professional
advice and secure attendance of outsiders with rclevant expertise, i
considers necessary. [Inserted by the SEBI (Listing
it
Obligations2021
Disclosure Requircments) (Second Amendment) Regulations,
and
w.c.. 5.5.20211.
cORPORATE GOVERNANCE
019. Write short note on the following; Corporate Governance Commit

tee. [December 2011, 3 Marks]
Ans. A company may constitute Corporate Governance Committee to
developand recommend the board a set of corporate governance guidelines
applicable to the company, implement policies and processes relating to
corporate governance, to review, periodically, the corporate governance
guidelines of the company.
The committee may be responsible for considering matters relating to
corporate governance including the composition of board, appointment of
new directors, review of strategic human resource decisions, succession
planning for the chairman and other key board and executive positions
pertormance evaluation of the board and its committees and individual
directors.
ICSI RECOMMENDATIONS TO STRENGTHEN CORPORATE GOVER-

NANCE FRAMEWORK
020. Prepare a detailed note on ICSI Recommendations to strengthen

Corporate Governance framework. December 2019, 3 Marks]
Ans. ICSI Recommendations to strengthen Corporate Governance
ramework suggests for constitution of Corporate Compliance Committee
on mandatory basis in respect of all public limited companies having a
paid-up capital of 7 5 crore or more.
he charter of the committee includes the following:
To oversee the Company's compliance efforts with respect to relevant

Company policies, the Company's Code of Conduct, and other relevant
laws and regulations.
BOARD COMMITTEES
5.20
T o review complaints received from internal and external

regarding mattersother than the financial matters
xiernal sources
which are
the purview of the Audit Committec. within
Toperiodically present to the Board for adoption of appropriate cho
to the policies, and oversee implementation of and compliance
these policies. with
To review regularly the company's compliance riSk assessment plan
To investigate or cause to be investigated any sigrniticant instancesri
plan
non-compliance, or potential compliance violations that are report.
to the committee. rted
To coordinate with other committees regarding matters
the committees attention that relate to issues of
brought to
compliance with
applicable laws and regulations.
021. Write notes on the following; Compliance officer.

une 2013, 3 Marks)
Ans.Compliance officers ensurethat compliance risk is adequately managed
In order to enhance effectiveness of
board
ofticer should report to the chairman' on allfunctioning,
the compliance
board governance matters
A compliance officer's should ensure the presentation of high-quality |
information to the board and its committees.
Regulation 6(1) of SEBI (LODR) Regulations, 2015 provides that
listed entity shall appoint a every
officer.
qualified company secretary as the
compliance
6 CORPORATE POLICIES AND DISCLOSURES
CH APTER
SEBI (SUBST
SEBI STANTIAL ACQUISITION OF SHARES AND TAKEOVERS)
REGULATIONS, 2011
atWrite short note on the following; Continual disclosure.

June 2014, 3Marks] June 2013, 3 Marks]
Ans.According to Regulation 30 of the SEBI (SAST) Regulation, 2011
1. Every person, who together with persons acting in concert with him,
holds shares or voting rights entitling him to exercise twenty-five per
cent or more ot the voting rights in a target company, shall disclose
their aggregate shareholding and voting rights as of the thirty-first
day of March, in such target company in the prescribed format.
2. The promoter of every target company shall together with persons
acting in concert with him, disclose their aggregate shareholding and
voting rights as ofthethirty-first day of March, in such target company
in such form as may be specified.
3. The disclosures required under sub-regulations (1) and (2) shall be
ade within seven working days from the end of each financial year
to:
a Every stock exchange where the shares of the target company
are listed.
b. The target company at its registered office.
DISCLOSURES UNDER SEBI (LISTING OBLIGATIONS AND DISCLOSURE

REQUIREMENTS) REGULATIONS, 2015
2. What are the guidelines provided in the Listing Obligation and Dis-
OSure Requirements (LODR) Rules, 2015 related to annual report of
companies? June 2017, 5 Marks]
6.1
DISCLOSURES
6.2 CORPORATE POLICIES
AND
Regulations, 2015 provides that

Ans. Regulation 34 of the SEBI (LODR) to the siock exchange within
the listed entity shall submit the annual report
and adopted in the annual
twenty one working days of it bcing approved
of the Companies Act, 2013.
eneral mecting as per the provisions
The annual report shall contain the following
protit and loss accounts
a. Audited financial statements ie.balancesheets, as stipulated in
of Audit Qualifications
etc, and Statement on Impact
regulation 33(3(d), if applicable.
audited by its statutory auditors.
b. Consolidated financial statements
c. Cash flow statement presented
only under the indirect method as
or Indian Accounting Standard
prescribed in Accounting Standard-3
in Section 133 of the Companies Act, 2013
applicable, specified
7, as
the
thereunder or as specified by
ead with relevant rules framed
Institute of Chartered Accountants of India, whichever is applicable.
d Directors report
e. Management discussion and analysis report- either as a part of direc-
tors report or addition thereto.
. Business Responsibility Reports describing the initiatives taken by
them from an environmental, social and governance perspective, in
the format as specified by the Board from time to time by the top one
thousand listed entities based on market capitalization (calculated as
on March 31 of every financial year)
Provided that listed entities other than top one thousand listed com-
panies based on market capitalization and listed entities which have
listed theirspecified securities on SME Exchange, may include these
business responsibility reports on a voluntary basis in the format as
specified. [SEBI (LODR) (Fifth Amendment) Regulations, 2019]
Additional Disclosures in Annual Report
The annual report shall contain any other disclosures specified in the
Companies Act, 2013 along with the following additional disclosures as
specified in Schedule V:
(a) Related Party Disclosure
(b) Management Discussion and Analysis
(c) Corporate Governance Report
(d Declaration signed by the chief executive officer stating that the mem
bers of board of directors and senior management personnel have
affirmed compliance with the code of conduct of board of directors
CORPORATE POLICIES AND DISCLOSURES 6.3
(Complhance certilicate Irom cither auditors or practicing company

secretariCS regarding compliance of conditions of corporate govei
ance be annexed with the directors'
report.
Disclosures with respect to demat suspense account/unclaimed sus
pense account.
03. You are Company Secretary of a listed company. You have been
asked to prepare report on corporate governance to be included in the
annual report of the company. Briefly explain the major contents of such
report. June 2016, 5 Marks]
The following disclosures shall be made in the section on the corporate
gOvernance of the annual report:-
1. A brief statement on listed entity's philosophy on code of governance.
2. Board of directors: Composition and category of directors, attendance,
number of other board of directors, Disclosure of relationships between
directors etc.
3. Audit committee: Brief description of terms of reference, composition,
name of members and chairperson, Meetings and attendance during
the year.
4. Nomination and Remuneration Committee: Brief description of terms
of reference, composition, name of members and chairperson, meeting
and attendance during the year, performance evaluation criteria for
independent directors.
5. Remuneration of Directors: Criteria of making payments to non-ex
ecutive directors, alternatively, this may be disseminated on the listed
entity's website and reference drawn thereto in the annual report.
6. Stakeholders' grievance committee: Name of non-executive director
heading the committee, Name and designation of compliance officer,
No. of shareholders' complaints received so far, No. of pending com-
plaints.
7. General body meetings: Location and time, where last three annual
general meetings held, whether any special resolutions passed in the
previous three annualgeneral meetings or through postal ballot, details

ol voting pattern, person who conducted the postal ballot exercise etc.
8. Means of communication: Quarterly results, newspapers wherein
results normally published, Any websile, where displayed, Whether it

also displays officialnews releases, presentations made to institutional
investors or to the analysts etc.
DISCLOSURES
AND
date, time
general meeting
-
Annual
9. General shareholder information:
date, stock Code, market
and venue, financial year, dividend payment
month in last tinancial ycar.
price data- high, low during each
10. Other Disclosures: Web link where policy for determining 'material
subsidiaries is disclosed.
of Board meeting to
04. Discuss provisions relating prior intimation
to
2015.
Stock Exchange as per SEBI (LODR) Regulations,
Obligations Disclosure
and
Ans. As per Regulation 29 of the SEBI (Listing
listed entity shall give prior intimation
Requirements) Regulations, 2015, a directors in the
tostock exchangeabout the meeting of the board of
following manner:
A. At least two working days in advance, excluding the date of the intima
tion and date of the meeting in which any of the following proposals
is due to be considered:
Proposal for buyback of securities.

Proposal for voluntary delisting by the listed entity from the stock
exchange(s).
Fund raising by way of further public offer, rights issue, Amer
ican Depository Receipts/Global Depository Receipts/Foreign
Currency Convertible Bonds, or any other method and for de
termination of issue price.
Declaration/recommendation of dividend, issue of convertible
securities including convertible debentures or of debentures
carrying a right to subscribe to equity shares or the passing over
of dividend.
The proposal for declaration of bonus securities where such
proposal is communicated to the board of directors of the listed
entity as part of the agenda papers.
B. At least five days in advance
excluding the date of the intimation and
date of the meeting in which following proposal
is due to be
Financial results viz quarterly, half
considered:
yearly, or annual, as the case
may be; (the intimation shall include the date of such meeting of
board of directors also)
C. At least eleven wvorking days before any of the following
proposal is
placed betore the b0ard of directors:
Any alteration in the form or nature of any of its securities
are listed on the stock
that
exchange or in the rights or privileges of
the holders thereof.
Any alteration in the date on which, the interest on debentures

or bonds, or the redemption amount of redeemable shares or or
debentures or bonds, shall be payable.
WEBSITE DISCLOSURES
05. What are the Financial Informatlon which are required to be disclosed
on website of the company as per Regulation 46 of SEBI (LODR)Regu
lations, 2015? [June 2019, 5 Marks]
Ans. The listed entity shall maintain a functional website containing the
basic information about the listed entity. The listed entity shall disseminate
the following financial information under a separate section on its website:
i Financial information including:
a. Notice of meeting of the board of directors where financial results
shall be discussed.
b. Financial results, on conclusion of the meeting of the board of
directors where the financial results were approved.
c. Complete copy of the annual report including balance sheet,
profit and loss account, directors report, corporate governance
report etc.
ii. Shareholding pattern.

ii. Details of agreements entered into with the media companies and/or
their associates, etc.
iv. Schedule of analyst or institutional investor meet and presentations
made by the listed entity to analysts or institutional investors simul
taneously with submission to stock exchange:
v. Newname and the old name ot the listed entity tor a continuous period
of one year, from the date of the last name change.
vi With effect from October 1, 2018, all credit ratings obtained by the
entity for all its outstanding instruments, updated immediately as and
when there is any revision in any of the ratings.
vi Separate audited financial statements of each subsidiary of the listed
entity in respect of a relevant financial year, uploaded at least 21 days
prior to the date of the annual general meeting which has been called
to inter alia consider accounts of that financial year.
Ihe listed entity shall ensure that the contents of the website are correct.
ne listed entity shall update any change in the content ot its website within
WO working days from the date of such change in content.
6.6 CORPORATE POLIcIES AND DISCLOSURES
UNDERSEBI (PROHIBmmONOFINSIDER TRADING) REGULATIONS, 201

the Stakeholders, SEBI has taken Vari
06. To protect the interest of ious
initiatives and Code of Fair Disclosure is one ot important steps
the und
Regulation 8 of SEBI (Prohibition of Insider Trading) Kegulations, 201
Prepare a note on Code of Fair Disclosure. December 2019, 5 Marks
Ans. As per Code of Fair Disclosure under Regulation 8 of Securities and
nd
Exchange Board of India (Prohibition of Insider Trading) Regulations, 201
1. The board of directors of every company, whose securities are liste
on a stock exchange, shall formulate and publish on its official websita
a code of practices and procedures tor tair disclosure of unpublished
pricesensitive intformation that it would tollow in order to adhera

to each of the principles set out in Schedule A to these regulations
without diluting the provisions of these regulations in any manner,
2. Every such code of practices and procedures for fair disclosure oi
unpublished price sensitive intormation and every amendment thereto
shall be promptly intimated to the stock exchanges where the securitie
are listed. The board of directors of a listed company shall makea
policy for determination of "legitimate purposes" as a part of "Codes
of Fair Disclosure and Conduct" formulated under Regulation 8.
Principles of Fair Disclosure forpurposes of Code of Practices and Procedures

for Fair Disclosure of Unpublished Price Sensitive Information, Regulation
8(1) are as under:
1. Prompt public disclosure of unpublished pricesensitiveinformation
that would impact price discovery no sooner than credible and con-
crete intormation comes into being in order to make such information
generally available.
2. Uniform and universal dissemination of unpublished price sensive
information to avoid selective disclosure.
3. Designation of a senior officer as a chief investor relations ofticer to
deal with dissemination of information and disclosure of unpublished
price sensitive information.
4. Prompt dissemination of unpublished price sensitive intormationt
gets disclosed selectively, inadvertently or otherwise to make su
intormation generally available.
5. Appropriate and fair response to queries on news reports and requs
for verification of market rumours by regulatory authorities.
6. Ensuring that information shared with analvsts and research personu
is not unpublished price sensitive information.
best practicestomaketranscriptsorrecords of proceedings

7. Developing on
of mectings with analysts and other investor relations conlerences
documentation
he ollicial website to cnsure official confirmation and
ol disclosures made.
on a need-to-
8. Handling ol all unpublished price scnsitive information
know basis.
Ltd. is public limited company listed on NSE and BSE. The

07. ABC a
Bank
company is enjoying cash credit
limit of 7 10 crores with Trust
limit is renewed from timne
against the book debts. The said cash credit
to time and
for this purpose the Trust Bank requires the financial papers
from the company which include the Balance Sheet and Profit and Loss
and projected
Account, list of sundry debtors (with age-wise outstanding)
debtors etc.
financial data viz: Turnover, Profit, Non-performing
of its annual accounts
The company was in the process of the finalisation
as of 31st March, 2018 and
the same was to be put before the Audit Com-
schedule to be held on 5th
mittee of Board (ACB), meeting of which was
Directors. The CC limit
July, 2018, for recommendation to the Board of
31st March, 2018,
with the Trust Bank which was due for renewal from
renewed on ad-hoc basis for three months only on the basis of provisional
else the CC limit account
data, subject to the submission of final papers,
Since the Trust
of the company will turned in to non-performing account.
it insisted the
Bank also wants the CC Limit account in performing status,
even before the approval of the ACB/
company to submit the final data
Board in order to renew the limit and prevent the account from turning
into NPA.
Based on the above facts the Company approaches you, being a Corporate
Law Consultant.
Answer the following queries raised by the ABC Ltd.:
() Whether HP Ltd. can provide the financial information (which is price
sensitive information) to its banker without getting it perused and
approved by the ACB and Board? Quote your answer with relevant
provisions of law.
(1) If the Manager of the Trust Bank Branch, where the CC Limit account
is provided the unapproved financial papers and on
Isthemaintained,
basis of these financial papers, he comes to know that company
shown profitwith a rlse of 20% previous year, so he pur-
from the
has
chased the shares of the company from the market with lesser price
(in expectation of high jump in price after declaration of the result).
When the results were officially declared by the company, the shares
6.8 CORPORATE POLICIES ANID
DISCLOSURES
Jumped to 30% and the branch manager off loaded the purchases
made. Whether the Manager will be treated as Insider as per the SERI
2015?
(Prohibition of Insider Trading) Regulations,
(iii) What are the provisions relating to the trading when a person is in
possession of unpublished price sensitive information as per the SERI
2015?
(Prohibition of Insider Trading) Regulations,
iv) What are the penal provisions for insider trading as prescribed in the
Companies Act, 2013 and SEBI Act, 1992.

June 2019, 5 Marks each
Answer
(i) In terms of Sub-Regulation (1) of Regulation 3 of SEBI (Prohibition
of Insider Trading) Regulations, 2015, no insider shallcommunicate,
provide, or allow access to any unpublished price sensitiveinformation
relating to a company or securities listed or proposed to be listed, to
any person including other insiders except where such communica
tion is in furtherance of legitimate purposes, pertormance of duties
or discharge of legal obligations.
Sub-Regulation (2) of Regulation 3 states that no person shall pro
cure from or cause the communication by any insider of unpublished
price sensitive intormation relating to a company or securities listed
or proposed to be listed, except in furtherance of legitimate purposes,
performance of duties or discharge of legal obligations
Sub-Regulation (2A) of Regulation 3 provides that the board of
directors of a listed company shall make a policy for determination
of legitimate purposes" as a part of "Codes of Fair Disclosure and
Conduct' formulated under Regulation 8.
Thus, as a prudent rule the price sensitive information should not be
passed on until it is for legitimate purposes. However, as per Explana
tion to Sub-Regulation (2A),
unpublished price sensitive information
can be shared with
banker/lender for legitimate purposes like renewal
of Credit limits provided that such
to evade or circumvent the
sharing has not been carried out
prohibitions these regulations.
of
(i) Sub-Regulation (2B) Regulation 3 of SEBI
of of Insider
Trading) Regulations, 2015 provides that any(Prohibition in receipt o
unpublished price sensitive information pursuantperson
to a "legitimate pu
pose" shall be considered an "insider" for purposes of these
and due notice shall be given to such regulanoi
persons to maintain
tiality of such unpublished price sensitive contiaci
with these regulations.
information in compliane
6.9
CORPORATT POLICIES AND DISUOSURES
lo the above para, the branch nanager who is in receipt

According
of unpublished price sensitive information for the legitimate purpose
is an insider under the regulations.
Regulation 4 of SEBI (Prohibltion of Insider Trading) Regulation5,
(1) 2015 dcals with the provisions relating to trading when in posSession
of unpublished price sensitive information.
that are listed
Regulation 4(1): No insider shall trade in securities of
or proposcd to be listed on a stock exchange
when in possession
unpublishcd price sensitive information.
securities has been
Explanation- When a person who has traded in
information, his trades
in possession of unpublished price sensitive
and
would be presumed to have been motivated by the knowledge
awareness of such information in his possession:
Provided that the insider may prove his innocence by demonstrating
the circumstances including the following:
insiders
Thetransaction is an off-market intersetransfer between
sensitive
who were in possession of the same unpublished price
3 and both
information without being in breach of regulation
made a conscious and informed
trade decision.
parties had
window
ii. The transaction carried out through the block deal
was
mechanism between persons who were

in possession of the
information without being in breach
unpublished price sensitive
made a conscious and in-
of regulation 3 and both parties had
formed trade decision.
carried out pursuant to a statu-
iii The transaction in question
was
to carry out a bona fide

transaction.
tory or regulatory obligation
was undertaken pursuant to the
iv. The transaction in question
of which the exercise price
exercise of stock options in respect
was pre-determined
in compliance with applicable regulations.
v. In the caseof non-individual insiders:

of such unpublished
a. The individuals who were in possession
intormation were diBferent from the indi-
sensitive
price
decisions and such decision-making
viduals taking trading
of such unpublished price
individuals were not in possession
decision to trade.
sensitive information when they took the
arrangements were in place
b. Appropriate and adequale
these regulations are not violated
and no
to ensure that
sensitive intormation was communicated
unpublished price
by the individuals
ISCIOSUKIS

AND
inlormation to the individuals taking trad.

diny
C Possessing the evidcncc ol such arrangems
ment,
decisions and there
is no
having bcen breached.

sct up in accordan
Vi. The trades w e r e pursuant toa trading plán
with Regulation 5,
connectcd persons the onus dd
In the case ol
Regulation 4(2): ol unpublished price
werenot in possessIon
establishing, that they
shall bc such connccled persons and in
on
sensitive information,
would be on the Board.
other cases, the onus
specily such standards and

Board may
Regulation 4(3): The il may deem necessary for
time to time, as
requirements, from
the purpose of these regulations.
Section 195 the Companies Act,
2013, dealing with the matter relat.
(iv) of
been omitted by the Companies Amendment
ing to insider trading has
Act, 2017 w.e.f. 09/02/2018.
However, penalty lor insider trading is provided under Section 15G
of the SEBI Act, 1992. It provides that if any insider who,;
1. Either on his own behalf or on behalf of any other person, deals
in securities of a body corporate listed on any stock exchange
on the basis of any unpublished price-sensitive information.
2. Communicates any unpublished price-sensitive information to
any person, with or without his request for such information
except as required in the ordinary course of business or under
any law.
3. Counsels, or procuresfor any other person to deal in any securities
of anybody corporate on the basis of
unpublished price-sensitive
information, shall be liable to a penalty which shall not be less
than ten lakh rupees but which may extend to twenty-live crore
rupees or three times the amount of profits made out of insider
trading, whichever is higher.
08. What are the material disclosures of which information should be
disclosed to Stock Exchange within 24 hours of conclusion of the Board
Meeting as per SEBI (LODR) Regulations, 2015?
December 2019, 3 Mars]
Ans. As per Regulation 30 of SEBI
(Listing Obligations and Disclosure
Requirements) Regulations, 2015, the listed entity shall first disclose to
stock exchange(s) of all events, as specified in Part A of Schedule IIl, or
information as soon as reasonably possible and not later than twenty 1ou
hours Irom the occurrence of event or information. Following events shal

be disclosed:
1. Comencement or any postponement in the date of commencement

of commercial production or commercial operations of any unit/
division.
2. Change in the general character or nature of business brought about
by arrangements lor strategic, technical, manufacturing, or marketing
tie-up, adoption of new lines of business or closure of operations
any unit/division (entirety or piecemeal).
3. Capacity addition or product launch.
4. Awarding, bagging/receiving, amendmentortermination of awarded/
bagged orders/contracts not in the normal course of business.
5. Agreements(viz. loan agreement(s) (as a borrower) or any other agree
ment(s) which are binding and not in normal course of business) and
revision(s) or amendment(s) or termination(s) thereof.
6. Disruption of operations of any one or more units or division of the
listed entity due to natural calamity (earthquake, flood, fire etc.), force
majeure or events such as strikes, lockouts etc.

7. Effect(s) arising out of change in the regulatory framework applicable
to the listed entity.
8. Litigation(s)/dispute(s)/regulatory action(s) with impact.
9. Fraud/defaults etc. by directors (other than key managerial personnel)
or employees of listed entity.
ESOP/ESPS Scheme.
10. Options to purchase securities including any
for any third
Giving of guarantees or indemnity or becoming surety
a
11.
party.
12. Granting, withdrawal, surrender, cancellation or suspension oif key
licenses or regulatory approvals.
DISCLOSURE ANDTRANSPARENCY REQUIREMENTS UNDER SEBI(ISSUE

OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2018
the merchant
09. Ms. Nidhi is the Company Secretary of ZYCO Bank,
banker for Synergy Ltd., which had recently carried out an issue and allot
issue advertisement to be circulated
ment of Equity Shares. Draft a post
in daily newspapers. [June 2017, 5 Marks]
shall ensure that advertisement giving
Ans. The post-issue merchant bankerbasis of allotment, number, value and
details relating to oversubscription,
DISCLOSURES
POLICIES AND
6.12 CORPORATE
Supported h
including (APplication ASBA by
Dercentage of all applications percentage
of essful
succe s: allottees
value and of retund orders or
Blocked Amount) number, of despatch
completion
Banks by the Registrar, date c
for all applications, date
of
Syndicate
instructions to Self Certified of listing
a p p i c a l o n , etc. is released
date of filing
despatch of certificatesand
of an advertisement is as under:
Format
of Synergy
Ltd. (Equity Shares)
Advertisement
Post Issue
Bank was a huge success
Carried out by Zyco

Shares issued : 100,000
Shares subscribed: 328,000
Oversubscription:3.28 times
made to 150,000 share (Green
Shoe
Pro rata allotment
Basis of Allotment
Option)
Applied through ASBA:80%
Process complete: 30/09/2016
refund orders : 08/10/16
Date of completion of despatch of
15/10/16
Dateof despatch of Certificates:
10/10/16
Date of filing of listing application:
Merchant Banker to the Issue
Place:
Date:
CORPORATE POLICIES MEANING AND IMPORTANCE
01. "Without proper policies, it is extremely tough for the business to

continue and policies work as guide and help the manager to direct all
the actions towards the same goal." In
light of the aforesaid statement;
highlight the importance of corporate policies.
Ans. Corporate Policy is
formal declaration of the guiding
a
which organization
an will
principles D
function. Policies are developed by the board
of directors or a senior management
policy committee.
Policies are an essential component of
every organisation and address
important issues. Theretore, must be effectively communicated amongst
stakeholders.
Following are ihe ponts highlighting the importance of corporate policies
Policics are neceSsary to perform the business activities in a smooth
way.
Policies promote delegation of the power of making decisions.

Policies help in analysis of performance by serving as a standard.
I t helps in dealing with the issues for optimal utilization of limited
resources.
Sound policies aid in developing good public image of an organization.
POLICIES UNDER THE COMPANIES ACT, 2013
02. Briefly explain the following; Corporate Social Responsibility Policy.

Ans. Section 135(4) of the Companies Act, 2013, contains that the Board ot
every company which is required to constitute a CSR Committe shall after
taking into account the recommendations made by the Corporate Social
Responsibility Committee, approve the Corporate Social Responsibility
Policy for the company.
The contents of such Policy shall be disclosed in board's report and also
place it on the company's website.
The CSR Policy of the company includes the following
A list of CSR projects or programs which a company plans to under.
take within the areas or subjects specitied in Schedule Vl of the Act,
specifying modalities of execution of such project or programs and

implementation schedules for the same.
Monitoring process of such projects or programs
A clause specifying that the surplus arising out of the CSR projects
or programs or activities shall not form part of the business profit of
the company.
03. Briefly explain the following; Risk Management Policy.

Ans. Section 134(3)(n) of the Companies Act, 2013, provides that a statement
indicating development and implementation ot a risk management policy

Tor the company including identification therein of elements of risk, if
any, which in the opinion of the Board may threaten the existence of the
Board of Directors. This
company should be included in the report by its is also
indicatesthat framinga risk management policy envisaged under
ne provisions of the Companies Act, 2013.
6.14 CORPORATE POLICIES AND
DISCLOsURES
the following: Vigil Mechanism

Policy. 9
04. Briefly explain
Ans. Section 177(10) of the Companies Act, 2013 provides that the
said section shall provide
under sub-section (9) ol the
gror mechanism of persons who use such
adequate safeguards against victimisation
direct a c c e s to the chairperson of
mechanism and make provision for c a s e s and the details
o r exceptional
the Audit Committee in appropriate
of establishment of such mechanism shall
be disclosed by the company
This mechanism is herein
its website, if any, and in the Board's report.
on
referred as a policy.
and Remuneration policy.
Q5. Briefly explain the following; Nomination
2013 provides that the
Ans. Section 178(3) and (4) of the Companies Act,
Nomination and Remuneration Committee shall formulate the criteria
for determining qualifications, positive attributes and independence ofa
director and recommend to the Board a policy, relating tothe remuneration
for the directors, key managerial personnel and other employees. The
Nomination and Remuneration Committee shall, while formulating the
policy shall ensure that -
a Thelevel and composition of remuneration is reasonable and sufficient

to attract, retain and motivate directors of the quality required to run
the company successfully.
b Relationship of remuneration to performance is clear and meets
appropriate performance benchmarks.
C. Remuneration to directors, key managerial personnel and senior
anagement involves a balance between tixed and incentive pay
reflecting short and long-term performance objectives appropriate
to the working of the
company and its goals.
The policy shall be placed
the website of the
on
company, if any, and the
salient features of the policy and changes therein, if
any, along with the
web address of the policy, if any, shall be disclosed in the
Board's report.
POLICIES UNDER THE SEBI (LODR) REGULATIONS, 2015
06. Explain any five policies which a

company is
under SEBI (LODR) Regulations, 2015.
required to formulate
Thekeypolicies required for companies under the SEBI(LODR) Regulations,

2015 are
1. Risk policy
AsperRegulation 4(2)()(i(1),a listed entity is required to havearisk
policy which shall be reviewed and guided by the board of directo
2. Policy tor preservation of documents
As per Regulation 9, a listed entity is required to have a policy for
preservation of documents, approved by its board of directors, clas
sifying them in at least two categories as follows:
a. Documents whose preservation shall be permanent in nature
b. Documents with preservation period of not less than eight ycars
after completion of the relevant transactions. The documents
may be preserved in electronic mode.
3. Policy for Determining Material' Subsidiary
As per Regulation 16(2)(c), a listed entity is required to formulate
a policy for determining 'material' subsidiary. "Material subsidliary
means a subsidiary, whose income or net worth exceeds 10% of the
consolidated income or net worth respectively, of the listed entity and
its subsidiaries in the immediately preceding accounting year.
4. Whistle Blower Policy
As per Regulation 22 and Regulation 46(2)(e), a listed entity is re
quired to formulate a vigil mechanism for directors and employees to

report genuine concerns under which they can have direct access to
the chairperson of the audit committee in appropriate or exceptional
cases. This mechanism/policy should be disclosed on the website of
the listed entity.
5. Policy relating to the remuneration of the directors, key managerial
personnel and other employees
A listed entity is required to formulate a policy on th remuneration
of the directors, key managerial personnel and other employees.
[Part D, Schedule II (1)}
DISCLOSURE AND TRANSPARENCY REQUIREMENTS
07. What are the contents to be incorporated in a director's responsibility

statement?
Ans. As per Section 134(5), the Directors' Responsibility Statement shall
state that
. In the preparation of the annual accounts, the applicable accounting
standards had been followed along with proper explanation relating
to material departures.
DISCLOSURES
AND
and applied them

had selected such accounting policies are
b.Thedirectors estimates that rcasonable
and made judgments and
Consistently of the state of affairc
a true
and fair v i c w
and prudent so as to give and oI the profit and
the linancial year
of the company at for thatofperiod

the end
loss of the company forthe maintenance
sufficient care
C. The directors had taken properand accordance with the provisions of

records in
of adequate accounting the assets of the company
and for preventing
this Act for safeguarding
and other irregularities.
and detecting fraud
the annual accounts
on a going concern
d. The directors had prepared
basis.
of a listed had laid down internal
company,
e. The directors, in the case
financialcontrols to be followed by the company and that such internal

adequate and were operating eftectively.
financial controls are
to ensure compliance with
f.The directors had devised proper systems such systems ade
and that were
the provisions of all applicable laws
quate and operating effectively.
DISCLOSURES UNDER SEBI REGULATIONSS
08. What are the disclosures required to be made by a company under

SEBI rules and regulations?
Ans. Following disclosures are made by a company under various regulations
of SEBI-
SEBI (Issue of Capital and Disclosure Requirements) Regulations,
2018:
I. Disclosures in the draft offer document and offer document
ulation 24
(Reg:
2. Filingof the draft offer documentand offer document (Regulation
25)
3. Draft offer document and offer document to be available to the
public (Regulation 26)
4. Issue-related advertisements (Regulation 43)
5. Post-issue advertisements (Regulation
51)
6. Post-issue reports
(Regulation 55)
SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations,
2011:
1. Disclosure of acquisition and disposal
(Regulation 29)
2. Continual disclosures (Regulation 30)

Disclosure of encumbered shares (Regulation 51)
SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015
1. Prior Intimations (Regulation 29)
2. Disclosure of Events or Information [Regulation 30/
a. Disclosure of Material Events
b. Disclosures of events upon application of the Materiality
Guidelines
c. Disclosure of Other Events
3. Disclosures of Financial Results [Regulation 33)
4. Anmual Report Disclosures [Regulation 34]
5. Website Disclosures ([Regulation 46]
SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS,
2015
1. Disclosures of Trading By Insiders [Regulation 6]
2. Disclosures by Certain Persons - Initial Disclosure [Regulaiion7
(
3. Continual Disclosures: /Regulation 72)]
4. Code of Fair Disclosure [Regulation 8
5. Code of Conduct [Regulation 9
6. nstitutional Mechanism for Prevention of Insider trading [Reg.
ulation 94]
09. What are the disclosures required to be made by a company for

encumbered shares?
Ans. According to Regulation 31 of SEBI (Substantial Acquisition of Shares
and Takeovers) Regulations, 2011, the following disclosures are necessary
if the company's shares are encumbered:
. The promoter of every target company shall disclose details of shares
in such target company encumbered by him or by persons acting in
concert with him in the prescribed tormat.
2. The promoter of every target company shall disclose details of any
invocation of such encumbrance or release of such encumbrance of
shares in prescribed format.
. The disclosures required under sub-regulation (1) and sub-regulation
shall be made within seven working days trom the creation or
(2)
DISCLOSURES
6.18 CORPORATE POLICIES AND
invocation or releasc of cncumbrance, as the case may be to,- (a) evo.
stock exchange where the shares ol the target Company are listed: and
d
oflice.
() the target company at its registercd
4. The promoter of every target company shall declare on a ycarly hae.
that he, along with persons acting in concert, has not made any en
asis
en-
cumbrance, directly or indirectly, other than those already disclosed
sed
during the financial year.
5. The declaration required undersub-regulation(4)shall be made within
seven working days from the end of each financial year to:
a. Every stock exchange where the shares of the target company
are listed.
b. The audit committee of the target company.
DISCLOSURES UNDER (PROHIBITION OF INsIDER TRADING) REGULA.

TIONS, 2015
Q10. Distinguish between Initial Disclosures and Continual Disclosures

under SEBI (Prohibition of Insider Trading) Regulations, 2015
Ans. Regulation 7(1): Initial Disclosure
Initial Disclosures are required to be made by:
a. Every promoter or member of the promoter group, key managerial
personnelanddirectorofevery company whose securities are listed on
any recognised stock exchange shall disclose his holding of securities
of the company as on the date of these regulations taking effect, to
the company within thirty days of these regulations taking effect.
b. Every person on appointment as a key managerial personnel or a
director of the company or upon becoming a promoter or member
of the promoter group shall disclose his holding of securities of the
company as on the date of appointment or becoming a promoter, to
the company within seven days of such appointment or becominga
promoter.
Regulation 7(2): Continual Disclosures
Continual Disclosures are required to be made by
a. Every
promoter or member of the promoter group, designated per
son and director of
every company shall disclose to the company
number of such securities acquired or tn
disposed of within two trading
days of such transaction if the value of the securities traded, whethet
in one transaction or a series of transactions over any calendar qua
6.19
cORPORATE POLICIES AND DISCLOSURES
or sucn
lakh rupees
aggregates to a traded value in excess of ten
ter,
be specified.
other value as may the stock
notity the particulars of such trading to
h Every company snall daysor
which the securities are listed within two trading
exchangeon of such intormation.
receipt of the disclosure or from becoming
aware
manner
and such
abOve disclosures shall be made in such form
CThe
the Board from time to time.
as may be specified by
ACCOUNTING AND AUDIT RELATED ISUES,
7
RELATED PARTY TRANSACTIONS AND VIGIL
CHAPTER MECHANISM
INTERNAL AUDIT
01. P Pvt. Lid. was incorporated under the Companies Act, 1956 on 3rd
October, 2011. The Authorised Share Capital of the Company is 7 75
crores. The present Paid-up Share Capital of the Companyis 60 crore
The turnover of the company for financial year 2017-18 was 150
crores
and because of good overseas marketability of the company's product, the

turnover of the company for the year ended 31st March, 2019 increased
to 210 crores.
The Secretarial Auditor of the company advised that the company should
have internal audit in place, but the Managing Director of the company
argued that since it is a private company, so it is not required.
Based on the facts in the above case, answer the following questions:
i. Whether internal audit is compulsory for the Private Limited?
ii. In the above case if the company had been an Unlisted Public Limited
and Turnover for year ended 31st March, 2019 would be 7 190 crore,
what would have been your answer?
ii. Can Company Secretary be appointed as Internal Auditor in an Unlisted
Public Company where he is already appointed as Key Managerial
December 2019, 2 Marks each]
Personnel1?
Ans.
As per section 138 of the Companies Act, 2013 read with Rule 13(1)
(c) of The Companies (Accounts) Rules, 2014 every private company
be required to appoint an internal auditor:
having the following shall
a. Turnover of two hundred crore rupees or more during the pre-
ceding financial year.
Or
7.1
ACCOUNTING AND AUDIT RELATED ISSUES, RELATED PARTY TRANSACTIONS
. Outstanding loans or borrowings from banks or public financial

nstitutions exceeding one hundred crore rupees or more at any
tinancial year.
point of time during the preceding
In the present case; the turnover of the P Pvt. Ltd. is higher than ? 200
crore, for the year ended 3 1st March,

2019, it is mandatory for P Pvt.
Ltd. to appoint an internal auditor.
2013 read with Rule 13(1)
ii. As per section 138 of the Companies Act,
2014 every unlisted public
(b) of The Companies (Accounts) Rules,
company having:
a. Paid up share capital of fifty crore rupees or m o r e during the
preceding financial year.
or
b. Turnover of two hundred crore rupees or more during the pre-
ceding financial year.
or
c. Outstanding loans or borrowings from banks or public financial

institutions exceeding one hundred crore rupees or more at any
point of time during the preceding financial year
or
d Outstanding deposits of twenty five crore rupees or more at any

point of time during the preceding financial year shall be required
to appoint an internal auditor.
In the present case; the paid up capital of P Pvt. Ltd is higher than
fifty crores, hence the company needs to appoint the internal auditor.
iii As per Section 138 of the Companies Act, 2013 an internal auditor
shall either be a chartered accountant or a cost accountant, or such
other professional as may be decided by the Board.
Explanation to Rule 13 of The Companies (Accounts) Rules, 2014
states that the internal auditor may or may not be an employee ot the
company.
In view of the above the Company Secretary who isappointed as Key
Managerial Personnel in the company can be appointed as an interna
auditor of the company.
Q2. Apart from Statutory Audit, for some class of companies, Internal
Audit is also mandatory. Which companies are
required to have Internal
Audit as per the provisions of the Companies Act, 2013?
7.3
ACCOUNTING AND AUDIT RELATED ISSUES, RELATED PARTY TRANSACTION
of the
138 of the Companies Act, 2013 read with Rule 13
ns. Section
Companies(
(Accounts) Rules, 2014 provides for emandatory appointment
ora cost
an internal auditor
whoshall either be chartered accountant
internal au a
of an
of
the Board to
or such as may be decided by
accountant,
a c c o u n t a
other professional
of company
conduct internal audit of the functionsand activities for classes
given below-
Every listed company

Every unlisted public company having
P a i d up share capital of 50 crore rupees or more during the pre
ceding financial year; or

TurnOver of 200 crore rupees or more during the preceane
financial year; or
Outstanding loans or borrowings from

banks or public financial
at any point oor
exceeding 100 crore rupees or more
institutions
time during the preceding financial year; or
of
or more at any point
Outstanding deposits of 25 crore rupees
time during the preceding financial year.
Every private company having -
or more during the preceding

Turnover of 200 crore rupees
financial year; or
Outstanding loans or borrowings

from banks or public inancial
c r o r e rupees or more at any point of
institutions exceeding 100
financial year.
time during the preceding
OF AUDITORS
MANDATORY ROTATION
Private Limited Company

03.MPvt. Ltd. was registered theyear 2001
as a
in
share capital
status. It is having a paid-up
and continuing with the same auditor, X,
2019. The present company's
of 7 65 crore as on 31st March,
Firm) who was appointed as auditor
Chartered Accountant, (a Proprietor
said auditor is going
the 2014. The term of the
of the company in year since he is
the same person,
wants to re-appoint
o expire and company officials and its working.
with the company's
having well acquaintance
questions:
answer the following
Based the above facts,
on
Auditor of the Compa-
as Statutory
i. Whether X can be reappointed [December 2019, 1 Mark]
ny? Person as an auditor, the
of the Individual
1. In the above case if, instead
7.4 ACCOUNTING AND AUIDIT RELATED ISSUES, RILATED PARTY TRANSACON
Firm of Chartered Account

company would have appolnted any ntantw
and now the tenure of the sald firm ls expiring, whether this firm
eligible for reappointment? December 2019, 2 Marks
iii. In the given case, if the paid-up capital of the company ls ? 5 cei
Ore
and having cash credit limit and term loan facllty from a bank t
the tune of? 55 crore, what would have been your answer?
Ans.
i As per Section 139(2) of the Companies Act, 2013 rcad with Rule 5(b
of the Companies (Audit and Auditors) Rules, 2014:
All private limited companies having paid up share capital of
rupees
fifty crore or more shall not appoint or re-appoint:
a. An individual auditor for than
as more one term of five conse.
cutive years.
b. An audit firm as auditor for more than two lerms of /ive conse.
cutive years.
Cooling off period
An individual auditor who has
completed his term of five consecutive
years shall not be eligible for re-appointment as auditor in the same
company for five years from the completion of his term.
Conclusion
In the present case as the
paid up share capital of the company is more
than ? 50 Crore, Mr. X cannot be
the second term.
appointed as Statutory Auditor for
ii. As per Section
139(2) of the Companies Act, 2013 read with Rule 5
of the Companies (Audit and Auditors) Rules, 2014:
All private limited
companies having paid share capital of rupees
fifty crore or more shall not appoint or up
An
re-appoint:
a. individual as auditor for more than
cutive years.
one term of five conse
b. An audit firm as auditor for more than two terms of five conse
cutive years.
Cooling off period
An audit firm which has
completed its term shall not be eligible
for re-appointment as auditor in the
same
from the completion of such term: company for five years
Provided further that as on the date of
having a common partner or partnersappointment auditfirm,
Iirm no
to the other audit
whose tenure has expired in a company immediately preceding

the linancial year, shall be appointed as auditor of the same
company for a period of five years.
Conclusion
In the present case, the firm of Chartered Accountants wil no
be eligible for the reappointment for five years on the completion
of the term.
ii. In the present case the company is having paid up share capital or
75 crore i.e. within the threshold limit of 7 50 crore, however, since
the company has borrowing facility from a bank of ? 55 crores (l.e.
exceeding the threshold limits of T 50 crores), the company cannot
re-appoint X as its auditor.
RELATED PARTY TRANSACTIONS
04. Answer the following in brief; Briefly explain the role of due diligence
report in helping to curb occurrence of related party transactions.
Ans. Section 188(1) of Companies Act, 2013 provides that except with the
consent of the Board of Directors given by a resolution at a meeting of the 2
Board and subject to such conditions as may be prescribed, no company shall
enter into any contract or arrangement with a related party with respect to
a Sale, purchase or supply of any goods or materials

b. Selling or otherwise disposing of, or buying, property of any kind
c. Leasing of property of any kind
d. Availing or rendering of any services
e. Appointment of any agent for purchase or sale of goods, materials,
services or property
1. Related party's appointment to any oftice or place of profit in the
company, its subsidiary company or associate company
&Underwriting the subscription of any securities or derivatives thereot,
of the company
Hence Due Diligence Report of such transactions has its own importance.
Due diligence report is system of curbing related party transactions from
OCCurring. Audit committee should seek a due diligence report with regard
O all proposed material transactions which should highlight potential
conflict of interest. Therefore, the companies should have well articulated
POCies specifying that transactions beyond a certain threshold limits and
A0UNTING AND AUDIT RELATED ISSUES, RELATED PARTY TRANSACTIONS
of certain nature would require a pre-Clearance trom the

sacions
audit committe.
95. Under the Energy Department, Govt. of Tamil Nadu, three Companies
as Government Company were incorporated as below:
A Ltd. for Generation of Electricity

BLtd. for Transmission of Electricity
C Ltd. for Distribution of Electricity
Further, three subsidiaries namely X Ltd., Y Ltd. and Z Ltd. were incorpo.
rated as wholly owned subsidiary companies of C Ltd. CLtd. purchases the
Power (Electricity) from A Ltd. and sell all Power to subsidiary Companies.
Subsidiary Company through B Ltd. distributes the Power in the State.
from that, C Ltd. also purchases cables from manufacturer and

Apart
sells it to Subsidiary Companies with margin of 5% on sale price. In the
power supply, C Lid. also charge 0.05 paisa per unit as service charge from
Subsidiary Companies.
During the Audit, Auditors raised the question that there are lot of related
party transactions and directors and members are same in all the Com
panies. Further, Chairman is also common. Neither the Board nor the
Members of the Company approved any transaction which comes under
the definition of Related Party Transaction. The Company Secretary re
plied that the transactions are preapproved by Energy Department, Govt.
of Tamil Nadu but Auditor is dissatisfied with this reply.
In such situation, check the validity of the transactions between related
parties. December 2019, 5 Marks]
Ans. Following are the legal provisions of Related party transactions:
All related party transactions require the approval of the Audit
Committee as per section 177 of the Companies Act, 2013 except to
a transaction, referred to in section 188
of the Companies Act, 2013,
between a holding company and its wholly owned
as stated under fourth
subsidiary company.
proviso to section 177(4) of the Companies Act,
2013. Up to certain limits, the
approval of the Board is required and
above the limits, approval ot the members must be
taken.
As per proviso two of section
188(1) of the Companies Act, 2013 mem-
ber of the company shall not vote
where he is related party. However
as per proviso three of section
90% or more members are related
188(1) of the Companies Act, 2013, it
party, members can vote.
ACCOUNTING AND AUDIT RELATED ISSUES, RELATED PARTY TRANSACTIONS 7.7
As per proviso lour of section 188(1) of the Companies Act, 2013, the
approval of the Board is not required where the transactions are on
arms length basis in ordinary course of business.
Further, as per proviso five of section188(1) of the Companies Act
2013, the approval of members is not required in case of transaction
between holding and wholly owned subsidiary.
As per the exemption notification dated 5th June, 2015 issued by Min-
istry of Corporate Affairs, the first and second proviso to sub-section(1)
to section 188 of the Companies Act, 2013 shall not apply to:
a. A Government Company where the contracts/arrangements to
be entered into by it with any other Government Company.
b. AGovernment company(otherthan a listed company), in respect
of contracts/arrangements other than those mentioned in (a)
above, if it has obtained approval of the administrative ministry
of the concerned Central/State Government.
Conclusion In this case, C Ltd., being a Government company has entered
into the following transactions:
i Purchase of power from A Ltd. (Government Company)
ii. Sale of power to subsidiary companies ( all Government companies,
as they are subsidiaries of a Government company)
ii XLtd, Y Ltd. and Z Ltd. (wholly owned subsidiaries, being Government
companies) distribute power through B Ltd. (Government company)
iv. Purchase of cables from a manufacturer and sale to its Subsidiary
companies (Government companies)
v. Levy of service charges at 0.05 paise per unit on its Subsidiary com-
panies (Government companies)
Therefore, in the present case, assuming that the transactions are at arm's
length and in the ordinary course of business, neither the approval of the
Board nor the members of the company is required and the related party
transactions would be valid.
06. Write short note on the following; related party transactions.

OR
Kelated party transactions have always been vlewed with theconcern"
In this context, briefly narrate the changes made under the Companies
Act, 2013. [December 2014, 6 Marks]
ISSUES, RELATED
PARTY TRANSACTIONS
ACCOUNTING AND AUDIT RELATED
OR
do you mean by 'related party transaction'? What are the provisions
What
or listing agreement related to monitoring of related party transactions?
June 2016, 5 M
Ans.
2015, defines related
Regulation 2(1)(zc) of SEBI (LODR) Regulations,o r
services obligations between
party transaction a transfer of resources, whether a price is charged
of
a listed entity and a related party, regardless
be construed to include
related party shall a
and a "transaction" with a
transactions.
Single transaction or a group of
2015 provides for monitoring
Regulation 23 of SEBI (LODR) Regulations,
of related party transactions:
1. Thelisted entity shall formulate a policy on materiality of related party
transactions and on dealing with related party transactions.

party related transactions shall
2. Approval of Audit Committee: Allcommittee.
audit
require prior approval of the
omnibus approval for
3. Omnibus approval: Audit committee may grant
related party transactions proposed to be entered into by the listed
to the following conditions-
entity subject
a. The audit committee shall lay down the criteria for granting the
omnibus approval in line with the policy on related party trans-
actions of the listed entity and such approval shall be applicable
in respect of transactions which are repetitive in nature.
b. The audit committee shall satisfy itself regarding the need for
such omnibus approval and that such approval is in the interest
of the listed entity.
c. The omnibus approval shall specify:
i. The name(s) of the related party, nature of transaction, pe-
riod of transaction, maximum amount of transactions that
shall be entered into.
ii. The indicative base price/current contracted price and the
formula for variation in the price if any.
iii. Such other conditions as the audit committee may deem fit
provided where the need for related party transaction cannot be
foreseen and aforesaid details are not available, audit committee
may grant omnibus approval for such transactions subject to
their value not exceeding rupees one crore per transaction.
ACCOUNTING AND AUDIT RELATED IsSUES, RELATED PARTY TRANSACTIONS 7.9
d. The audit committee shall review, at least on a quarterly basis,

of related party transactions entered the listcu
the details into by
entity pursuant to each of the omnibus approvals given.
e. Such omnibus approvals shall be valid for a period not exceeding
one year and shall require fresh approvals after the expiry or one
year.
4. Approval of the shareholders: All material related party transactions
shall require approval of the shareholders through resolution and the
related parties shall abstain from voting on such resolutions whether
the entity is a related party to the particular transaction or not.
shall not
5. Exemptions: The provisions of sub-regulations (2), (3) and (4)
be applicable in the following cases:
a. Transactions entered into between two government companies.
its
b. Transactions entered into between a holding company and
with
wholly owned subsidiary whose accounts are consolidated
such holding company and placed before the shareholders at the
general meeting for approval.
SECRETARIAL AUDIT
with
provisions of
07. Secretarial audit is a process to check compliance
and discuss
all applicable laws and rules regulations procedures. Elaborate
to Secretarial Audit.
provisions of the Companies Act, 2013 with regard
Ans. As per section204(1) of Companies Act, 2013 read with Rule 9 of the
of Managerial Personnel)
Companies (Appointment and Remuneration
to obtain Secretarial
Rules, 2014, the following companies are required
Audit Report:
Every listed company
Every public company having a paid-up share capital of fifty crore
rupees or more
Every public company having a

turnover of two hundred fifty crore
rupees or more.
from banks
Every company having outstanding hundredborrowings
loans or
crore rupees or more.
or public financial institutions of
one
Circular dated February 8, 2019 specifies that while the annual secretarial
audit shall cover a broad check on compliance with all laws applicable to
the entity, listed entities shall additionally, on an annual basis, require a
Check by the PCS on compliance of all applicable SEBI Regulations and
10ACCOUNTING AND AUDIT RELATED ISSUES, RELATED PARTY TRANSACTIONS
Crculars/guidelines issucd thereunder, conscqucnt to which, the PCS shall

Submit a report to the listed entity in the manncr specil icd in thiS circular
NATIONAL FINANCIAL REPORTING AUTHORITY (NFRA)
08."The NFRA is an independent regulator established under Section 13

of the Companies Act, 2013 to oversee the auditing profession". Discuss
June 2019, 5 Marks
Ans. The NFRA is an independent regulator established under Section
132 of the Companies Act, 2013 to oversee the auditing proBession. The
NFRA has been established as an independent regulalors tor entorcement
of auditing standards and ensuring the quality of audits to strengthen the
independence of audit firms and therclore enhance investor and public
confidence in financial disclosures of companies. The powers and functions
of NFRA are majorly pertaining to oversee the auditing protession that may
be studied under the following points-
1. To investigate either suo-motu or on a reference made by the Central
Government in matters of professional misconduct committed by any
member or Chartered Accountants firm.
2. Tomakerecommendations to the CentralGovernment on formulation
and laying down of accounting standards and auditing policies for
adoption by companies or their auditors.
3. To monitor and implement compliance relating to accounting stan-
dards and auditing policies as prescribed.
4. To oversee the quality of service of professions associated with com-
pliance of accounting standards and auditing policies and suggest
measures for improvement.
5. NFRA shall have equivalent powers as a civil court under the Code
of Civil Procedure, 1908. It can exercise the powers related to:- ()
dis
covery and production of books or other documents as specitied by
NFRA; (i) summoning and enforcing the attendance of persons and
examining them on oath; (ii) inspection of books, registers and other
documents of any person; (iv) issuing commissions for examination
ol witness or other documents.
6. NFRA may impose penalties: () not less than one lakh rupees which
may extend up to five times of the fees received in case of individuals
and (i) not less than ten lakh rupees which may extend up to ten times
of the fees received in case of firms.
consider an investigation based on monitoring and comn

7, NFRA may
by
pliance review ol auditor or audit firm upon recommendations
Member- Accounting and Member- Auditing.
list ls inclusive and exhaustive)
Note: This
not
VIGIL MECHANISM
09. Write short notes on the following; Whistle blower mechanism.

belonging to the following
Ans. Every
listed company and the companies
and
or classes shall establish a vigil mechanism for their directors
class
employees to report their genuine c o n c e r n s or grievances:
a The Companies which accept deposits from the public.
borrowed money from banks and public
b. The Companies which have
financial institutions in excess of fifty crore rupees
has
listed company. The company
company secretary of a
Q10. You are a
the form
from the Banks/Fls worth Rs. 75 crores, which is in
borrowings
Finance. You noticed that the company
of Term Loan and Working Capital suitable strategy to
Vigil Mechanism in place. Suggest the
is not having
Mechanism in the company quoting
the Board for establishment of Vigil
Act, 2013 and SEBI (LODR)
the relevant provisions of the Companies June 2019, 5 Marks]
Regulations, 2015.
Mechanism under Companies Act, 2013

Ans. Vigil
2013 provides that every listed
Section 177(9) of the Companies Act, be prescribed,
or such class classes of companies, as may
or
company to report
mechanism for directors and employees
shall establish a vigil
concerns in such manner as may be prescribed.
genuine
of Board and its Powers) Rules,
Rule 7 of the Companies (Meetings
listed company and the companies belong-
2014 provides that every
or classes shall
establish a vigil mechanismn
ing to the following class to report their genuine c o n c e r n s
or
for their directors and employees
grievances:
which accept deposits from
the public.
a. The Companies
and
have borrowed money trom banks
b. The Companies which
financial institutions in
crore excess of titty rupees.
public
and Disclosure
igil mechanism under SEBI (Listing Obligations
Regulations), 2015
Regulation 22 of SEBI (LODR) Regulations, 2015 provides that every
sted entity shall establish a vigil mechanism lor directors and emplovees
to report concerns about uncthical behaviour, actual or suspected fraud
or violation of the listed entity code of conduct or ethics policy
Conclusion
Since the company is a listed company, it should establish vigil mechanism
as per both Section 177(9) of the Companies Act, 2013 and SEBI (LODR
Regulations, 2015 with following provisions:
The audit committee shall oversee the vigil mechanism through the
committee and if any of the members of the committee have a con.
flict of interest in a given case, they should recuse themselves and the
others on the committee would deal with the matter on hand.
The vigil mechanism shall provide for adequate safeguards against
victimisation of employees and directors who avail of the vigil mech-
anism and also provide for direct access to the Chairperson of the
Audit Committee or the director nominated to play the role of Audit
Committee, as the case may be, in exceptional cases.
In case of repeated frivolous complaints being filed by a director or
an employee, the audit committee or the director nominated to play
the role of audit committee may take suitable action against the con-
cermed director or employee including reprimand.
The details of establishment of such mechanism shall be disclosed by the
listed entity on its website and in the Board's report.

NATIONAL FINANCIAL REPORTING AUTHORITY (NFRA)
Q1. Write a note on the following; Functions and duties of NFRA.
Ans. Following are the function & duties of NFRA as per section 132(2) ot
Companies Act 2013.
(a) Maintain details of particulars of auditors appointed in the compan1es
and bodies corporate specified in rule 3 of NFRA Rules.
(b) Recommend accounting standards and auditingstandards for approval
by the Central Government.
(c) Monitor and enforce compliance with accounting standards and au
diting standards.
ACCOUNTING AND AUDIT RELATED ISSUES, RELATED PARTY TRANSACTIONS.D
Oversee the qualty of service of the professions associated win
ensuring compliance with such standards and suggest measures tor

improvement in the quality of service.
() Promote awareness in relation to the compliance of accounting stan-
dards and auditing standards.
Co-operate with national and international organisations of indepen
dent audit regulators inestablishing and overseeing adherence t
accounting standards and auditing standards.
(Pertorm such other functions and duties as may be necessary or
incidental to the aforesaid functions and duties.
02. Briefly explain the following; Powers of NFRA under section 132 of
Companies Act, 2013.
Ans. Section 132(4) of Companies Act, 2013 states that notwithstanding

anything contained in any otherlaw for the time being in force, the National
Financial Reporting Authority shall -
a Have the power to investigate, either suomoto or on a reterence made

to it by the Central Government, for such class of bodies corporate
or persons, in such manner as may be prescribed into the matters of
professional or other misconduct committed by any member or firm

ofchartered accountants, registered under the Chartered Accountants
Act, 1949:
Provided that no other institute or body shall initiate or continue
any proceedings in such matters of misconduct where the National

Financial Reporting Authority has initiated an investigation under this
section.
b. Have the same powers as are vested in a civil court under the Code of
Civil Procedure, 1908, while trying a suit, in respect of the following
matters, namely: -
account and other docu-

i Discovery and production of books of
such time as may be specified by thhe
ments, at such place and at
National Financial Reporting Authority.
L Summoning and enforcing the attendance of persons and exam-
ining them on oath.

ii Inspection of any books, registers and other documents of any
person referred to in clause (b) at any place.
1V. Issuing commissions for examination of witnesses or documents.
Where professional or other misconduct is proved, have the power to
make order for-

PARTY TRANSACTIONS
I9ACCOUNTING AND AUDIT RELATED ISSUES, RELATED
i. Imposing penalty
1. Debaring the member or the firm being appointed as an auditor
in respect of finan.
or internal auditor orundertaking any audit
functions and activities
cial statements or internal audit of the
corporate or pertorming any valuation
of any company or body
247.
as provided under section
six months or such higher period not ex.
tor a minimum period of
determined by the National Financial
ceeding ten years as may be
Reporting Authority.
TYPES OF WHISTLEBLOWERS
Whistleblowers.
03. Write a note on the following; Types of
whistleblowers:
Ans. Following are the types of
Internal: When the whistleblower reports
the wrong doings the to
1.
officials at higher position in the organization. The usual subjects of
internal whistle blowing are disloyalty, improper conduct, indiscipline,
insubordination, disobedience etc.
2. External: Where the wrongdoings are reported to the people outside
the organization like media, public interest groups or entorcement
agencies it is called external whistle blowing
3. Alumini: When the whistle blowing is done by the former employee
of the organization it is called alumini whistle blowing.
4. Open: When the identity of the whistleblower is revealed, it is called
Open Whistle Blowing.
5. Personal: Where the organizational wrongdoings are to harm one
person only, disclosing such wrong doings it is called personal whistle
blowing.
6. Impersonal: When the wrong doing is to harm others, it is called
impersonal whistle blowing.
7. Government: When a disclosure is made about wrong doings or
unethical practices adopted by the officials of the Government.
8. Corporate: When a disclosure is made about the wrongdoings in a
business corporation, it is called corporate whistle blowing.
04. Write a note on the following: Whistle Blowing under Sarbanes-Oxley

Act, 2002 (SOX).
Ans. Section 302
of Sarbanes Oxley Act of 2002, Act enacted byU.S
congress to protect investors by improving the accuracy and reliability ot
an
CCOUNTING AND AUDIT RELATED ISSUES, RELATED PARTY TRANSACTIONS 7.15
ACC
carDorate disclosures made pursuant to the securities laws, and for other
nttDOses contains following provisions for whistleblowers:
Make it illegal to "discharge, demote,suspend, threaten, harass or in

any manner discriminate against" whistleblowers.
Establish criminal penalties of up to 10 years for executives who re
taliate against whistleblowers.
Require board audit committees to establish procedures for hearing
whistleblower complaints.
Allow the secretary of labour to order a company to rehire a termi-
nated employee with no court hearing.
Give a whistleblower the right to a jury trial, bypassing months or
years of administrative hearings.
VIGIL MECHANISM UNDER SEBI (LISTING OBLIGATIONS AND DISCLO-

SURE REQUIREMENTS) REGULATIONS, 2015
05. Briefly explain, Vigil mechanism under SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015.
Ans. Following are the provisions of Vigil mechanism under SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015
1. The listed entity shall formulate a vigil mechanism for directors and
employees to report genuine concerns. [Regulation 22(1)]
2. The vigil mechanism shall provide for adequate sateguards against
victimization of director(s) or employee(s) or any other person who
avail the mechanism and also provide for direct access to the chair-
person of the audit committee in appropriate or exceptional cases.
Regulation 22(2)]
3. The listed entity shall disseminate the details of establishment of vigil
mechanism/Whistle Blower policy.
4. The disclosure regarding the details of establishment of vigil mech
anism, whistle blower policy, and affirmation that no personnel has
been denied access to the audit committee shall be made in the section
On the corporate governance of the annual report.
8 CORPORATE GOVERNANCE AND
SHAREHOLDERS RIGHTS
CHAPTER
INTRODUCTION
Q1. Briefly comment on the following:

i. Protection of shareholder's rights is sacrosanct for good corporate
governance.
ii. Investors relations can be referred to as 'financial public relations' or
financial communication'. [December 2014, 2 Marks]
Ans.
i Protection of shareholder rights is sacrosanct for good corporate
governance. It is one of the pillars of corporate governance. For the
efficient functioning of the capital market, the fundamental require-
ment is that the investor rights are well protected.
The Preamble to Securities and Exchange Board of India Act, 1992
reads as under:
"An Act to provide for the establishment of a Board to protect the in-
terests of investors in securities and to promote the development of,
and to regulate the securities market and for matters connected there
with or incidental thereto."
The central element in corporate governance is the challenges arising
out of separation of ownership and control. The shareholders are the
true owners of a corporate and the governance function controls the
operations of the corporate. There is a strong likelihood that there
is a mismatch between the expectations of the shareholders and the
actions of the management. Therefore there is a need to lay down
clearly the rights of the shareholders and that of the management.
In the Indian context, the SEBI Act, 1992, the various SEBI Regulations
and Guidelines and the Companies Act, 2013 enables the empowerment
of shareholder rights.
Investor Relations (IR) is a strategic management responsibility that
integrates finance, communication, marketing and securities law
8.1
CORPORATE GOVERNANCE AND SHAREHOLDERS RIGHTs
8.2
compliance to enable the most cffective two-way communicati..

ween a company, the financial community and other constituene be
which ultimately contributes to a company's ncies
securities achieving fair
valuation.
Typically, investor relation is a department or person reporting.
ng to
the Chief Financial Officer. n some companies, investor relation i
managed by the public relations to as "tinancial public relations" or
financial communications".
PROTECTION OF RIGHTS OF SHAREHOLDERS/INVESTORS IN INDIA

Q2. What is meant by investor protection? Discuss the investor
measures taken by Securities and
protection
Exchange Board of India (SEBI
June 2014, 6
Marks
OR
Investors must besafeguarded not only against frauds and cheating but
also against the losses arising out of unfair
practices. What are the SEBI's
regulations for investors' protection in India?
Ans. Securities and
Exchange Board of India (SEBI) is the capital market
regulator and nodal agency in India who regulates the
One of the
objectives of the SEBI is to provide a degree of security market.
investors and to safeguard their protection to the
and to rights, steady flow of savings into market
promote the development of and regulate the securities market.
Investors should be safeguarded not
also only against frauds and cheating but
against the losses arising out of unfair practices. Such
include: practices may
Deliberate misstatement in offer statements to
investors
Price manipulations
Insider trading
SEBI has issued many guidelines and
market and to protect the investors. Someregulations to regulate the capilal
of these
guidelines are:
SEBI (Ombudsman)
-
Regulations, 2003 SEBI (Prohibition of Fraudulent and
designed to redress the investor's | Unfair Trade Practices relating to Se
grievance against listed companies or | curities
intermediaries or both for amicable prohibit Market) Regulations, 2003 to -
settlement. any fraudulent and unfair Traue

Practices relating to securities markel.
SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2009.
SEBI (Investor Protection and Educa-|
tion Fund) Regulations, 2009 to establist
anInvestor Protection and Education
CORPORATE GOVERNANCE AND SHAREHOLDERS RIGHTS 8.3
Fund which will be used inter-alia, for

"aiding investors"
SEBI (Prohibition of Insider Trading) | SEBI has also set up a separate cell to
Regulations, 2015- The basic objective | address the grievances of investors.

peSOns who have m o r e
is to prohibit
intormation which
access tOcompany's
can be used to benefit the individual o r
individual o r ageney.
group ot
PROMOTING GOOD
INSTITUTIONAL INVESTORS AND THEIR ROLE IN
CORPORATE GOVERNANCE
the following; Institutional investors.

03. Write short note on
June 2014, 3 Marks]
Ans. Institutional investors are organizations

which pool large s u m s oft
money and invest those s u m s
in companies. Their role in the economy is
to act as highly specialized investors on
behalf of others. In India, there are
broadly the followingtyped of institutional investors:

1. Development oriented financial institutions such as IFCI, IDBI and
ate financial corporations.
2. Insurance Companies - LIC, GIC and other subsidiaries.
3. BanksS.
4. All mutual funds and including UTI.
5. Pension Funds.
04. Highlight the role of institutional investors in promoting good corpo
rate governancee. June 2013, 5 Marks
OR
Write short note on the following; Role of institutional investors in cor
porate governance. [December 2010, 3 Marks]

OR
Brlefly comment on the following statement; institutional investors have
a crucial role to play in ensuring good corporate governance.
June 2016, 2 Marks]
ns. Most of the reports on corporate governance have emphasized o n the

role of institutional investors in promotinggood corporate governance. The
Kumar Mangalam Birla committee on corporate governance emphasizes
that the institutional shareholders can play etfective role in the corporate
8vernance system of a company because of following reasons-
SHAREHOILDERS RIGHTS
8.4 CORPORATEGOVERNANCE
AND
Institutional shareholders have acquircd a rge stake in equity shas
capital of listed companies.

the weightage of their vat.
They have a special responsibility given Mes
and have a bigger role to play in corporale governanCc as retail in
Vestors look upon them for positive use of their voting rights.
05. "Institutional Investors play an important role in promoting good
this notion has its own pros and cons".What ar

8Overnance, however, [December 2018, 5 Marks
these pros and cons? Explain.
Ans. Institutional investors are financial institutions that accept funds from
third parties for investment in their own name but on such parties' behalf
They include pension funds, mutual funds and insurance companies.
Institutional investors are organizations which pool large sums of money

and invest those sums in companies. Their role in the economy is to act as
highly specialized investors on behalf of others.
The Pros and Cons on the role of the institutional investors in promoting
the good corporate governance may be listed as under:
PROS CONS
Theinstitutional investors have signifi- Mutual Fund Investors have the short-
cant stakes in the companies and so of term vision hence their performance
the voting power. measurement may not be a significant
evaluation in assessing the corporate
governance while making the invest.
ment decision.
They are in better position to have the | The investment objectives are also a
access of the information about the | deciding factor whilemaking the invest-|
company ment decision.
The stock market pertormance can vi- | Institutional investors may off load the
sualised with the adoption of the better | holding if there is mis-matching in their|
corporate governance. asset-liability/liquidity position.
They may influence in attracting the | A common man's investment
Foreign Direct Investment in India. porttolho|
is affected with the decision of the in-
vestment by the institutional investors.
Based on the experience of countries where shareholders activism is vibrant,
such as for example Australia, France, the UK, or the United States, it is
reasonable to expect that Indian institutional investor should use ther
ownership rights more actively.
cORPORATE GOVERNANCE AND SHAREHIOLDERS RIGHTS 8.5
a How the institutional investors assess the health of a company before

making the investment decision? December 2017, 5 Marks]
OR
The institutional investors use different tools to assess the health of a
company betore investing resources in it". Elaborate

OR
by the institutional the health
Describe the tools used invertors to assess
before investing resources in it. June 2011, 6 Marks]

of a company
OR
the health of aa
The institutional investors use different tools to assess
Discuss some of the important tools
company before investing of funds.
used by the institutional investors for this purpose.
assess the health of
Ans. Institutional investors use different tools to
of the important tools are
Company before investing resources in it. Some
discussed as under:
1. One-to-one meeting
The meetings between institutional investors and companies are
the
extremely important as a means of communication between
two
parties, and a tool to assess the health of companies. Company usually
institutional investors and not
arrange such meeting with its largest
with other investors.
2. Voting
The right to vote can be seen as fundamental tool for some element
of control by shareholders. The institutional investors can register
their views by postal voting, or, vote electronically where this facility
is available. By voting, institutional investors can build pressure on
the large institutional investors
management of the corporation. Most of
now have a policy of trying to vote on all
issues which may be raised
at their investee company's AGM.
3. Focus lists
Anumberof institutional investors have established tocus lists'whereby
include them on a list of
they target underperforming companies and
Companies which have underperformed a main index. Atter being put
on the focus list, the companies often receive unwanted, attention of
the institutional investors who may seek to change various directors
on the board.
SHAREHOLDERS RIGHTS
8.6 CORPORATE GOVERNANCE AND
4. Corporate governance rating systems

With thc incrcasing emphasis on corporategovernance
across the globe
it Is perhaps not surprising that a number or corporate governanCe
Some institutional investors have

rating systems have been developed.
systems. A corporate gover.
developed corporate governance rating
indicator of the extent to which a
nance rating could be a powerful
o r has the potential
to add in the future
company currently is adding,
shareholders value.
rating systems.
07. Elucidate the following; Corporate governance
Ans. With the increasing emphasis on Corporate Governance across the
perhaps not surprising that a number Corporate Governance

of
globe, it is
Standard and Poor's,
Rating Systems have been developed such Deminor,
as
and Governance Metrics International (GMI).

Advantages of Corporate Governance ratings
I t is a powerful indicator of the extent to which a company currently
is adding, or has the potential to add in the future, shareholder value.
This is because a company with good Corporate Governance is gen-
erally perceived as more attractive to investors than one without.
Provides a useful indication of the CG environment in specific coun-
tries, and in individual companies within those countries.
Theserating systems willprovidea useful "benchmarks" for the majority
of investors who identify good CG with a well-run and well-managed
company.
The ratings will also be useful to Governments in identifying perceived
levels of Corporate Governance in their country compared to other
countries in their region, or outside it, whose companies may be com-
peting for limited foreign investment.
08. Discuss the activities for which financlal sanctions can be

under Investor's Education and Protection Fund.
provided
[June 2017, Marks
2
Ans. Schedule II to the Investor Education
and Protection Fund Authoru
(Appointment of Chairperson and Members, holding of Meetings an
provisions for Offices and Officers) Rules, 2016 stipulate the broau
functional divisions of the the
Authority including sanctioning grants to
registered entities for seminars, programmes,
projects or activities
in tn
field of Corporate Governance, Investors'
Education and Protection tu
including rescarch activities.
ORA. The Board of directors of your company Intends to formulate corpo-

te communication policy. As a Company Secretary, you are required to
rate
pare a qualitative note highlighting the areas on which communication

policy may specifically focus. [June 2013, 6 Marks]
To
of Directors
The Board
ABCD Limited
Subject: Corporate Communication Policy

Dear Sir,
Corporate Communication Policy defines the role and responsibilities of

the emplovees in the communication structure of the company.
Corporate Communication Policy may specifically focus on:
Internal Communications:
(a) Information to Employees
-
All the relevant intormation should be communicated to the emplovees

through internal channels.
involves building and maintaining a positive
(b) Media Relations: This
relationship with the media.
(c)External Event: Could involve vendor/supplier/distributor meets,
related to product launches, important
channelpartner meetings, event
initiatives etc.
Investor Communication: Investor
relation cell can held responsible
(d)
communications with investors.
for coordinating
communication
(e) BrandManagement: Majorresponsibility of
corporate
is image or brand building.
) Legal Communication: Regulators are the external players having
the company. At various points
considered role in communication by
government
Communication are to be made to the stock exchange,
may be held
and judicial authorities. Secretarial and legal department
accurate communication.
responsible for timely and
UK STEWARDSHIP CODE
Gover-
Steward Theory of Corporate
9.Answer the following; Discuss
nance. [December2017, 2 Marks]
another's property
word 'steward' means a person who manages toa
he of guardian in relation
estate. Here, the word is used in thesense
Governance is value based.
"POration. The Steward Theory
Corp of Corporate
SHAREHOLDERS RIGHTS
8.8 CORPORATE GOVERNANCE AND
to the resources of corporatin

safeguard
Managers and employees are
and its property and interest when the owner is absent. They are like
caretaker. They have to take utmost care of the corporation. They should
not use the property for their selfish ends. This theory makes use of tho
social approach to human nature.
Themanagers should manage the corporation as it it is their owncorporation
They are not agents as such but occupy a position of stewards. The managers
are motivated by the principal's objective and the behaviour pattern is
collective, pro-organizational and trustworthy. Thus, under this theory:
First of all values as standards are identified and formulated.
Second step is to develop training programmes that helps to achieve
excellence.
Thirdly, moral support is important to fill any gaps in values.
SHAREHOLDER ACTIVISM
010. Discuss briefly the following; shareholder activism.
OR
Briefly explain the following terms and their relevance to good corporate
governance practices; shareholder activism. [June 2014, 2 Marks]
OR
Elucidate the following; Shareholder activism.
[December 2015, 5 Marks each]
OR
"Shareholders can ensure that the company follows
nance practices and
good corporate gover
implements beneficial policies." Discuss shareholder's
activism. [December 2016, 5 Marks]
Ans. Shareholder activism means:
Establishing dialogue with the management on issues that concern.

Influencing the corporate culture.
Using the corporate democracy provided by law.
Increasing general awareness on social and human rights
cerning the organization. issues con
Shareholder activism reters to the active involvement of
in their
stockholders
organization. Active participation in company meetings s
healthy practice. They can resolve issues laid down in the annual and
othergeneral meetings and can raise concerns over financial matters

or even sOCial causes such as protection of the environment.
Shareholder activists include public pension funds, mutual funds,

unions, religious institutions, universities, foundations, environmental
activists and human rights groups. A share in a company is not only
share in prolits but also a share in ownership. Shareholders must
a
realize that their active participation in the company's operations
ensures:
Better Management
Less Frauds
Better Governance
Q11. Explain briefly the following; UN Principle Responsible Invest

ment.
investors to use
Ans. Principles tor Responsible Investment encourages but
enhance returns and better manage risks,
responsible investment to with global policy makers
it
does not operate for its own profit; engages
it is supported by, but not part
but is not associated with any government;
of, the United Nations.
Investment area voluntaryand aspirational
ThesixPrinciples for Responsible
of investment principles that offer a menu of possible actions for
set
into investment practice.
incorporating ESG issues
investors which are as
The Principles were developed by investors, for
follows:
investment analysis
Principle 1: We will incorporate ESG issues into
and decision-making processes.
and incorporate ESG issues into
Principle 2: We will be active
owners
Ownership policies and practices.

disclosure on ESG issues by the
Principle 3: We will seek appropriate
entities in which they invest.
and implementation of the
Principle 4: We will promote acceptance We will
promote acceptance
Principles within the investment industry.
within the investment industry
andimplementation of the Principles enhance etfectiveness in imple-
Principle 5: We will work together
to
menting the Principles.

and progress towards
Principle 6: We will each report on theiractivities
implementing the Principles.
SHAREHOLDERS RIGHTSs
AND
8.10 CORPORATE
GOVERNANCE
RETIREMENT SYSTEM
EMPLOYEES'
CALIFORNIA PUBLIC
features of CalPERS. What are main dria

the
ivers
Q12. Discuss the salient
programme? (June 2016, 5 Marks
of their corporate engagement
Public Enyployees Reliremenl Systen (CalPERS) manato
Ans. California
retirement benetits tor more than 1.6 million Calilornia public employees
ees,
retirees, and their families. The corporate governance team at CalPERS
Vote proxies; work closely wit
challenges companies and the status quo;
regulatory agencies to strengthen financial markets,
and
invest with partners
to add value to the fund byturnin
that u s e corporate governance strategies ing
around ailing companies.
As a strategy CalPERS invest in sick and ailing companies whereit employs
good governance practices to improvise company's overall performance.
CalPERS corporate engagement process has the overarching objective of
improving alignment of interest between providers of capital and company
management. It is CalPERS view that improved alignment of interest
will enable the fund to fulfil its fiduciary duty to achieve sustainable risk
adjusted returns.
The main drivers in the corporate engagement program are -
Financial Performance - company engagement to address persistent,
relative value destruction, through the Focus List
Program.
Value Related Risk material environmental, social and
-
governance
factors, such as reputational risk, climate change, board diversity and
key accountability measures such as majority voting.
Compliance - in response to State or Federal legislation.
013. "The central element in
corporate governance is the challenges
arising out of separation of
ownership and control. The shareholders
are the true owners of a
corporate and the governance function controls
the operations of the
corporate. There is a strong likelihood that there is
mismatch between the expectations of the
of management". shareholders and the actions
In the light of above
statement, enumerate the core
able corporate governance. principles of accoun
Ans. Following are the core principles of accountable
are- corporate governane
CORPORATE GOVERNANCE AND
SHAREHOLDERS RIGHTS 8.11
S. PRINCIPLES MEANING
No.
1. Sustainability Companies and exlernal managers are expectcd to
optimizeoperating performance, profitability and
investment returns in a risk-aware manner and
with a responsible conduct.
2. Director Account Directors should be accountable to
ability and
sharcowners,
management accountable to directors.
3. Transparency Operating, financial, and governance information
about the companies must be readily
transparent
|to permit accurate market comparisons.
One-share/One-vote | All investors must be treated equitably and upon
the principle of one-share/one vote.
5. Proxy Materials Proxy materials should be written in a manner de
signed toprovide shareowners with the information
necessaryto makeinformed voting decisions.
. Code of Best Prac Code of Best Practices should be followed to pro-
tices mote transparency of information, prevention of
harmful labor practices, investor protection, and
corporate social responsibility.
7. | Long-term Vision Corporate directors and management should have
a longterm strategic vision that, at its core,
empha-
sizes sustained shareowner value and effective
management of both risk and opportunities in the
oversight of financial, physical, and human capital.
8. Access to Director Shareowners should have etfective access to the
Nominations director nomination process.
9. Political Stability Progress toward the development of basic
democratic institutions and principles, including
such things as: a strong and impartial legal system;
and, respect and enforcement of property and
shareowner rights.
ROLE OF PROXY ADVISORY FIRMS
14.The big investors, FIls etc. engages the Proxy Advisory Firms to get
ne important information and recommendations which lead the protec
On of their interest and safeguard of thelr fund. Prepare a brlef note on
easons for engaging the Proxy Advisory Firms.
RIGHTS
8.12 CORPORATE GOVERNANCE AND SHAREHOILDERS
independent rescarch outlits that evaluat

Ans. PrOxy advisory firms are
such as ergers, acquisitions, ton
the of corporate matters
proS and cons
sharcholders arc cxpected to vote on
ppointments and CEO pav, which
mcelngs.
n AGMs, EGMs o court-convencd advisors
institutional investoT's engage proxy
Followingarefewreasons why of
oller Viariety ol Consisting
services both
. Prox advisors generally and recommending votina
generalmectings
analvzingtheproposals at
decisions.
the investors to obtain
recommcndations of proxy advisors help
ii. The dillerent agenda items and to
a more
considered understanding of
decision, allowing them to optimise their
arrive at a n infomed voting
votes in a timely and informed
own limited r e s o u r c e s and cast their
manner.
institutional investors invest in multiple
companies
ii. Considering that it not be feasi.
a c r o s s the globe, may
in different industry range and
ble for those investors to have informed knowledge of the corporate
of that
country and hence there may be an
governance specifications
of a particular agenda
inability to understand the need and impact as well
item. Proxy advisors help to combat this
issue through their
informed consultancy.
iv. from the above, general meetings across the globe may be
Apart
concentrated during a certain period of the year and therefore the
investors may not be in a position to gatherinformation and knowledge
position
not be in a to take
about all the companies and hence, may
informed decision while voting. Proxy services firms play an important
role in the proxy voting systenm.
1. Proxy advisers also influence boards' decision making. They do a good
job of policing the boards and governance records of the firms they
track, and nudging institutional investors to take astand on governance
issues.

PROMOTER
01. Write a brief note on the following; Promoter.

Ans. According to Sec. 2(69) of Conmpanies Act, 2013 a "promoter" means
a person:
a.Who has been named as such in a prospectus or is identified by the

company in the annual return referred to in section 92.
Who has control over the affairs of the company, directly or indirectly
whether as a shareholder, director or otherwise.
In accordance with whose advice, directions or instructions the Board
c.
of Directors of the company is accustomed to act:
Provided that nothing in sub-clause (c) shall apply to a person who is

acting merely in a professional capacity.
"Control" has been defined by section 2(27) in the Companies Act,
2013 which reads as under:
the directors
"control" shall include the right to appoint majority of
or
to control the management or policy decisions exercisable by a per-

o r in concert, directly or indirectly,
son o r persons acting individually
o r management rights or
including by virtue of their shareholding
orin any other m a n n e r .
shareholders agreements or voting agreements
PROMOTER GROUP
02. Write a note on the following; promoter group.

2018, 'promoter
Ans. As per Regulation 2(1)(pp) of the SEBI Regulations,
group' includes:
1. The promoter
of that
person,
the promoter (i.e. any spouse
2. An immediate relative of of the spouse).
sister o r child of the person
o r
o r any parent, brother,
corporate:
3. in c a s e promoter is a body
of such body corporate.
A. A subsidiary o r holding company
holds twenty per cent
corporate in which the promoter
B. Anybody
share capital; and/or anybody
corporate
o r m o r e of the equity
cent o r m o r e of the equity
share capital
which holds twenty per
of the promoter.
individuals o r companies
C. Anybody corporate
in which agroup of
which hold twenty per
combinations thereot acting in concert,
or
share capital in that body
corporate
cent o r of the equity
more combinations
or
of individuals o r companies
and such group the equity share
cent o r nmore ot
thereof also holds twenty per
also acting in
concert.
of the issuer and a r e

capital
RIGHTS
8.14 CORPORATE GOVERNANCE
AND SHAREHOLDERS
* n case the promoter is an individual:

A. Anybody corporate in which twenty per cent or morcol the equit
share capital is held by the promoter or an immediate relative
the promoter or a firm or Hindu Undivided Family in which the
more of their rclative is a member.
promoter or any one or
B. Anybody corporate in which a body corporate as provided in (A
above holds twenty per cent or more, ol the cquity sharc capital
C. Any Hindu Undivided Family or firm in which the aggregate
share of the promoter and their relatives is equal to or more than
twenty per cent ot the total capital.
5. All persons whose shareholding is aggregated under the heading
"shareholding of the promoter group
INVESTOR EDUCATION & PROTECTION FUND
03. "The IEPF Authority is entrusted with the responsibility of adminls-

tration of the Investor Education Protection Fund (IEPF), make refunds
of shares, unclaimed dividends, matured deposits/debentures etc. to
investors and to promote awareness among investors." In the light of the
aforesaid statement answer the following:
(i) What are the amounts credited to the fund? Name any five.
(ii) For what purposes such funds may be utilized?
Ans.
() As per Section 125(2) of the Companies Act, 2013, following shall be

credited to the Fund:
(a) The amount given by the Central Government by way of grants
after due appropriation made by Parliament by law in this behall
for being utilised for the purposes of the Fund.
(b) Donations given to the Fund by the Central Government, State
Governments, companies or any other institution for the purposes
of the Fund.
(c) The amount in the Unpaid Dividend Account of companies trans
ferred to the Fund under sub-section (5) of section 124.
(d) The amount in the general revenue account of the Central
Government which had been transferred to that account under
sub-section (5) of section 205A of the Companies Act, 1956, as t
stood immediately before the commencement of the
Companies
(Amendment) Act, 1999, and remaining unpaid or unclaimed on
the commencement of this Act.
cORPORATE GOVERNANCE AND SHAREHOLDERS RIGHTS 8.15
(e)Theamount lying in the Investor Education and Protection Fund

under section 205C of the Companies Act, 1956.
T h e interest or other income received out of investments made
from the Fund.
(g The amount received under sub-section (4) of section 38.
t) Section 125(3) of Companies Act, 2013, provides that the Fund shall
be utilised for-
a. The refund in respect of unclaimed dividends, matured deposits,

matured debentures, the application money due for retund and
interest thereon.
b. Promotion of investors' education, awareness and protection.
c. Distribution of any disgorged amount among eligible and identi-
fiable applicants for shares or debentures, shareholders, deben-
ture-holders or depositors who have suffered losses due to wrong
actions by any person, in accordance with the orders made by
the Court which had ordered disgorgement.
d. Reimbursement of legalexpenses incurred in pursuing class action
suits under sections 37 and 245 by members, debenture-holders
or depositors as may be sanctioned by the Tribunal.
e. Any other purpose incidental thereto, in accordance with such
rules as may be prescribed.
9 CORPORATE GOVERNANCE AND OTHER
STAKEHOLDERS
CHAPTER
INTRODUCTION
Q1. Elaborate the concept of stakeholders. [December 2011, 4 Marks]

OR
What do you understand by the 'stakeholders' concept? Whether this
concept has been recognized in law? December 2014, 5 Marks]
Ans. In a business context, customers, investors and shareholders, employ-
ees,suppliers, government agencies, communities and many others who
have a "stake' or claim in some aspect of a company's products, operations,
markets, industry and outcomes are known as "stakeholders."
Stakeholders provide resources that are more or less critical to a firm's
long-term success. These resources may be both tangible and intangible
Shareholders, for example, supply capital;suppliers offermaterial resources
orintangibleknowledge; employees and managers grant expertise leadership
and commitment; customers generate revenue and provide intrastructure
and the media transmits positive corporate images.
Recognition of Stakeholder Concept in Law
The stakeholders concept has been reflected in the laws governing the
corporate for a long period. The labour laws seeks to ensure fair and eq-
uitable treatment to employees, the environment protection laws seeks
to ensure adoption of measures which will minimize the negative impact
Tax laws give incentives in the form ot tax holidays for
on environment.
development of backward areas. Tax benefits in the form of exemptions
tor donations made to recognized funds and organizations etc.
02. Write notes on the following; Stakeholder orientation.

June 2010, 4 Marks]
Ans. The degree to which a firm understands and addresses stakeholders
demands can be referred to as a "stakeholder orientation
he orientation comprises three sets of activities:
9.1
9.2 CORPORATE GOVERNANCE AND OTHER STAKEHOLDERS
.The organization wide generation of data about stakeholder groups

and asscssment of the firm's cffects on these groups.
2. The distribution of this information throughout the firm.
3. The organization's responsiveness as a whole to this intelligence.
A stakeholder orientation is not complete unless it includes activities that
actually address stakeholder issues. The responsiveness of the organization
as a whole to stakeholder information consists of the initiatives the firm
adopts to ensure that it abides by or exceeds stakeholder expectations and
stakeholder issues.
has a positive impact on
03. Discuss the stakeholders' concept stating the principles enunciated by

Evans and Freeman. June 2011, 5 Marks]
Ans. Freeman defined stakeholders as any group or individual who can
affect or is affected by the achievement of the organization's objectives. This
concept was elaborated by Evan & Freeman as the following two principles:
Principles of corporate legitimacy:
The corporation should be managed for the benefit of its stakeholders:
its customers, suppliers owners, employees and local communities.
The rights of these groups must participate, in some sense in decisions
that substantially, affect their welfare.
The stakeholder fiduciary principle:
Management bears a fiduciary relationship to stakeholders and to
the corporation as an abstract entity. It must act in the interest of
the stakeholders as their agent and it must act in the interests of the
corporation to ensure the survival of the irm, safe guarding the long-
term stakes of each group.
Subsequently Freeman redefined stakeholder as "These groups who

are vital to the
survival and success of the corporation" and the prin-
ciples were altered renamed:
The stakeholder enabling principle: Corporation shall be managed in
the interest of stakeholders.
The principle of Director Responsibility: Directors of corporationshall
have a duty of care to use reasonable judgment to define and direct
the affairs of the corporation in accordance with the stakeholder
enabling principle.
CORPORATE GOVERNANCE AND OTHER STAKEHOLDERS 9.3
STAKEHOLDER ENGAGEMENT
4.Discuss brietly the following; Stakeholder engagement.

04.

OR
takeholders engagement is an alliance building tool". Comment
June 2013, 5 Marks]
OR
How does better stakeholder engagement enables good governance. Dis-
cuss. [December 2017, 5 Marks]
Ans. Following are the key points on Stakeholder engagement:
Stakeholder engagement is an alliance-building tool.
Corporations practice stakeholder engagement in an effort to under.
stand the needs of their stakeholders, create partnerships and promote
dialogue.
Stakeholder engagement identifies stakeholders, assessees stakeholder
needs, develops stakeholder relations plans and forms alliances with
stakeholders.
Stakeholder engagement provides opportunities to further align busi-
ness practices with societal needs and expectations, helping to drive
long-term sustainability and shareholder value. Stakeholder engage-
ment helps the organization, to compete in an increasingly complex
and ever-changing business environment, while at the same time
bringing about systemic change towards sustainable development.
Stakeholder engagement leads to increased transparency, respon-
siveness, compliance, organizational learning, quality management,
accountability and sustainability.
Stakeholder engagement is a central feature of sustainability per-
tormance. In nutshell, the stakeholder's engagement ensures good
governance.
95. "Stakeholder engagement provides opportunities to further align

business practices with societal needs and expectations, helping to drive
glerm sustainability and shareholder value".
the context of this, discuss key principles of stakeholder engagement.
June 2018, 5 Marks]
OR
Explain the key principles of stakeholder engagement.
June 2017, 5 Marks]
STAKEHOLDERS
9.4 CORPORATEGOVIERNANCE AND OTHER
Ans. Stakcholder engagement is the process by which an organisation

Involves pcople who may be allected by the decisions il makes or can
1nthuence the implementation of its decisions.
The key principles of Stakeholders' cngagement arc

Communicate: Interactions from
the various stakeholders should
communication may be
made through the print
be promoted. The
of the company, which is also
media elaborating about the progress
a part of the transparency
and disclosurc. Ensurc intended message
achieved.
is understood and the desired response
ask the right questions to get the
Consult, early and often: Always
their support ask them for
useful information and ideas. To engage
advice and listen how they fecl.
Remember, they are human: Operate with an awarencss of human
feelings
Plan it: Time investment and careful planning against it, has a signif.
icant payoff.
Relationship: Try develop trust with stakeholders.
to
Simple but noteasy: Be empathetic. Listen to the stakeholders.

Managing risk: Stakeholders can be treated as risk and opportunities
that have probabilities and impact.
Compromise: Across a set ol stakeholder's diverse priorities.
Understanding what is success: Explore the value of project to the
stakeholder.
Take responsibilities: Project governance is thekey of project success.
It's always the responsibilities of everyone to maintain an ongoing
dialogue with stakeholders.
06. Answer the following in brief; How a better stakeholder engagement

ensures good governance? June 2017, 2 Marks]
Ans. Stakeholder engagement provides opportunities to further align busi
ness practices with societal needs and expectations, helping to drive long-
term sustainability and shareholder value. Stakeholders engagement helps
the organization, to compete in an increasingly complex and ever-changing
business environment, while at the same time bringing about systemie
change towards sustainable development.
Stakeholder engagement leads to increased transpareney, responsiveness,
compliance, organizational learning, quality management, accountability
and sustainability. Stakeholder engagement is a central feature of sustain-
ability pertormance. In nutshell, the stakeholder's engagement ensures
good governance.
STAKEHOLDER ANALYSIS
07. "Stakeholder analysis is the identification of a project's/activity's

which
key stakeholders, an assessment of their interests and the ways in
these interests affect project's riskiness and viability". Elaborate this
statement. June 2012, 5 Marks
OR
What do you understand by stakeholder analysis? [June 2015, 5 Marks)
Ans. Stakeholder analysis is the identification of a project or activity's key
stakeholders, an assessment of their interests, and the ways in which these
interests affect project's riskiness and viability. It is linked to both institu-
tional appraisal and social analysis: drawing on the information deriving
from these approaches, but also contributing to the combining of such data
in a single framework. Stakeholder analysis contributes to project design/
activity design through the logical framework, and by helping to identify
appropriate forms of stakeholder participation.
Doing a stakeholder analysis can:
Draw out the interests of stakeholders in relation to the problems
which the project is seeking to address (at the identification stage) or
the purpose of the project (once it has started)
Identify conflicts of interests between stakeholders.
Help to identify relations between stakeholders which can be built
upon, and may enable establish synergies.
Helpto assess theappropriate type of participation by ditterent stake
holders. The underlining factor in the stakeholder concept is that every
activity of an organization should be based taking into account the
interests of all the stakeholders. A holistic approach ensuring fairness
to all the stakeholders is completely necessary lor the sustainability
of an enterprise.
BETTER STAKEHOLDER ENGAGEMENT ENSURES GOoD GOVERNANCE

8."Better Stakeholder engagement ensures Good Governance". In light
O this sentence, elaborate the role of stakeholders in governance.
Ans. Stakeholders are characterized by their relationship to the company
STAKEHOLDERS
9.6 CORPORATE GOVERNANCE

AND OTHER
which will be loremost in their

and their needs, interests and concerns,
However, as the prOcess un-
minds at the start of an engagement process.
rolewith related tasks and responsibilitics
tolds they soon take a particular
stakeholdcrs can play
some of the
different roles that
The following are just
academicians, who have been invited to contribute
Experts, such as advice to the company's
board.
knowledge and strategic
social and environmental
Technical advisors with expertise on the
technological and scientitic develop.
risks associated with particular
scientific and ethical pancls in science-based
ments invited to sit on
industries.
such as employees, local communi
Representatives ofspecialinterests,
invited to participate in stakeholder
ties or the environment commonly
to review company pertormance
and/or reporting practices.
panels
Co-implementers, such as NGOs, who have partnered with the com-
pany to implement a joint solution or program to address a shared
challenge
Stakeholders can only be well informed and knowledgeable ifl companies
are transparent and report on issues that impact stakeholders. Both parties
have an obligation to communicate sincerely and attempt to understand,
not just be understood.
TYPES OF STAKEHOLDERS
09. Answer the following; "Stakeholder is any group of individuals which

can effect or is affected by the organization." What are the types of stake
holders? [December 2017, 2 Marks]
OR
What is understood by the term stakeholder-Enumerate the different
stakeholder of any corporate entity. [December 2013, 5 Marks]
Ans. In a business context, customers, investors and shareholders, employ-
ees, suppliers, government agencies, communities and many others who
have a 'stake' or claim in some aspect of company's
product operations,
markets, industry and outcomes are known as stakeholder. These groupare
influenced by business, but they also have the ability to affect businesses.
The stakeholders may be classified into:
Primary stakeholders
Primary stakeholders are those whose continued association Is
absolutely necessary for a firm's survival; these include employees,
customer's, investors, and shareholders, as well as the governments
and communities thal provide necessary infrastructure.
Secondary stakeholders
Secondary stakeholders do not typically engage in transactions with
a company and thus are not essential for its survival; these include
the media, trade associations, and special interest groups.
Q10. Explain briefly the following: Thesis of stakeholder theory.

(December 2014, 3 Marks]
Ans. Thesis in stakeholder theory is as follows:

1. Descriptive: The theory is used to describe specific corporate char-
acteristics such as nature of the firm, the way managers think about
managing, how corporations are managed or how the board members

think about the interests of constituencies.
2. Instrumental: Instrumental stakeholders are defined by the need to
the management to take them into account when trying to achieve
their goals.
3. Normative: This approach is categorical in effect it says 'Do (don't
do) this because it is the right (wrong) thing to do'.
4. Broadly managerial: It recommends atitudes, structures and practices
that taken together constitute stakeholder management.
THE CAUX ROUND TABLE

011. Write a brief note on Caux Round Table (CRT).
June 2019, 3 Marks]
OR
Write a note on the following; The Caux Round Table.
of business
Ans. The Caux Round Table (CR7) is an international network
of business.
eaders working to promote a morally and sustainable way doing
1986 by Frits Philips Sr. former
The Caux Round Table was founded inOlivier Giscard d'Estaing, former
President of Philips Electronics, and international
Ce-Chairman of INSEAD, as a means reducing escalating
of
ade tensions between Europe, Japan and the USA.
three ethical
un 1994 Caux Round Table Principles for Business around
Toundations were formed namely:
Responsible stewardship.
9.8 CORPORATE GOVERNANCE AND OTHER STAKEHOLDERS
lor
Ihe Japanese concept of Kyosci living and working mutual
advantage.
Respecting and protecting human dignity.
These principles recognize that while laws and market forces are nec.
essary, they insufficient guides for responsible business conduct.

are
The Caux Round Table believes that the world business communi.
ty should play an important role in improving economic and social
conditions. Through an extensive and collaborative process in 1994,
business leaders developed the CRT Principles for Business to embody
the aspiration of principled business leadership. The CRT believes that
its Principles for Responsible Business provide necessary toundations
for a fair, free and transparent global society.
Q12. What are CRT Principles of responsible business? Discuss
OR
Discuss briefly the Caux Round Table (CRT) and its principles of busi-
ness. une 2012, 5 Marks]
OR
"The Caux Round Table (CRT) is based on the belief that the world busi-
ness community should pay an important role in improving economic
and social conditions".
In the light of this statement, enumerate the CRT general principles for
business. [December 2011, 4 Marks
Ans. The CRT Principles for Business are a worldwide vision for ethical
and responsible corporate behaviour and serve as a foundation for action
for business leaders worldwide.
Aim of CRT Principles
As a statement of aspirations, the CRT Principles aim to express a world
standard against which business behaviour can be measured. The Caux
Round Table has sought to begin a process that identifies shared values,
reconciles differing values, and thereby develops a shared perspective on
business behaviour acceptable to and honoured by all. CRT Principlesfor
Responsible Business set forth ethical norms for acceptable businesses
behaviour. The principles also have a risk management foundation be
cause good ethics is good risk
management. They balance the interests ot
business with the aspirations ot society to ensure sustainable and mutual
prosperity for all.
Following are these principles:
CORPORATE GOVERNANCE AND
OTHER STAKEHOLDERS
9.9
Drinciple I Respect stakeholders beyond
shareholders
DritlCiple 2-Contibutctoeconomic, social and
Pripnciple 3 -
Build trust environmentaldevelopment

by going beyond the letter of the law
Principle 4- Respect rules and conventions
Principle 5 Support responsible globalisation
Principte o -Respect the environment
Principle 7- Avoid illicit activities
013. Explain the following statement; KYOSEI philosophy reflects a

confluence of social environmental
technological and political solution.
OR
The Japanese concept of KYOSEI reflects spirit of
a note on how to implement KYOSEI in an
co-operation. Formulate
organization.
June 2014, 5 Marks]
OR
What are different stages of KYOSEI?
Ans. KYOSEI is a Japanese
technique meaning "a spirit of co-operation". In
simple words, it means 'the living and working together for the common
good'. However, in broad sense it may be detined as "All people,
of race, religion or culture, regardless
the future."
harmoniously living and working together into
Stages of KYOSEI (Five stages)

First stage: In the first stage
of KYOSEI, a company must work to
secure a predictable stream of profits and to establish strong market
positions. At this stage a corporate is at the stage of evolution and it is
concerned with profit making and its economic survival. Stakeholder's
benetits are not a major concern area.
Second stage: From this foundation, it
moves on to the second
stage,
in which managers and workers resolve to
cooperate with one anoth-
er, recognizing that both
groups are vital to the company's success.
Managers and workers unite in working for the prosperity of the
Corporation and both have a share in the profits.
Third stage: In the third stage, this sense of cooperation is extended
beyond the company to encompass customers, suppliers,
community
groups, and even competitors. At this stage company assunmes local
SOcial responsibilities. Companies respect the interests of their own
STAKEHOLDERS
9.10 GOVERNANCE AND OTHER
CORPORATE
staff, sharcholders, suppliers, competitors

ors
stakeholders, customers,
and the local community.

Fourth stage: At the fourth stagc, a company takCs the cooperative
and addresses some of the global

spirit beyond national boundaries
imbalances. At this stage company assumes global social responsi.
its direct stakeholders, including
bilities. It begins to take c a r e of all
its local community and beyond. Thus it strives to tulil its corporate
global scale.
obligations on a
Fifth stage: In the fifth stage, which companies rarely achieve, a com-
to work towards rectifying global
pany urges its national government
imbalances. At the global level KYOSEI will address Trade imbalances
Income imbalances and Environmental imbalances by advocating
political, economic and educational reform.
THE CLARKSON PRINCIPLES OF STAKEHOLDER MANAGEMENT
014. Discuss Clarkson principles of stakeholder management.

une 2015, 5 Marks] [December 2014, 3 Marks]
June 2014, 3 Marks] [June 2013, 5 Marks]
LDecember 2012, 5 Marks] [December 2011, 4 Marks]
[December 2010, 5 Marks] [June 2010, 5 Marks]
Ans. The Clarkson Principles, which emerged from a project undertaken
by the Centre for Corporate Social Performance and Ethics, are as follows:
Principle 1:Managers should acknowledge and actively monitor the concerns
of all legitimate stakeholders, and should take their interests appropriately
into account in decision-making and operations.
Principle 2: Managers should listen to and openly communicate withstake
holders about their respective concerns and contributions, and about the
risks that they assume because of their involvement with the
corporation
Principle 3: Managers should adopt processes and modes of behaviour
that are sensitive to the concerns and capabilities of each stakeholder
constituency.
Principle 4: Managers should recognize the interdependence of efforts
and rewards among stakeholders, and should attempt to achieve a fair
distribution of the benefits and burdens of corporate activity among them,
taking into account their respective risks and vulnerabilities.
Principle 5: Manages should work cooperatively with other entities, both
public and private, to insure that risks and harms arising from corporate
tivities are mininzed and, where they cannot be avoided, appropriately
actin
compensated.
Deinciple 6: Managers should avoid altogether activities that might jeop

dize inalienable human rights (¢.g., the right to life) or give rise to risks
which, if clearly undcrstood, would be patently unacceptable to relevant
stakcholders.
Principle 7: Managers should acknowledge the potential conflicts between

their own role as corporate stakeholders and their legal and moral respon
sibilities for the interests ofstakeholders, and should address such conflicts
through open communication, appropriate reporting and incentivesystems,
and, where necessary, third party review.
GOVERNANCE PARADIGM AND VARIOUS STAKEHOLDERS
Q15. "Better stakeholders' engagement ensures good governance." Analyse

this statement in the context of employees as stakeholders.
LDecember 2015, 5 Marks]
Ans. "Better stakeholders' engagement ensures good governance".
Employees are one of the important and primary stakeholders of the
companies. Employees have a stake in the long-term success of the corpo-
ration. Employees possess skills and knowledge which are specific to their
particular corporation. Moreover, employees care about a wide range of
decisions within corporations. Stakeholder engagement leads to increased
transparency, responsiveness, compliance, organizational learning, quality
management, accountability and sustainability. Stakeholder engagement
is a central feature of sustainability performance.
016. "Employees participation in corporate governance system can be

found in many countries and corporations throughout the world". In the
light of this statement, discuss some of the important examples for ensuring
g0odgovernance by employee. [December 2014, 4 marks]
Ans. Employee participation in corporate governance systems can be found
n many countries and corporations throughout the world.
rollowing are the some important example for ensuring good governance
by employees:
Right to consultation- where employees must be consulted on certain
agement decisions. This right increases transparency of man-
agement decisions and allows employee opinion to ameliorate the
asymmetry of information between management and the market.
STAKEHOI.DERS
AND OTHER
9.12 CORPORATE
GOVERNANCE
R i g h tt o nominate/vote for supervisory board members- In manycasesa
nandaled. This right createsa

participation on the board is
employee supervisory
and the
bctween managemenl
check and balancesystem ol grealer lairness.
turn c r e a t e s
the perception
board, which in
programs
that makeemployces holders
Compensation/privatization
to clect the
board members
empoweringemployees
ofshares, thereby responsible.
which, in holds management
turn
in thecapital
Employees may be partner
Participation in the capital: the ESOP scheme
be given the shares under
contribution. They may the
the belongingness of the ownership concepl among
This will create
as employee.
This will lead
o w n e r as well
employeesmeaning there by to management's
commitment and buy-in
the Improved enmployee
to
interest between employces and
side by side the alignment of
goals the emergence of
m o r e transparent and
shareholders. It may support
effective corporate governance.
with its
that builds mutually strong relationship
017. "Organization
in the market price". Discuss.
vendors improves its overall performance [December 2014, 4 Marks]
in the of an organisation. The organisa-

Ans. Vendors play akey role
success
tion which builds a mutually strong relationship with its vendors improves
The time, money and energy
its overall performance in the marketplace.
cannot be measured direct
used to nurture a positive vendor relationship
line. However, a well managed vendor
ly against the company's bottom customer satisfaction, reduced costs,
relationship will result in increased contributes
better quality, and better service from the vendor. ultimately
It
toward the good governance of an organisation. A proper systematie ap-
proach of vendor management will benefits all the employees, organisation,
customer and vendors.

GERMAN CORPORATE GOVERNANCE CODE, 2019
Q1. Name any five principles lad down under German Corporate Gov
ernance Code, 2019.
Ans. Following are the first five principles under the German Corporate
Governance Code, 2019
Principle 1: The Management Board is responsible for managing the en

terprise in its own best interests. Its members are jointly accountable for
naging the enterprise. The Chair or Spokesperson of the Management
manag
Roard coordinates the work of the Management Board members
B
Deinciple 2: The Management Board develops the enterprise strategy, co-
dinates it with the Supervisory Board and ensures its implementation.
ordina
Principle 3: The Management Board stipulates target values for the share
af women in the two management levels below the Board.
Principle 4: A responsible management of risks arising from business
activities requires an appropriate and effective internal control and risk
management system.
Principle 5: TheManagement Board ensures that all provisions of law

achieve their
and internal policies are complied with, and endeavours to
compliance by the enterprise.
10 GOVERNANCE AND
COMPLIANCE RISK
C HAP T ER
ELEMENTS OF EFFECTIVE COMPLIANCE PROGRAM
01. "A corporate compliance program is a formal program specifying an

organization's policies, procedures and actions within a process to help
prevent and detect violations of laws and regulations". In this context
discuss the essential of an effective compliance program.
June 2019, 5 Marks]
Answer: Following are the elements of an Effective Compliance Program:
1. High level company personnel who exercise effective oversight: The
governing body should have the overall responsibility for the com-
pliance program and shall ensure the effectiveness of it. It should be
knowledgeable about the effective compliance program A Compliance
Officer shall be designated by the organization's governing body, who
shall periodically report to the higher level management/governing
body. The Compliance Officer should be given adequate resources
with appropriate authority and direct access to the governing body.
2. Written policies and procedures: The employees of the organization
should be made known the legal requirements so that employees
understand their obligations. The employees should be encouraged
to report suspected fraud and other irregularities without fear.
3. Training and education: The employees of the organization should
be provided reasonable training to understand the organization's
compliance programme and its policies and process.
4. Lines of communication: Information about the compliance program
must be widely communicated at all levels of an organization.
5. Standards enforced through well-publicized disciplinary guidelines:
The organization's compliance and ethics program should be promot
ed and enforced consistently through well-publicized guidelines that
provide, incentives to support the compliance and ethics program,
disciplinary measures.
10.1
COMPLIANCE RISK
10.2 GOVERNANCE AND
6. Internal compliance monitoring: The organization shall take reastn.

able steps, including monitoring and auditing, to, cnsure that the or
is tollowed, periodicall
ganization's compliance and ethics program
compliance program
evaluate the effectivenes of the organization's
corrective action plans: After mon
7. Response to detected offenses and
program, the organization shall
itoring and auditing of the compliance to any violations of
take reasonable steps to, respond appropriately
misconduct, modity and improve
the law o r policies to prevent future
ethics program.
the organization's compliance and
02. You have been appointed as Company Secretary of a newly incor.

which is engaged in providing logistic
porated public limited company,
services across India. The company has come out with a public issue and
its shares are listed at BSE and NSE. How would you implement a Cor.
porate Compliance Management culture in the company?
Ans. Being a Company Secretary i.e. 'Compliance Manager/Officer' of the
company, I would ensure that the company
is in total compliance with all
regulatory provisions. I would ensure that all statutory and non-statutory
disclosures are made to shareholdersand other stakeholders in true letter
and spirit. I would draft a Corporate Compliance Management Policy and
put up before the board of directors for their approval and implementation.
The policy would contain following aspects:-
Background and busines strategy of the company: This will include
the brief background of the company, area of operation, competition
prevailing from the peer companies and SWOT analysis of the compa-
ny, marketing strategies to be adopted, use of technology in providing
better services to the customers.
Identification of applicable laws: This will include identifying the
applicable laws, application of control measures to mitigate the risk.
generation of reports for identifying the non-compliances, reminder
before the due date for compliances and having internal control on
compliances.
Individual responsibilities on compliances to be clearly defined: Re-
sponsibility with respect to compliances would be clearly defined in
the
compliancemanagement program, which will enable the compli
ance officer to co-ordinate with the respective officials in respect o
deviations if any.
Evaluation: Compliance management system would have a proper
evaluation methodology through questionnaires for departmental
heads etc. at regular intervals.
GOVERNANCE AND COMPLJANCE RISK 10.3
Bridging the gap between compliance in letter and compliance in letter

and spirit: The compliance management system would be made in
such a manner that the compliance is made in letter and spirit.
Updation: Updation of compliance management program is very es
sential as and when there is any change in any of the applicable law.
cOMPLIANCE-RISK MANAGEMENT PROGRAM
03. A successful compliance-risk management program which iselements.

an essen-
and vibrant operational system contains certain

tial for sound
elements. [June 2019, 3 Marks]
Point out such
Ans. The compliance

tramework needs to be comprehensive, dynamic, and
customizable, allowing the organization to identify and assess the categories
of compliance risk to which it may be exposed.
Elements of compliance-risk management program
compliance-risk management program which is an essential
A successful
component for sound and vibrant operationalsystem contains the following
elements:
ELEMENTS MEANING
S
No.
1. Active board and An effective board and seniormanagement oversight
senior management | is the cornerstone of an effective compliance risk
management process.
oversight
2. Effective policies | Compliance risk management policies and proce
and procedures dures should be clearly defined and consistent with
the nature and complexity of an institution's activities.
3. Compliance risk Organizations should use appropriate tools in com-
analysis and com-| pliance risk analysis likeself-assessment, risk maps,

prehensive controls process flows, key indicators and audit reports;|
which enables in establishing an effective system
of internal controls.
4. Effective compliance | Organizations should ensure that they have adequate

monitoring and re- management intormation systems that provide
management with timely reports on compliances
porting
like training, effective complaint system and certi-
fications.
5. Independent testing should be conducted to verify
Testing that compliance risk mitigation activities are in
place and functioning as intended throughout the
organization.
10.4 GOVERNANCE AND COMPLIANCE RISK
04. "Corporate
Compliance Management should bradly include com.
pliance of various laws". In view of this, what are the
Commercial Law.
and Fiscal
Laws, which should be complied with by every organization?
[December 2019, 5 Markst
Ans. With
reference to Corporate Compliance Management, the
Commercial Laws should be complied by an organization:
following
Indian Contract Act, 1872
Transfer of Property Act, 1882
Arbitration and Conciliation Act, 1996
Negotiable Instruments Act, 1881
Sale of Goods Act, 1930
Following Fiscal Laws should be complied with by an organization:-
Income-tax Act, 1961
Central Excise Act, 1944
Customs Act, 1962
GST Act, 2017
05. "Compliance Management plays the significant role to comply with

a steady stream of complex regulations". What can be added to the sig.
nificance of the Corporate Compliance Management?
December2019, 5 Marks
Ans. As the organizations face mounting pressures that are driving them
towards a structured approach to enterprise wise compliance management,
the key drivers of compliance management encompass, the complexity
ot today's business, dependency on IT and hi-tech processes, growth in
business partner relationships. Increased liability and regulatory oversight
has amplified risk to a point where it demands continuous evaluation of
compliance management systems. Furthermore, the multiplication of
compliance requirements that organizations face increases the risk of
non-comnpliance, which may have potential civil and criminal penalties.
The following may add to the significance of the corporate compliance
management:
Image building of a responsible corporate citizen.
Stake holders can trust in the working of the corporate.
Prevent improper conduct in the organization.
I t keeps things running smoothly and minimizes risks.
I t helps the company in maintaining a good reputation.
Real time status of legal/statutory compliances.
GOVERNANCE AND COMPLIANCE RISK 10.5
Prevent unintended non-compliances/prosecutions.

Higher Productivity in the Company.
Building Positive Reputation.
tenhances credibility/creditworthiness being a lawabiding company.
RISKS OF NON-COMPLIANCE
05A. Compliance Management is the most important part of any business.

Highlight the risk of non-compliances.
Ans.Following are the risk of non-compliance:
1 Penalties and
Fines: Penalties include financial fines, limitations on
activities, additional barriers to approval and even imprisonment.
2. Criminal Charges: Criminal charges are a potential consequence for

for
certain regulatory non-compliance. Criminal Liability may arise
Misstatements in Prospectus, Search and Seizure under section 209(3)
of Companies Act, 2013 may be done. Investigation may be made into
affairs of company by Serious Fraud Investigation Office.
Reputational Damage: A business' public image is a key to its

success.
3.
When a company is thrust into the public eye for failing to comply with
regulations, there are reputational repercussions, which eventually
lead to distrust, loyal customers may leave, new customers may be
never develop.
put off and potentially beneficial partnerships may
4. Access to Markets and Product Delays: Businesses are required
to
meet a host of regulations if they wish to do business with government.
Companies that place value on corporate compliance may avoid doing
business with companies which are non compliant as they would want
to ensure that they meet their own regulatory obligations. Non com-
pliances may also result into financially damaging events like having
products/services blocked at the border, forced to issue a recall
or
issues etc.
Torced to destroy merchandise due to compliance
. Roadblock in Funding: The pre-requisite of any funding exercise either
from banks or venture capitalists is the status of tax and regulatory
seed invest-
Compliances. A company cannot get funded, even in the
ment level, whose compliances are not up to date.
6. Why Shann Turnbull, an Australian expert in corporate governance

Commended 'Corporate Senate ?
I h e Australian Government has undertaken a set of reforms to improve
disclosure norms of financial information and
Governance and
totorale
update accounting rules.
10.6 RISK
GOVERNANCE AND COMPLIANCE
Shann Turnbul, a verv well-known Australian expert in corporate

gOvernance recommended that there should be a Dual Board Siructure"
along with Corporate Senate'to

a oversee the regular board tunctioning
(senate means a council).
The Corporate Senate was recommended todetermine accounting policies
direct audit activities, arbitrate on board conflicts, ad viceAGM on director's
benefits. The senate would also nominate directors on the Board and would
act as trustees for any Employees Stock Option Scheme (ESOP).
The Corporate Senate would comprise of maximunm of 3 (three) members
who would be clected on the basis of 'One Vote per Shareholder' instead
of One Vote per Share' principle. The corporate senate would have no
it would have the 'veto' power over
proactive power of any kind. However,
conflict of interests, and that
activity in which the board has a even
any
can be overridden by a vote of 75% of the shares.
COMPLIANCE RISK y
01: Write a short note on the following; compliance risk?

Ans. "Compliance risk" is exposure to legal penalties, financial forfeiture and
material loss an organization faces when it fails to act in accordance with
industry laws and regulations, internal policies orprescribed best practices.
Compliance risk is the threat posed to a company's earnings or capital as a
result of violation or non conformance with laws, regulations, or prescribed
practices. Compliance risk is also known as integrity risk.
The Basel Committee on Banking Supervision in its paper on 'Compliance
and the compliance function in banks' defined the compliance risk as:
"The risk of legal or regulatory sanctions, material financial loss, or
loss
to reputation a bank may suffer as a result of its failure to comply with
laws, regulations, rules, related self-regulatory organisation standards,
and codes of conduct applicable to its banking activities."
This risk is closely interconnected with:
Operational risk
Legal risk
Reputation risk
cOMPLIANCE RISK MANAGEMENT
risk management?
What is compllance
02.
Compliance risk management is the process of managing corporate
Ans.
nliance to nicet regulalions
within a workable timeframe and budget.
Risk management is part of the collective governance,
risk
Capliance
and compliance discipline.
managemet
and narTOW Outlook that compliance is limited to statutory
The traditional
to run a business, has widened considerably. Compliance
filings, required responsibility.
now a cross-functional
nractices are
continues to be a focal point lor regulators, compliance
Ascompliance risk to take steps to ensure that compliance
risk is
officers are encouraged
management ensure
adequately managed. Best practices for compliance
risk is adequately managed.
that compliance
RISK MANAGEMENT
STEPS IN COMPLIANCE
risk management?
03. What are the steps compliance
in
should be followed for risk management compliance:

Ans. Following steps
1. Understand compliance obligations
2. Assess risks
3. Address allcompliance risks
4. Evaluate performance
COMPLIANCE RISK MITIGATION
compliance management and monitoring

pro-
94, The success of any these
of
gramme depends on the existence, functloning and integration
three lines
of defence in the performance of thelr dutles. Explain the
uines
of defence.
Ans. Following are the defences:
cOMPRISES OF
S. DEFENCES
NO
strategies.
setting and executing
Assists in
Management Provides direction, guidance and
oversight.
Assurance
strong risk culture &
sustainable risk
Promotes a
return thinking.
10.8 GOVERNANCE AND COMPLIANCE RISK
S. DEFENCES cOMPRISES OF
NO.
Promotes a strongcomplianceculture and manage.
ment of risk exposure.
Ongoing monitoringand management of risks.
2. Risk Manage Formal, robust and effective risk management with-
ment, Legal & in which the organisation's policies and minimum
Compliance standards are set.
Objective oversight and the ongoing challenge of
risk mitigation, management and pertormance
while
reporting is achieved across the business units.
Overarching risk oversight across all risk types.
Compile and maintain a legislative universe for the
organisation.
Facilitate the risk prioritisation of all pieces of
legislation in the regulatory universe.
Initiate new legislative requirements within the or.
ganisation.
Analyse and send out alerts on the new law to inform
theorganisation of the new requirements.
Facilitate an executive review of the
legislation by
Legal analysts.
Facilitate the completion of the
Management Plan ("CRMP")
Compliance Risk
Update compliance monitoring plans on the CRMP.
Escalate compliance matters to
management.
Undertake quarterly compliance reporting.
3. Internal Audit
& other Inde-
Independent and objective assurance of overall ade
quacy and effectiveness of governance, risk manage- |
pendent Assur- ment and internal controls within
the organisation.
anceProviders Ability to link business risks with established
cesses and provide assurance on the pro-
effectiveness ot
mitigation plans to effectively manage organisationa
risks.
oVERNANCE, RISK MANAGEMENT AND cOMPLIANCE
oVERNAN.
GOV
"Governance, risk management, and compliance are three related facets

dat aim to assure an organization reliably achieves objectives, addresses
certainty and acts with integrity" Explain the statement.
u nc e
Ans. Many' companies take an integrated approach to these three areas

oferring to them collectively as Governance, Risk Management and
re
Compliance (GRC).
Governance
Governance is the combination of processes established and execut
ed by the directors or the board of directors that are retlected in the
achiev-
organization's structure and how it is managed and led toward
ing goals.
Governance describes the overall management approach through
which senior executives direct and control organization,
the entire
information and hierarchical
using a combination of management
management control structures.
Risk management
which management
Risk management is the set of processes through
where necessary, responds appropriately
identifies, analyzes, and, of the organization's
affect realization
to risks that might adversely on their
The response to risks typically depends
business objectives. accepting or
and involves controlling, avoiding,
perceived gravity, whereas organizations routinely
a third party,
transferring them to
a wide range
of risks.
manage commercial/financial risks, infor-
risks,
For example: technological
etc.
mation security risks
Compliance boundaries (laws and
with the mandated
Compliance refers toadhering policies, procedures
boundaries (company's
regulations) and voluntary requirements. At
an
with stated
means
conforming processes
etc.). Compliance achieved through
management
in
organizational level,
it is (defined for example
requirements the state
the applicable assess
which identify contracts,

strategies
and policies),
non-compliance
aws, regulations, potential otcosts
assess the risks and compliance,

and hence
Ocompliance, achieve
to
expenses deemed necessary.
against the projected corrective
actions
initiate any
prioritize, fund
and
11 CORPORATE GOVERNANCE FORUMS
C HAPTER
INTRODUCTION
01.Describe briefly the following; Enumerate any six corporategovernance

forums worldwide, which are instrumental in promoting the culture of
creativityand compliance among corporate. [December 2010, 6 marks]
Ans. Following are six corporate governance forums worldwide, which
are instrumental in promoting the culture of creativity and compliance
among corporales:
1. Global Corporate Governance Forum (GCGF)
GCCF is an OECD World Bank initiative. Its mission is helping coun-
tries improve the standards of governance for their corporations, by
fostering the spirit of enterprise and accountability, promoting fairness,
transparency and responsibility.
2. Asian Corporate Governance Association (ACGA)
ACGA is anindependent, non-profit membershiporganisation dedicated
to working with investors, companies and regulators in the implemen-
tation of efective corporate governance practices throughout Asia.
ACGA was founded in 1999 from a belief that corporate governance
is fundamental to the long-term development of Asian economies and
capital markets.
3. Common Wealth Association of Corporate Governance (CACC)
CACG was established in 1998 with the objective of promoting the
best international standards on corporate governance throughout the
Commonwealth as a means to achieve global standards of business
efficiency, commercial probity and eltlective economic and social
development.
. International Corporate Governance Network (ICGN)
under the laws of
TCGN is a non-profit company limited by guarantee
England and Wales. It has four primary purposes:
11.1
11.2 CORPORATE GOVERNANCE FORUMS
a. Toprovide an investor led network for the exchange of views and

intormation about corporate governance issues internationally
b. To examine corporate governance principles and practices.
C.To develop and encourage adherence to corporate governance

standards and guidelines.
a To generally promote good corporate governance.
5. European Corporate Governance Institute (ECGI)
The ECGI was founded in 2002. It has been established to improve
corporate governance through tosteringindependent scientitic research
and related activities.
6. Conference Board
The conference Board was established in 1916 in USA. The conference
Board is a non-profit organization. The conference Board creates and
disseminates knowledge about management and the market place to
help businesses strengthen their performance and better serve society.
INSTITUTE OF COMPANY SECRETARIES OF INDIA (ICSI)
02. Write short note on the following; ICSI Motto, Vision Statement and
Mission Statement. [December 2018, 2 Marks]
Ans. According to the Institute of Company Secretaries of India
Corporate Governance is the application of best management practices
compliance of law in true letter and spirit and adherence to ethical standards
for effective management and distribution of wealth and discharge of social
responsibility for sustainable development of all stakeholders."
Following is the ICSI Motto, Vision Statement and Mission Statement:
Motto of ICSI
HT4ai gHTRI -Speak the Truth, A bide by the Law"
Mission statement of ICSI
"Todevelop high calibre professionals facilitatinggood Corporate Govermance
Vision statement of ICSI
"To be a global leader in promoting Good Corporate Governance
03. Describe briefly the following; ICSI initiatives towards
governance
corporate
Ans. The vision of ICSIis to be a global leaderin
development of professionals
specializing in Corporate Governance. For promoting good
corporate
11.3
CORPORANTE GOVERNANCE FORUMS
nance the
misson develop high calibre
ol ICSI is to continuously
ssionalcnsurnggood corporategovernancc and effectivemanagement
activities for protection
tocarTyoul pro:Clive rescarch and developmcnt
interest
ol all stakcholders thus contributing to public good.
a
of
ving are the nitialives by ICSI towards corporate governance:
Follo
INITIATIVES OBJECTIVE
S.
NO.
Corporate Governance ICSI has set up the ICSI- Centre for Corporate
1.
Governance Research and Training
(CCGRT)
Rescarch and Training
with the objective of fostering and nurturing
members of the
rescarch initiatives among
and other
Company Secretaries profession
researchers.
awards instituted by the ICSI in

ICSINational Award for | These
were
Excellence in Corporate 2001 to identify, foster and reward the culture

of evolving global best practices of corporate
Governance
governance among
Indian companies.
Considering corporate
governance as
3. Focus on Corporate Secretaries,
Governance in the core competency of Company
Secretary
Course Curriculum education and training for Company
governance.
significantly focuses on corporate
Governance titled
Onefull paperon Corporate Compliances
"Governance, Risk Management,
of the syllabus in the
and Ethics" forms part
Professional Programme.
Post Membership
ICSI has launched
a
PMO Course in Governance
4.
Corporate Governance Qualification Coursein Corporate
and
members gain acumen, insight
to enable its
governance.
thorough expertise in corporate
Asapioneering initiative,ICSIissues Secretarial
Secretarial Standards harmonise and
5. to integrate,
Standards
secretarial practices
standardise the diverse
the corporate sector.
prevalent in
SS-1:Secretarial Standard
on Meetings of the
Board of Directors
General Meetings
SS-2:Secretarial Standard
on
and not exhaustive)

(Note: The above list is inclusive
evolved by the institute
of corporate governance
Discuss the principles June 2010, 5 Marks]
secretaries of India.
Company
CORPORATE GOVERNANCE FORUMS
11.4
Governance as:
Ans. ICSI has defined Corporate
practices, compliance of law
"The application of best managementethical standards for effective
to
In letter and spirit and adherence
of social re.
and distribution of wealth and discharge
management stakeholders."
development of all
sponsibility for sustainable
principles of corporate
From the aforesaid definition the following Secretaries of India:
governance are evolved by
the Institute of Company
all stakeholders: To e n s u r e growth of all
1. Sustainable development of
on sustainable
associatcd with or effected by the enterprise
individuals
basis.
2. Discharge of Social responsibility: To ensure that enterprises is ac-
ceptable to the society in which it is functioning.
3. Application of best management practices:
To ensure excellence in
of wealth on sustain.
functioning of enterprise and optimum creation
able basis.
4. Compliance of law in letter and spirit: To ensure value enhancement
for all stakeholders guaranteed by the law for maintaining socio-eco
nomic balance.
5. Adherence to ethical standards: To ensure integrity, transparency,
independence and accountability in dealings with all stakeholders.
05. Write a brief note on "The ICSI National Awards for Excellence in
Corporate Governance June 2019, 5 Marks]
Ans. "ICSI National Award for Excellence in Corporate Governance" was
institutedby the 1CSl in the year 2001 in pursuit of excellence and to identify,
foster and reward the culture of evolving globally acceptable standards of
corporate governance among Indian companies.
Objective of Award
The underlying guideline for the Corporate Governance Award is to identify
the corporates, which follow the best corporate governance norms in letter
and spirit. The institution of the Award aims at promoting the cause of
Corporate Governance by:
Recognizing leadership etforts of corporate boards in practicing good
corporate governance principles in their functioning.
Recognizing implementation of innovative practices, programs and
projects that promote the cause of corporate governance.
Enthusing the corporates in tocusing on corporate governance prac
tices in corporate functioning.
CORPORATE GOVERNANCE FORUMS 11.5
Implementation of acknowledged corporate governance norms in

letter and spirit.
Attributes for bestowing the award
The Institute annually bestows upon a corporate leader the "ICSI Lifetime
Achievement Award tor Translating Excellence in Corporate Governance
into Reality".
This award is bestowed upon keeping in view the following attributes:

Outstanding contribution to social upliftment and institution building
Exemplary contribution in enhancement of stakeholders'value
A visionary with innovative ideas.
Long tradition of trusteeship, transparency and accountability.
Qualities of leadership, team spirit, integrity and accountability.
Proven track record of adherence of statutory obligations.
Social acceptance and approval.
the
06: You being the company secretary of Adherence Ltd. are asked by
board to prepare a note on the attributes which the institute annually looks
for;before it bestows upon the or the corporate leader the ICSI lifetime
Achievement award for translating excellence in corporate governance
into reality. [December 2014, 4 Marks]
Ans.
To,
Adherence India Limited
Subject: Attributes for obtaining ICSI Lifetime Achievement Award for
Excellence in Corporate Governance
Respected Sir,
he Institute annually bestows upon a corporate leader the "ICSI Lifetime
Achievement Award Translating Excellence in Corporate Governance
for
into Reality'.
nIs award is bestowed upon keeping in view the tollowing attributes:-
and institution building
Outstanding contribution to social upliftment
value
Exemplary contribution in enhancement ofstakeholders'
A visionary with innovative ideas
transparency and accountability
Long tradition of trusteeship,
Qualities of leadership, team spirit, integrity and accountability
obligations
Proven track record of adherence of statutory
Social acceptance and approval

Sd/
Mr. X
Company secrelary
Adherence Lid
FOUNDATION FOR CORPORATE

GOVERNANCE (NFCG)
NATIONAL
the following; National

Foundation for Corporate
07. Write short note o n
Governance. December 2013, 3 Marks] [June 2012, 3 Marks]

Ans. Formation of NFCG
Governance" w a s set up in the year
"National Foundation for Corporate
practices in
2003 with the goal of promoting better corporate governance
along
Government of India with
India, by the Ministry of Corporate Affairs,
Secretaries of
Confederation of Indian Industry (CI), Institute of Company
India (ICS) and Institute of Chartered Accountants of India (ICA).
Stakeholders in NFCG have been expanded with the inclusion of Institute
of Cost Accountants of India and the National Stock Exchange of India Ltd.
Vision of NFCG
"The vision of NFCG is to be the Key Facilitator and Reference Point for
highest standards of Corporate Governance in India."
Objective of NFCG
NFCG endeavours to build capabilities in the area of research in corporate
governance and to disseminate quality and timely information to concerned
stakeholders. It works to foster partnerships with national as well as
international organisations.
Governing Structure of NFCG
The internal governance structure of NFCG consists:
Governing Council: Works at the apex level for policy making.
Board of Trustees: Deal with the implementation of policies and pro-
grammes and laying down the procedure for the smooth functioning
Executive Directorate: Provides the internalsupport to NFCG activities
and implements the decisions of the Board of Trustees.
CORPORATEGOVERNANCE FORUMS 11.7
AR. Explain the tollowing; mission of National Foundation for Corporate

Governance.
OR
practices in In-
with the goal
ot promoting better corporate governance
government o lndia has set up national foundation of corporate

dia, the
FCG).
governance (NFC Explain in brief the mission of NFCG.
June 2018, 5 Marks]
with the
Ans. National Foundation of Corporate Governance was formed
better corporate governance practices in India. Following
ooal of promoting
are the mission of National Foundation of Corporate Governance
To foster a culture of good corporate governance.
a framework of best practices, structure, processes and
To create
ethics.
Governance tramework
Toreduce the existing gap between Corporate
& actual compliance by corporates.
stakeholders.
To facilitate eftective participation of different
areas of Corporate
To catalyse capacity building in new emerging
Governance.
Foundation for Corporate Governance

09.Prepare a brief noteon National
NFCG. [December 2019, 3 Marks]
(NFCG) and Board of Trustees of
Governance (NFCG) With the
Ans. National Foundation for Corporate
practices in India, the
goal of promoting better corporate governance
Government of India, has set up National
Ministry of Corporate Affairs, with Confederation
Foundation for Corporate Governance (NFCG) along
Secretaries of India (ICSI)
of Indian Industry (CIM), Institute of Company
of India (ICA). In the year 2010,
and Institute of Chartered Accountants
with the inclusion of Institute
stakeholders in NFCG have been expanded
of Cost Accountants the National Stock Exchange of India Ltd.
of India and
"Be the KeyFacilitator and Reference Point for
Ihe Vision of NFCG is Governance in India."
highest standards of Corporate
of NFCG consists of Governing Council,
ne internal governance structureDirectorate.
Board of Trustees and Executive
Board of Trustees
of policies and programmes
ard of Trustees deal with the implementation
the smooth functioning. It is chaired by
lay down the procedure for Affairs, Government ot India.
retary, Ministry of Corporate
11.8
The members of the Board of Trustees are

Industry (CII)
Director General, Confederation of Indian
Accountants of India (ICAI)
Secretary, Institute of Chartered
India (ICSI) and
Secretary, Institute of Company Secretaries of
Institute of Cost Accountants
of India (ICAI-CMA)
Secretary, The
Representative, National Stock Exchange (NSE)
Director General & CEO, Indian Institute of Corporate Affairs (IICA)
ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

(OECD)
Q10. Describe how the OECD principles of corporate governance helped
in evolution and development of corporate governance.
Ans. The Organisation for Economic Co-operation and Development (OECD)
is one of the first non-government organizations to spell out the principles
that govern corporates. It was established in 1961 when 18 European
countries plus the United States and Canada joined forces to create an
organisation dedicated to economic development.
Mission of OECD
The mission ofthe Organisation for Economic Co-operation and Development
(OECD) is to:
"Promote policies that will improve the economic and social well-bein
"
ofpeople around the world.

Objective of OECD
The OECD works with governments understand what drives economic,
to
social and environmental change. It measures productivity and global flows
of trade and investment analyse and compare data to predict future trends,
set international standards on a wide range of
things, from agriculture
and
tax to the satety of chemicals etc.
The OECD had focused helping governments around the world to:
on
Restore confidence in markets and the institutions

that make them
function.
Re-establish healthy public finances as a basis for future sustainable
economic growth.
Foster and support new sOurces of growth through innovation, envi
ronmentally friendly 'green growth' strategies and the development
of emerging economies.
11.9
Ensure that pcople of all ages can develop the skills to work produc
tively and satistyingly in the jobs of tomorrow.
011. Organization for economic co-operation and development (0ECD)

which business corporationsS
defines corporate governance as a system by statement, enumerate
the
are directed and controlled. In the light of this
nrinciples of corporate governance as evolved by OECD.
June 2012, 6 Marks]
OR
brief the following; OECD was the first organization to spell
Discuss in
June 2014, 2 Marks]
out the principles of good corporate governance.
OR
Briefly explain OECD principles of corporate governance.

OR
(OECD)
economic co-operation and development
The organization of
in 1961. The OECD w a s o n e
of the first non-government
was established
should govern corporate.
out the principles that
organizations to spell governance?
OECD principles of corporate
What are the existing
and development (OECD)
economic co-operation
Ans. Organization for
corporates.
has laid down principles that govern
1999
Principles ofOECD published in
Governance w e r e first published
in
The OECD Principles of Corporate
benchmark for policy
have become an international
1999. These principles stakeholders worldwide.
and other
makers, investors, corporations
in 2004
OECD published
Revised Principles of revised in 2004.
in 1999 were
principlesof OECD published the

The original principles was done to take into
account
he revision of the original scandals highlighted the

governance
corporate
uevelopments and the that the integrity of the
standards. It was recognized to
ced for improved w e r e designed
the revised principles
and to
OCk market w a s critical
underpin this integrity.

Kevised Principles of OECD
published in 2015
revised in 2015. OECD
The0 0 4 of thePrinciples w e r e again
2 version divided in six ditferent chapters,
are
Corporate Governance Principles
which are
Principle 1: Ensuring the basis for an ellective corporate

ate govern
governance
tramework
Principle 2: The rights and cquitable treatment of sharcholders and
ownership functions
Principle 3: Institutional investors, stock markets, and other intermediar
aries
Principle 4: The role of stakeholders in corporate governance
Principle 5: Disclosure and transparency
Principle 6: The responsibilities of the board
012. "The Global Corporate Governance Forums mandate is to

promote
global, regional and local initiatives that improve corporate governance
policy standards and practices in developing countries". Elucidate this
statement. June 2011, 5 Marks
OR
Explain the focus areas of Global Corporate Governance Forum.
[June 2016, 5 Marks
Ans. Global Corporate Governance Forum is an OECD
World Bank initiative.
Its mission is helping countries
improve the standards of governance for
their corporations,by fostering the spirit of enterprise and accountability,
promoting fairness, transparency and responsibility.
Objective of Global Corporate Governance Forum
Global Corporate Governance Forum was established
to promote initiatives
to raise
corporate governance standards and practices in developing
countries and emerging markets, using the OECD
Governance as the basis for its work in 1999. Principles of Corporate
The focus areas of the Forum are as
follows-
Raising awareness and building consensus for implementation
reform through meetings,
briefings, policy papers, and conterences
Sponsoring research relevant to the needs of
underpin retorm etforts by sound analysis developing countries
and building sustainable networks for through sponsoring pa
tries
academics in developing c
Disseminating best practice materials and publications and ines

developed with leading global specialists and guide
practitioners. ical
Supporting institution and capacity building and
assistance to ensure providing techn ing
implementation at the field
programs, toolkits and other direct assistance. level through ran
INTERNATIONAL CORPORATE GOVERNANCE NETWORK (ICGN)

013. Brietly discuss the scope of work of the international corporate
governance network (ICGN). [December 2014, 5 Marks]
OR
Describe the role of international corporate governance network (ICGN)
governed by the ICGN memorandum and article of associations.
OR
With what mission, International Corporate Governance Network (ICGN)
was incorporated? Describe the purpose of the ICGN.
not-for-
Ans. Thelnternational Corporate Governance Network( ICGN') is a
under
profit company limited by guarantee and not having share capital
the laws of England and Wales founded in 1995.
ICGN's mission is to promote effective standards of corporate governance
sustainable
and investor stewardship to advance efficient markets and
economies worldwide.
ICGN's positions are guided by the ICGN Global Governance Principles
and Global Stewardship Principles, which were first published in 2003, as
a statement on shareholder stewardship responsibilities both of which are
implemented by:
Influence policy by providing a reliable source of investor opinion on
governance and stewardship.
Connect peers at global events to enhance dialogue between companies
and investors around long term value creation.
Inform dialogue through education to enhance the professionalism
of governance and stewardship practices.
Membership of ICGN
Membership of ICGN is open tothose whoare committed to the development
explains the benefits
Ogood corporate governance. The MembershipsectionhoW
membership, the dilferent ot membership and
types tojoin the ICGN.
he Institute of Company Secretaries of India is a member ot ICGN.
t has four primary purposes:
the exchange of views and
To provide an investor-led network for
ntormation about corporate governance issues internationally.
1 0 examine corporate governance principles and practices.
3. To develop and encourage adherence to corporate governance stan

dards and guidelines.
4. To generally promote good corporate governance.
EUROPEAN CORPORATE GOVERNANCE INSTITUTE (ECGI)
014. How academicians legislators and professionals are joining hands

to improve the corporate scenario throughout the affected world.
Ans. Academicians, Legislators and Professionals are joining hands
throughout the world to improve corporate scenario. World over, a
consultative stakeholder centric approach is being adopted before
introducing any new law or regulation. Companies are encouraged to
be more self-governed and professionals are being tasked with ensuring
the compliance of laws. Various of profit and non-profit associations are
working in order to ensure good corporate performance.
European Corporate Governance Institute (ECGI)
The European Corporate Governance Institute (ECGI), an International
Scientific Non-Profit Association has been established to improve Corporate
Governance through fostering independent scientific research and related
activities. It emphasizes on:-
Providing a forum for debate and dialogue between academicians,
legislators and practitioners, focusing on major Corporate Governance
issues and thereby promoting best practice.
Advising on the formulation of Corporate Governance policy and
development of best practice and undertakes any other activity that
will improve understanding and exercise of corporate governance.
Acting as a focal point for academicians working on Corporate Gover-
nance in Europe and elsewhere, encouraging the interaction between
the different disciplines such as Economics, Law, Finance and Man-
agement.
ASIAN CORPORATE GOVERNANCE ASSOCIATION (ACGA)
Q15. Describe brlefly the following; scope of work of the Aslan Corporate
Governance Association. June 2010, 3 Marks
OR
What is Asian Corporate Governance Association (ACGA)? Discuss the
scope of work in ACGA. June 2018, 5 Marks]
ns.The AsiancorpOrateGovernance Association (ACGA)is an independent,

Ans
D o f i t membership organisation dedicated to working with investors,
mpanies and regulators in the implementation of effective corporate
comp
eOvenance practices throughout Asia.

Formation of ACGA
ACGA was founded in 1999 from a belief that corporate governance
and
is fundamental to the long-term development of Asian economies
capital markets. It was founded by a network of sponsors and corpo
rate members, including leading pension and investment
funds, other
financial institutions, listed companies, multinational corporations,
professional firms and educational institutions.
It is incorporated under the laws of Hong Kong and is managed
by
a secretariat based there. Its governing
Council comprises directors
from around Asia.
Scope of work of ACGA

ACGA's scope of work covers three areas:
across
I. Research: Tracking corporate governance developments
of new
11 markets in Asia and producing independent analysis
laws and regulations, investor activism and corporate practices.
constructive dialogue with financial
I. Advocacy: Engaging in a
and institutional investors and c o m -
regulators, stock exchanges environment
the regulatory
panies on practical issues affecting practices
governance
and theimplementation of better corporate
in Asia.
conferences and seminarsthat foster a
M. Education: Organizing
the competitive benefits of sound cor
deeper understanding of
it effectively.
porate and ways to implement

INTEGRATED REPORTING
COUNCIL (URC)
NTERNATIONAL
enhance and support the work that
. The IIRC seeks to build upon, framework.
to achieve a reporting
been done to date, and is ongoing,
D
Elucidate.
enhance and support the work that has
Ans.
he IIRC seeks to build upon, tramework that:
is ongoing, to achieve a reporting
C done to date, and
Comnmunicates the organization's strategy, business model, perfor.

mance and plans against the background of the context in which it
operates.
Provides a coherent framework within which market and regulatory
driven reporting requirements can be integrated.

I s internationally agreed, so as to encourage convergence of approach
information presented.
and hence more ready understanding of
Reflects the use of and effect on all of the resources and relationships
or "capitals" (human, natural and social as well as tinancial, manufac
tured and intellectual) on which the organization and society depend
for prosperity.
Reflects and communicates the interdependencies between thesuccess
of the organization and the value it creates for investors, employees,
customers and, more broadly, society.
12 RISK MANAGEMENT
CHAPTE R
INTRODUCTION
1. The risk evaluation process requires a mathematical approach and

considerable data on the past losses. Comment 2015, 5
June Marks]1
Ans. The risk measurement process requires a mathematical approach and
considerable data on the past losses. The data available trom the
itself may not be adequate enough to lend itself amenable to analytical
concern
exercise. Hence, it becomes necessary to resort to data on industry basis,
at national and sometimes even at international level.
Risk evaluation includes the determination of the:
Probability or chances that losses will occur.
Impact the losses would have upon the financial affairs of the firm
should they occur.
Ability to predict the losses that will actually occur during the budget
period.
There are various statistical methods of quantifying risks. But the statistical
methods are too technical and the risk manager then relies on his judgment.
Risks are classified as modest, medium, severe etc. In either event, a 'risk
matrix' can be prepared which essentially classifies the risks according to
their frequency and severity.
CLASSIFICATION OF RISKS utoso13t0 eaiiiunaeho statbona

92. What is Systematic Risk and Unsystematic Risk? Give examples.
s . The concept of Systematic and Unsystematic risk may be explained
as under:
12.1
12.2 RISK MANAGEMENT
S. SYSTEMATIC RISKK UNSYSTEMATIC RISK

No.
1. It is not fully uncontrollable by an | It is usually controllable by an
organisation. ganisation. or
.It is not entirely predictable. It is
reasonably predictable.
3. lt is usually of a macro nature. It is
normally micro in nature.
It usually affects a large number | If not managed it directly affects the
of organisations operating under a | individual organisation first.
similar stream.
5. It cannot be fully assessed and antic-
| It can be usually assessed well in
ipated in advance in terms of timing | advance with reasonable efforts
and gravity. and risk mitigation can be
with planned
proper understanding and risk
assessment techniques.
6. The example of such
type of risks The examples of such risk are Com-
is Interest Rate Risk, Market
Risk, pliance risk, Credit Risk,
Purchasing Power Risk. Risk. Operational
03.Liquidity and Solvency are altogether different.Do you
the types of
liquidity risk. agree? Discuss
Ans. Solvency
signifies the capability of the organization to its debt and
dues. It represents the financial pay
the liquidity risk arises due to soundness of the organization. Whereas
mis-matches in the cash flow ie. absence of
adequate funds. Liquidity is altogether different from the word
position as per the balance sheet, but if thesolvency
A firm may be in sound
current
assets are not in the form of cashor near cash assets, the firm
payment to the creditors which adversely affect the may not make
Types of Liquidity Risk reputation of the firm.
The liquidity risk may be of two types, trading risk and
Trading Risk: It may mean the absence of the funding
risk:
a.
products or securities etc. to actually undertake liquidity or enougn
e.g. in the context of securities buy and sell activities

tive transactions with trading inability to enter into derivä
counter parties or make sales or
securities. purchase of
b. Funding Risk: It refers to
the inability to meet the
inability to manage funds by either obligations es
securities. It arises where the balanceborrowing or the sale ot ets/
asse
sheet of a firm contains i d
financial assets which cannot be turned into cash within a very sihort
time.
RISK MANAGEMENT
12.3
Therefore, it can be stated that Liquidity and Solvency are two
ent aspects. differ
n4, What are the major financial risks which may adversely affect an
organization?
[June 2017, 5 Marks]1
Ans, The risk which has some financial impact on the business
entity is
treated as financial risk. The major financial risks which may adversely
affect an organisation are as follows:
Market Risk: This type of risk is associated with market ups and down.
The market risks may be Absolute Risk (when it can be measured in
rupee/currency term) and Relative Risk (relative to bench mark in-
dex). Hence the market risk may be defined as the risk to a firm due
to the adverse changes in interest rates,
currency rates, equity prices
and commodity prices.
a Interest Rate Risk: The financial assets which are connected with
interest factors such as bonds/debentures, faces the interest rate
risk. Interest rate risk adversely affects value of fixed income
securities. Any increase in the interest reduces the price of bonds
and debts instruments in debt market and vice versa
b. Currency Risk: The volatility in the currency rates is called the
currency risk. Theserisks affect the firmswhich have international
operations of business and the quantum of the risk depends on
the nature and extent of transactions with the external market.
c. Equity Risk: It means the depreciation in one's investment due
to the change in market index. Beta of a stock tells us the market
risk of that stock and it is associated with the day-to-day
fluctu
ations in the market.
d Commodity Risk: This type of risk is associated with the absolute
changes in the price of the commodity. Since commodities are
physical assets, hence the prices are changed on account of the
demand and supply factor
Credit Risk: When a counter party is unable or unwilling to fulfil their
Contractual obligation, the credit risk arises. This type of risk is related
to the probability of default and recovery date.
12.4 RISK MANAGEMENTT
RISK MANAGEMENT AND CORPORATE GOVERNANCEt

and corporate goy.
05. Discuss in brief the following; Risk management
ernance are inseparable. June 2014,2 Marks
Ans. Risk management is the culmination
of decision taken to improve
that actively manage their risk
corporate governance. Organizations
and preventing major
have a better chance of achieving their objectives
problemshappening. Thus, risk management and corporate governance
are inseparable.
06. Whether Risk Management and Corporate Governance Principles

have any relations? Explain. June 2019, 5 Marks
Ans. Risk management and corporate governance principles are strongly
interrelated. An organization implements strategies in order to reach their
goals. Each strategy has related risks that must be managed in order to
meet these goals.
Risk
Risk is an important element of corporate functioning and governance.
There should be a clearly established process of identifying, analyzing
and treating risks, which could prevent the company from effectively
achieving its objectives.
The Board has the ultimate responsibility for identifying major risks to
the organization, setting acceptable levels of risk and that appropriate
risk management systems and procedure are in place to identity and
manage risks.
Risk governance
Good risk governance provides clearly defined accountability, au-
thority, and communication/reporting mechanisms. The board sha
have to identity the extent and type of risks it faces and the planning
necessary to manage and mitigate the same for ensuring growth tor
the benefit of all the stakeholders.
Corporate governance
Corporate governance concerns the relationships among the manage
ment, board of directors, controlling shareholders, minority sharehold-
ers,andother stakeholders. Good corporate governance contributes
sustainable economic development by enhancing the performance o
companies and increasing their access to foreign capital. Incorporating
risk management in corporate governance of an organisation is vely
important.
RISK MANAGEMENT 12.5
OECD Principles of Corporate Governance

The sixth principle of OECD Principles of Corporate Governance deals
with the responsibilities of the board with respect to Risk Management
and provides-
The board should fultil certain key functions, including revicwing and
guiding corporate strategy, major plans of action, risk managemcnt
policies and procedures, annual budgets and business plans; setting
performance objectives; monitoring implementation and corporate
performance; and overseeing major capital expenditures, acquisitions
and divestitures.
Ensuring the integrity ot the corporation's accounting and financial

reporting systems, including the independent audit, and that appro-
priate systems ot control are in place, in particular, systems for risk
management, financial and operational control, and compliance with
the law and relevant standards.
ADVANTAGES OF RISK MANAGEMENT
07. Write short on the following; Importance of risk management in

companies. June 2014, 3 Marks]
Ans. "Risk Management' is a process which aims to assist organisations to
identify, understand, evaluate and take action on their risks with a view
to increasing the probability of their success and reducing the impact and
likelihood of failure.
Importance of risk management:
Effective risk management gives comfort toshareholders, cus-
tomers, employees, other stakeholders and society at large that
a business is
being effectively managed.
I t helps the company or organisation confirm its compliance
with corporate governance requirements. Risk management is
relevant to all organisations large or small.
Effective risk management practices support accountability, per-
tormance measurement and reward and can enable etficiency
at all levels
through the organisation.
Effective Risk Management
management requires a detailed knowledge and understanding
the organization (both internal and external) and the processes
Involved in the business.
RISK MANAGEMENT
12.6
manage risk,
and seize the opportunity within evo
To effectively of business dimensic
challenge, institutions must manage a varicty
maximizing digital capabilitinc
today's world they must focus
on
In
fluid collaboration, develoni
building ongoing expertise, driving ping
top-notch analytics and fostering
a risk culture that can withstand
disruptive change.
Better risk management techniques provide early warning signals
so that the same may addressed in time. In traditional concept the
natural calamities like fire, ecarthquake, flood, etc. were only treated
as risk and keeping the safe guard equipments etc. were assumed to
have mitigated the risk.
08. Briefly comment on the following statement; Well defined and im-
plemented risk management polices has many potential advantages to an
organization. June 2016, 2 Marks]
Ans. The key advantages of having risk management are as under:
Risk Management in the long run always results in significant cost
savings and prevents wastage of time and effort in firefighting. It
develops robust contingency planning.
I t can help plan and prepare for the opportunities that unravel during
the course of a project or business.
Risk Management improvesstrategic and business planning. It reduces
costs by limiting legal action or preventing breakages.
I t establishes improved reliability among the stakeholders leading to
an enhanced reputation.
Sound Risk Management practices reassure key stakeholdersthrough
out the organization.
STEPS FOR RISK MANAGEMENT
09. What is risk? Discuss various phases of risk management cycle.

the
Ans.
'Risk refers to variations the
in outcomes that could occur ovet
a specified period in a given situation. If only one outcome is possible, the
variation and hence the risk is zero. If many outcomes are possible, the risk
is not zero. The greater the variation, the greater the risk.
Risk may also be defined as the possibility that an event will occur and
adversely affect the achievement of the company's objective and goas.
RIsiness risk' is the threat that an event of action will adversely affect an
oranisation's abilityto achieve its business objcctive/targets. Business risk
arises as much trom the possibility that opportunities
will not be realized
as
a s much rom the lact that certain threats could well materialise and that
could well be made.
errors
under:
The risk management cycle is an
ldentification
(i) Assesses
(a) Evaluate the risk

risk and select
(b) Identify suitable responses to
(c) Plan and resources

(d) Implement, monitor and report
010. "Unit and unless risks are properly managed they may cause sever
would
loss to the business." In the context of this, discuss what steps you
ike to take for the proper management of the risks of your business.
Ans. Risks, if not managed properly may cause severe damage to the
organisations and therefore almost all organisations develop sequential
process to deal with risks.
The steps every business should take for the proper management of risk
of business are as under:
1. Identification of risk: It is the first phase of the risk management
process. The origin/source of the risk is identified.
2. Assessment of risk: After identifying the origin of the risk the second
step is assessment of the risk. A business organisation faces various
threats and vulnerabilities that may affect its operation or the fulfil-
ment of its objectives. Therefore, the quantum and severity of risk
involved is assessed.
3. Analysing and evaluating the risk: It is the third step where the risk
is analysed and evaluated. The risk analysis involves thorough exanm-
ination of the risk sources, its positive and negative consequences, the
likelihood of the consequences that may occur and the factors that
affect them and assessIment of any existing controls or processes that
lend to minimize negative risks or enhance positive risks.
Handling of risk: The ownershipofrisk should be allocated. The persons
concerned when the risk arises, should document it and report it to
the higher ups in order to have the early measures to get it minimized.
KIsk may be handled in the following ways:
eti
i. Risk Avoidance
ii. Risk Retention/absorption - it may be active or positive
ii. Risk Reduction

i. Risk Transfer
5. Implementations of decision: The last step in the risk management
process is the implementation of the decision. It is recommended to
the Board or the organization to use various alternatives of tackling
the risks. After getting it approved, initiate measures to implement it.
011. Risk management is a structured consistent and continuous process

applied across the organization for the identification and assessment of
risks control assessment and exposure monitoring. In the light of the
statement discuss the risk management process and advantages of risk
management. [December 2014, 6 Marks]
Ans. Risk management is a structured, consistent and continuous process,
applied across the organisation for the identification and assessment of
risks, control assessment and exposure monitoring.
Objectives of the Company's risk management framework
The objectives of the Company's risk management framework com-
prise the following:
a. To identify, assess, prioritise and manage existing as well as new
risks in a planned and coordinated manner.
b. To increase the effectiveness of internal and external
reporting
structure.
c. To develop a risk culture that
encourages employees to identity
risks and associated opportunities and respond to them with
appropriate actions.
Advantages of Risk Management
Properly implemented risk management has many potential advan-
tages to an organization in the form of:
a. Better informed decision making- for example in assessing new
opportunities.
b. Less chance of major problems in new and ongoing activities.
C. Increased likelihood of achieving corporate objectives.
012. What are the different dimenslons of identifying threats in Risk
Analysis process? In a company there is a probability of increase of 40%
cost of raw material from present level of R 10 crores. What shall be risk
value of cost of production ? olot oii el trJune 2019, 5 Marks]
Thereare various stages in risk management process. After identification

the risk which
Ans.
the second stage is of analyzing

she risk parameters,
ac1o identily and manage potential problems that could underrmine
ness initiatives or projects.
Risk Analysis
Risk Analysis, first the possible threats are identified and then
ncarry Out a
ikelihood that these threats will materialize is estimated. The analysis
hould be objective and should be industry specific.
identify risks threats both existing
The first step in Risk Analysis is to or
and possible which may pertain to:

individual.
Human: IIlness, death, injury, or other loss of a key
Operational: Disruption to supplies and operations, loss of access to
essential assets, or failures in distribution.

Reputational: Loss of customer or employee confidence, or damage
to market reputation.
Procedural: Failures of accountability, internal systems, or controls,
or from fraud.
Project: Going over budget, taking too long on key tasks, or experi-
encing issues with product or service quality.
Financial: Business failure, stock market fluctuations, interest rate
changes, or non-availability of funding.
Technical: Advances in technology, or from technical failure.
Natural: Weather, natural disasters, or disease.
Political: Changes in tax, public opinion, government policy, or foreign
influence.
Structural: Dangerous chemicals, poor lighting, falling boxes, or any
situation where staff, products, or technology can be harmed.
There is a probability of increase of 40% of price rise in the raw material.
f this happens, it will increase the cost of production in the next year. So,
the risk value of the cost of the production can be derived by the following
formula:
ISk value= Probability of event X Cost of event
By, putting the values
sK value=0.40 (Probability of event) X F 10 Crores (Cost of event) = 7 4
Crores
13. Your company is office

running its corporate
a
in rented bust.
premises. The Landlord of the building has increased the rent
companies and there are 80% chances of increase in the rent of the o
ofsiness
oother
occupied by your company within the next year. If this happens,it
cost your business an extra 7 5,00,000 over the next year.
Calculate th
risk value.
December 2019, 5 Markl
Ans. The formula for calculating the Risk Value is:
Risk Value =
Probability of EventX Cost of Event
By putting the values, we get:
0.80 (Probability of Event) x 7 500, O00
(Cost of Event) =7
4,00,000 (Risk
Value)
Q14. Point out the situations where the Risk Analysis may be useful.
une 2019, 5 Marks
Ans. Risk management
process comprises of fivestages. Afteridentification
of the risk parameters, the second
stage is of analyzing the risk which
helps to identify and manage potential problems that could undermine
key business initiatives or projects.
Process of Risk Analysis
To carry out Risk Analysis, first the
a
then estimate the likelihood that these possible threats are identified and
threats will materialize. The analysis
should be objective and should be
scenario based analysis may be
industry specific. Within the industry, the
events that may occur and its
adopted taking into consideration of possible
alternative ways to achieve the
Risk Analysis can be given target.
complex, as it
such as project plans, financial requires draw on detailed information
to
data, security protocols, marketing
and other relevant information.
However, it is an essential
forecasts
and one that could save time, planning too
money and reputations.
Risk analysis can
be useful in
many situations like:
1. While
planning projects, to help in anticipating and
sible problems. neutralizing PU
2. While deciding whether or not to move forward with a
3. While improving safety and managing potential risks in theprojec.
4. While preparing for events
such as equipment or
workpla
theft, staff sickness, or natural disasters. technology failue
5. While planning for
changes in environment, such as new titors
coming into the market, or changes to compe
government policy.
HANDLING OF RISK
015. Companies are not entirely free to decide on how they shalil handle
thetr risks. Discuss this statement in the light of prescribed regulation of
the SEBI (Listing Obligation & Disclosure Requirements) Regulations,
2015. June 2012, 6 Marks]
Ans. Risk can be handled in the following ways:
. Risk Avoidance: Risk Avoidance means to avoid taking or choosing
of less risky business/project. For example one may avoid investing
in stock market due to price volatility in stock prices and may prefer
to invest in debt instruments.
2. Risk Retention/absorption: It is the handling the unavoidable risk
internally and the firm bears/absorbs it due to the fact that either
because insurance cannot be purchased of such type of risk or it may
be of too expensive to cover the risk and much more cost-effective to
handle the risk internally. Usually, retained risks occur with greater
frequency, but have a lower severity. An insurance deductible is a
common example ot risk retention to save money, since a deductible
is a limited risk that can save.
There are two types of retention methods for containing losses as
under:
a Active Risk Retention: Where the isk is retained as part of
deliberate management strategy after conscious evaluation of
possible losses and causes.
b. Passive Risk Retention: Where risk retention occurred through
negligence. Such type of retaining risk is unknown or because the
risk taker either does not know the risk or considers it a lesser
risk than it actually is.
3. Risk Reduction: In many ways physical risk reduction is the best way
of dealing with any risk situation and usually it is possible to take steps
to reduce the probability of loss.
It is done at the planning stage of any new projectavhen considerable
improvement can be achieved at little or no extra cost.
4. Risk Transfer: This refers legal assignment of cost of certain
to po
tential losses to another. The insurance of risks' is to occupy an im
portant place, as it deals with those risks that could be transferred to
an organization that specialises in accepting them, at a price. Usually,
there are 3 major means of loss transter viz,
a By Tort
RISK MANAGEMENT
12.12
b. By contract other than insurance

C. By contract of insurance
Q16."The rapidly growing global economy has created an expandingar

of risks to be managed to ensure the viability and success of an enterprise
array
Discuss the statement enumerating classes of risk and the ways of ist
handling. [Decembe 2010, 5 Mark
Ans. Risk may be summarized as hereunder:
1. Credit Risks 6. System Risks
2. Industry and Services Risks 7. Management and Operation Risks -
3. Legal Risks 8. Market Risks

4. Liquidity Risks 9. Political Risks
5. Disaster Risks 10. Non compliance and related risks
2
Risk can be handled broadly in four ways:

1. Risk Avoidance
2. Risk Reduction
3. Risk Retention
4. Risk Transfer
017. What is risk retention? Distinguish between risk retention and risk
transfer. [June 2011, 5 Marks]
OR
Describe and differentiate risk reduction and risk retention.
June 2010, 6 Marks
Ans.
Risk reduction
Risk reduction means prevention of loss by taking steps to
the probability of loss. The ideal time to think of risk
reduce
reductiol
measures is at the planning stage of any new project when co
siderable improvement can be achieved at little or no extra OSt.
co
It is the best way of dealing with
any risk. Risk prevention sn
be evaluated in the same way as other investment
will save a lotof cost and energy
projects
at a later stage.
Risk retention
"Risk retention" is the process of handling the unavoidabie
risk
internally. The firm bears/absorbs the risk due to the tacte

insurance of such a type of risk cannot be purchased or
nay
be too expensive to cover the risk and much more cost-effective

to handle the risk internally.
Retained risks occur with greater frequency, but have a lower
severity.
Methods of risk retention
There are two types of retention methods for containing losses
as under:
() Active Risk Retention: Where the risk is retained as part of

deliberate management strategy after conscious evaluation
of possible losses and causes.
(i) Passive Risk Retention: Where risk retention occurred

through negligence. Such type of retaining risk is unknown
or because the risk taker either does not know the risk or
considers it a lesser risk than it actually is.
RISK MITIGATION STRATEGY
Q18. Discuss in brief the following; Risk management.

June 2014, 3 Marks]
Ans.Risk is an important element ofcorporate functioning and governance

There should be a clearly established process of identikying, analyzing and
treating risks, which could prevent the company trom ettectively achieving
its objectives.
It also involves establishing a link between risk return and resourcing
priorities. Appropriate controlprocedures in the torm ot a risk management
The
plan must be put in place to manage risk throughout the organization.
plan should cover activities as diverse as review of operating pertormance,
elfective use of information technology, contracting out and outsourcing.
FRAUD RISK MANAGEMENT

01
.While conducting the Audit, Secretarial Auditor found
that by forged
had transferred huge amount in dummy account.
SRure, accountant
on fraud,
MeWas a big financial scam in the organization. Reporting detect and
anagement has desired that a Risk Management Policy to
ontrol the Fraud be

prepared.
Being a Compa
in F mpany Secretary, point
out the major aspects to be included
Fraud RiskManagement Policy. [June 2019, 5 Marks]
Ans. The management should be pro-active in fraud related matte.

fraud is usually not detected until and unless it is unearthed. A Fraud R."
Managenment Policy should be incorporated, aligned to its internal contRisk
and risk management. The Fraud Risk Management Policy will heto.
ntrol
to
strengthen the existing anti-fraud controls by raising the awareness aC
Icross
the company and promote an open and transparent communication cultu
It would also promote zero tolerance to fraud/misconduct and encoura
employees to report suspicious cases of traud/misconduct. The polic
would spread awareness amongst employees and educate them on risk
faced by the company.
The major aspects to be included in Fraud Risk Management Policy are-
1. Defining fraud: This shall cover activities which the company would
consider as fraudulent.
2.
Defining Role & responsibilities: The policy may define the respon
sibilities of the officers who shall be involved in effective prevention,
detection, monitoring & investigation of fraud. The company may
also consider constituting a committee or operational structure that
shall ensure an effective implementation of anti-fraud strategy of the
company. This shall ensure etfective investigation in traud cases and
prompt as well as accurate reporting of fraud cases to appropriate
regulatory and law enforcement authorities.
3. Communication channel: Encourage employees to report
suspicious
cases of fraud/misconduct. Any with
person knowledge suspect.
of
ed or confirmed incident of fraud/misconduct must report the case
immediately through effective and efficient communication channe!
or mechanism.
4. Disciplinary action: After due investigations disciplinary action againat
the fraudster may be considered as per the
company's policy.
5. Reviewing the policy: The employees should educate their team
members on the importance of complying with
Company's policies
& procedures and identilying/reporting of
suspicious activity, wnete
uation arises. Based on the
reviewed on periodical basis.
developments, the policy should
020. Write short note on the following; Fraud risk management.

Ans. The fraud risk management policy will help to:
1. Strengthen the existing anti-fraud controls by raising the awarcness
across the company.
Promote an open and transparent communication culture.

Promotc zcro tolerance to fraud/misconduct.
4. Encourage employeestoreport suspicious cases of fraud/misconduct.
5. Spread awareness amongst employces and educate them on risks
faced by the company.
Such a policy may include the following:
a. Defining fraud
b. Defining Role & responsibilities
c Communication channel
d Disciplinary action
e.Reviewingthe policy
REPORTINGOF FRAUD UNDER COMPANIES ACT,2013

021. Write the relevant provisions of the Companies Act, 2013 relating to
the reporting of fraud. December 2019, 5 Marks]
Ans. Following are the provisions related to reporting of fraud under
Companies Act, 2013:
Section 143(12) of the Companies Act, 2013 read with Rule 13 of
the Companies (Audit and Auditors) Rules, 2014 provides that if an
auditor of a company in the course ot the pertormance ot his duties
as auditor, has reason to believe that an offence of fraud involving an
amount of rupees one crore or above, is being or has been committed
in the company by its officers or employees, the auditor shall report
the matter to the Central Government.
Rule 13(2) of Companies (Audit and Auditors) Rules, 2014 provides
that the auditor shall report the matter to the Central Government as
under:
Reporting the matterto the Board/Audit Committee immediately
but not later than two days of his knowledge of the fraud, seeking
their reply or observations within 45 days.
On receipt of such reply or observations, the auditor shall for
ward his report and the reply or observations of the Board/Audit
Committee along with his comments to the Central Government
within 15 days from the date of receipt of such reply or observa-
tions.
In case the auditor fails to get any reply or observations from the
Board/Audit Committee within the stipulated period of 45 days,
RISK MANAGEMENT
12.16
he shall forward his report to the Central Government alongw
with
a note containing the details
of his report.
The report shall be sent to the Secretary, Ministry of Corpora
rate
Affairs in a sealed cover by Registercd Post with Acknowled
ment Due or by Speed Post followed by an e-mail in confirmati
ion
of the same.
The report shall be on the letter-head of the auditor containin
postal address, email address and contact telephone numberor
mobile number and be signed by the auditor with his seal and
shall indicate his Membership Number.
The report shall be in the form of a statement as specified in
Form ADT4.
Fraud value less than one crore:
Rule 13(3) of Companies (Audit and Auditors) Rules, 2014 further
states that in case of a fraud involving lesser than
one crore
rupees,
the auditor shall report the matter to Audit Committee/Board im-
mediately but not later than two days of his knowledge of the fraud
and he shall report the matter specifying the nature of Fraud with
description, approximate amount involved; and Parties involved and
the same shall also be disclosed in the Board's
Report.
Penal Provisions
The person guilty of the offence shall be
punishable with fine which
shall not be less than one lakh rupees but which
may extend to twen-
ty-five lakh rupees.
REPUTATION RISK MANAGEMENT
Q22. Discuss briefly the following: Reputation risk.

OR
Elucidate the following; Reputational risk management.
June 2016, 5 Marks]
Ans. The Reserve Bank of India in its
Master Circular dated July 1, 20O1
has defined the Reputation Risk as:
The risk arising from negative perception on the part
parties, shareholders, investors, debt-holders, of customers, counler
parties or regulators that can marketanalysts; other relevan
adversely affect a bank's ability to mainta
blish
enisting, or establis new, business relationships and continued access to
sources offunding
ihe interbank securitisation markets.
For example: through
or
Reputational Risk Management

For managing the reputation risk, the following principles are worth noting:
Integration of risk while formulating business strategy.
Effective board oversight.
Image building through effective communication.
Promoting compliance culture to have good governance.
Persistently following up the Corporate Values.
Due care, interaction and feedback from the stakeholders.
Strong internal checks and control.

Peer review and evaluating the company's performance.
Quality report/newsletter publication.
Cultural alignment.
RESPONSIBILITY OF RISK MANAGEMENT
023. You are the company secretary of Nodal Power Company Ltd your
board of directors wants to understand its responsibilities for reviewing
the company's policies on risk oversight and management in the light of
SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015
and satisfy itself whether the management has developed and implemented
a sound system of risk management and control.
Prepare board note discussing the responsibilities of the board on risk
management and the relevant provisions on risk management under SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015.
To,
Ihe Board of Directors
Nodal Power Company Limited
Sub: Responsibility of Board of Directors on Risk Management
Dear Sir,
pertinent to note that following are the legal of risk
is
nanagement under SEBI (LODR) Regulations 2015.
provisions
RISK MANAGEMENT
12.18
SEBL LoDR) Regulations, 2015 provIdes that company shall

down procedures toinform Board members about the risk lay
assess
ment and minimization procedures. The Board shall be responsil
for framing, implementing and monitoring the risk management
pl
for the company.
The Risk Management Plan must include all elements of risks. TH
traditional elements of potential likelihood and potential consequenee
of an event must be combined with other factors like the
the risks, the correlation of the possibility ol an event
timing
others, and the confidence in risk estimates. occurring with
Risk management policies should retlect the
company's risk profile
and should clearly describe all elements ot
the risk management and
internal control system and any internal audit function.
A company's risk management policies should clearly describe the
roles and accountabilities of the board, audit
committee, or other
appropriate board committee, management and any internal audit
function.
A company should have identified Chief Risk Officer manned
individual with the vision and the by an
diplomatic skills to forge a new
approach. He may be supported by "risk groups" to oversee the initial
assessment work and to continue the work till it is
completed.
Regulation 21 of SEBI(LODR) Regulations, 2015, requires that every
listed company should have Risk
a
Management Committee.
ROLE OF cOMPANY SECRETARY IN RISK
MANAGEMENT
Q24. A company secretary can play a significant role in ensuring that a
sound enterprise risk management
the company is in place explain.
(ERM) which is effective throughout
OR
Briefly comment on the following; Role of company
risk management efforts in the secretary in evaluating
organization significant. June
is 2014)
[June 2014
OR
Discuss the role of company secretary in addressing risk management.
June 2013, 5 Marks]1
OR
Write a note on the following; Role of company
secretary in ensuring ris
management. June 2010, 5 MarkS
The company sec

ccrclaries are governance professionals whose role
Anforce a compliance framework to safeguard the integrity of the
anization and to promote high standards of ethical behaviour. Following
are t h e r f u n c t i o n s :
Advising on best practice in governance, risk management and com-

pliance.
Championing the compliance Iramework to safeguard organizational
integrity.
Promoting and acting as a 'sounding board' on standards of ethical
and corporate behaviour.
Balancing the interests of the Board or governing body,managem
and other stakeholders.
In terms of Section 203(1)(ii) of Companies Act, 2013, a Company Secre-

Person. Hence being a top level officer and board
tarv is a Key Managerial
a sound
confidant, a Company Secretary can play a role in ensuring that
Enterprise wide Risk Management [ERM] which is effective throug
the company is in place.
RISK MANAGEMENT
IS0 31000: INTERNATIONAL STANDARD FOR
025. Answer the following in brief; Write a note onIS0 31000.

June 2017, 2 Marks]
Ans.IS0 31000 published on the13th of November, 2009,providesastandard

on the implementation of risk management. ISO 31000 seeks to provide a
universally recognized paradigm for practitioners and companies employing
nisk management processes. ISO 31000 contains 11 key principles that
position risk management as a fundamental process in the success of the
organization.
13 INTERNAL CONTROL
CHAPTER
INTRODUCTION TO INTERNAL CONTROL

01. Write short note on the following; Internal control.
OR
Elucidate the following; Internal control.
Ans. According to Merriam-Webster Internal Control means:
"a system or plan of accounting and financial organization within
a business comprising all the methods and measures necessary for
safeguarding its assets, checking the accuracy of its accounting data
or otherwise substantiating its financial statements, and policing pre
viously adopted rules, procedures, and policies as to compliance and
effectiveness".
According to The Standard on Auditing 315 (SA 315) the nature of the
internal control depicts the following:
Internal control is a processdesigned, implemented and maintained by
those charged with the governance, management and other personnel.
I t provides reasonable assurance about the achievement of an entity's
objectives in the categories of financial reporting, efectiveness and
efficiency of operations, safeguarding of assets and compliance with
applicable laws and regulations.
Internal control at the organizational level
nternal controlobjectives attheorganizational level relate to the following:
Reliability of financial reporting
Timely feedback on the achievement of operational or strategic goals
Compliance with laws and regulations
13.1
13.2 INTERNAL CONTROL
Internal control at the specific transaction level

Internal control at the specific transaction level refers to the followino
ng
The actions taken to achieve a specific objective
Example: How to ensure the organization's payments to third partie
are for valid services rendered.
Reduction in process variation, leadingto more predictable outcomes
02. Internal control is a way for management to run a business and

integrated within the management process. Comment.
Ans. According to Investopedia, Internal controls are:-
"The mechanisms, rules, and procedures implemented by a compa:
ny to ensure the integrity of financial and accounting intormation,
promote accountability and prevent fraud. Besides complying with

laws and regulations, and preventing employees trom stealing assets
or
committing fraud, internal controls can help improve operational
efficiency by improving the accuracy and timeliness of financial re-
porting"
Objectives of Internal Control
Objective behind the establishment of the internal control are as under:
Internal Control is a policy matter, designed and implemented by the
company concerned.
It describes the rules and procedures to ensure the integrity of the
It provides the mechanism of work flow in such a manner that no
single person may carry out the process from the beginning to end.
I t ensures that work is segregated in small parts and is checked d
processed by an independent person.
I t improves operational eficiency by improving the accuracy and
timeliness of financial reporting.
I t gives a reasonable assurance about the achievement of an entitys
objectives with regard to reliability of financial reporting, effectiveness
and efticiency of operations, and compliance with applicable laws ana
regulations.
I t aids in detecting and preventing fraud and
protecting the organiZa
tion's resources.
I t reduces the process variations and
arbitrary intervention in
tn
work flow process
13.3
INTERNL CONTROI
it can be stated that

internal control is a w a y for management
herefore,
Ther
the management process.
'ln a
business and is integrated within
OF INTERNAL CONTROL
cLASSIFICATION
Control".
the scope of "Administrative
03. Explain u n e 2019, 5 Marks]
concerned
include all managerial controls
Administrative controls indirect
Administrative controls have
Ans. an
with decision making process.

with financial records.
relationship
works standards, periodic reporting, policy
For example: Quality control,
appraisal etc.
They include all
wide in their scope.
Administrative controls very
are
concerned with decision-making process. They are
managerial controls
with the authorisation of
and
transactions include:
concerned
to procedures
Anything from plan of organisation
Record keeping
of decision-making.
Distribution of authority and the process
Controls such as quality control through inspection
Performance budgeting
Responsibility accounting
Performance evaluation, etc.
in improving the
help
Thus, administrative controls are those which
recorded under the accounting
efficiency, productivity and not necessarilymethods
systems. Works standards, quality control, study and motion study
control.
are examples of administrative
COMPONENTS OF INTERNAL CONTROL
the Information System is the component of

most essential
04. Why [December 2019, 5 Marks]
Internal Control?
andhardware
ns.Aninformation system consists ofinfrastructure(physical
intormation
components), software, people, procedures, and data. Many
yems make extensive use of information technology (IT).
ne
ntormation system relevant to financial reporting objectives, which
Cudes the financial reporting system, encompasses methods and does
the following:
Identify and record all valid turansactions.
Describe on a timely basis the transactions in sufficient detail to perm

rmit
tor financal reporting.
proper classification of transactions
Measure the value of transactions in a manner that permits recordin.
their proper monetary value in the financial statements.
Determine the time period in which transactions OcCurred to permit

recording of transactions in the proper accounting period.
Present properly the transactions and related disclosures in the finan.
cial statements.
The quality of system-generated information affects management's ability
to make appropriate decisions in managing and controlling the entity's
activities and to prepare reliable financial reports.
Communication, which involves providing an understanding of individual
roles and responsibilities pertaining to internal control over financial
reporting, may take such forms as policy manuals, accounting and financial
reporting manuals, and memoranda. Communication also can be made
electronically, orally, and through the actions of management.
Thus Information System is the most essential component of Internal Control
ELEMENTS OF INTERNAL CONTROL
05. Prepare a Board note on internal control highlighting the elements of

sound internalcontrol system for a company. June 2012, 5 Marks]
Ans. Following is a Note to the Board of directors on Internal Control:
To,
XYZ Ltd.
Subject: Note on Internal Control
Dear Sir,
Internal Control is process for
a
assuring achievement of an organization
objectives in
operational effectiveness and efficiency, reliable tinanC1a
reporting, and compliance with laws, regulations and
It is a means by which
policies.
and measured. It
organization's resources are directed, monitorc
an
plays important role in detecting and preventing trau

an
and protecting the
organization's resources, both physical and intangiDic
Following are the elements of sound
internalcontrolsystem
fora company
INTERNAL CONTROL 13.5
Segregation of duties
Segregation of duties among different people allows internal checks

to take place.Itreduces the risk of intentional manipulation and error
and increases the element of checking, however it does not eliminate
the risk.
Organisational structure
The structure or pattern of an organisation includes detining and allo-
catingresponsibilities and identifying lines of reporting for all aspects
of the enterprise's operations, including the controls. The delegation
of authority and responsibility should be clearly specified.
Objectives and Policy Statements
Objectives are the aims, goals, purposes or accomplishments laid down
by the top management to be achieved by the middle and lower man
agement. Policies and procedures provides the manner of achieving
the objectives.
Authorisation and approval
All transactions should require authorisation or approval by an appro-
priate responsible person. The limits of these authorisations should
be specified.
Personnel
Proper procedures should be made that personnel have
to ensure
capabilities commensurate with their responsibilities.
(NoteiThe list is inclusive and not exhaustive)

of Sd.
iion Mr. A
Company Secretary
XYZ Ltd.
INTERNAL CHECK VERSsus INTERNAL CONTROL

used terms in
Internal check and internal control are two frequently
of Internal Check
anagement and compliance. Explain the meaning are different from
nternal Control and also mention how these two [June 2019, 5 Marks]
each other.
Ans. Internal check
internal check"is asystem
halcheck"is asys of instituting checks on the day-to-day transactions
which
O p e r a t e continuously as a part of routine system whereby
the work
INTERNAL CONTROL
13.6
complementary to the work of another, the obiect bject being

of One person is detection of errors or fraud.
the prevention or early
The objective of such allocation
of duties is that no single individual .
of transactions
dividual has
one transaction or group
an exclusive control over any ons
Internal control
"Internal control", as defined in accounting and auditing, as a procao
cess
for assuring achievement of an organization's objective in operational
effectiveness and efficiency, reliable financial reporting, and compliance
with laws, regulations and policies.

It is a means by which an organization's resources are directed, monitored
and measured. It plays an important role in detecting and preventing fraud
and protecting the organization's resources, both physical and intangible
For example:
Physical Resources: Machinery and property.
Intangible Resources: Reputationorintellectualproperty such astrademarks
Following are the differences between internal check and internal control
S. BASIS INTERNAL CHECK INTERNAL CONTROL
No.
1. MEANING Internal check refers to the Internal control is the system
way of allocating responsibili- | implemented by a company to
ty, segregation of work, where ensuretheintegrityof financial
work of the subordinates is and accounting information
checked by the immediate | and that the company is pro-
supervisors to verify that the |gressing towards fulHling its
work is carried out according prohtability and operational
to the company policies and objectives in a successtul
guidelines. manner.
2. VERIFICA One person's work is inde- It is a self-balancing mech-|
TION pendently checked by another | anism implemented by the
person(s). management, so as to ensure
that the entire work process
is divisible in parts, so that not
a single person may have the
access to complete the entire
process.
3.
IMPLEMEN Internal checks are imple- | Internal controls are designeu
TATION mented at all organizational and documented at the corpo"
levels such as tactical and
operational level.
rate management level.
BASIS INTERNAL CHECK INTERNAL CONTR0L

No.
WHEN ITIS AS soon
as one part or process | Internal Control is a policCy
DONE is completed, it is checked by decision by the management
another. and is a continuous process.
PURPOSE Sateguarding or minimizing Formulation and circulation
errors and frauds in actions of management principles
transactions andrecords, so as and policies and ettective and
toensurethe etficient running | speedy execution thereof with
ot busincss. the help of internal checking
and internal audit activities.
6 SCOPE Scope of internal check is| Wider in scope than internal

narrowercompared tointernal check.
control.
COMPONENTS OF INTERNAL CONTRoL
07. What do you understand by internal control? What are its compo
nents? June 2016, 5 Marks]
Ans. "Internal control' is defined as a process, affected by an organization's
people and information technology systems, designed tohelp the organization
accomplish specific goals or objectives.
It is a means by which an organization's resources are directed, monitored,
and measured. It plays an important role in preventing and detecting fraud
and protecting the organization's resources, both physical and intangible.
The Appendix 1 of SA 315 provides the following Internal Control
Components:
S. NO. COMPONENT| MEANING
1. Control Envi The control environment is the set of standards, pro-
ronment cesses, and structures that provide the basisfor carrying
out internal control across the organization. Control
Environment comprises of the following elements:
Communication and entorcement ofintegrityand
ethical values.
Commitment to competence.
Participation bythosechargedwith governance.
Management's philosophy and operatingstyle.
Organizational structure.
Assignment of authority and responsibility.
Human resource policies and practices.
S.NO. cOMPONENT MEANING

2. Entity's Risk Every entity laces a variety of risks trom
Assessment internal sources. Risk assessment external
Process and iterative process for involves a dvna
identifying and mic
to the achievement of objectives. assessing risks
riske
3. Information Information is necessary for the
internal control responsibilities to entity carry oOut
and Commu- to
nication ment of its support the achieve.

objectives. Communication is the continual
iterative process of providing,
sharing, and obtaining
necessary information. Internal
communication is the
meansby which information is disseminated
the throughout
organization, fHowing up, down, and across the entity
Control Activ- | Control activities are the actions
ities established
through
policies and procedures that help ensure that manage.
ment's directives
of
to
mitigate risks to the achievement
objectives are carried out. Control activities can be
carried outby the following means:-
Performance reviews
Information processing
Physical controls
5.
Monitoring Ongoing evaluations, separate evaluations,
Activities combination of the two
or some
are used to ascertain whether
eachofthefive components of internal control, including
controls to affect
is present and theprinciples within each component
functioning.
COSO'S INTERNAL CONTROL
FRAMEWORK
Q8. Write short note on the
following; CosO's internal control
[December 2014, 3 Marks] [December framework.
2010, 3 Marks
June 2013, 3 Marks)
Ans. Committee of
Sponsoring
(COSO)defines internal controlOrganizations
of the Treadway
as a
Commission
process, effected by an entity's
directors,management, and other personnel, designed to boara
assurance regarding the achievement of provide reasonadie
reporting, and compliance. objectives relating to operatio
Following are the components of Internal Control as
defined by COS0
Control environment
Risk Assessment
Control Activities
Intormation
Monitoring Activities
concepts from the definition of Internal Control by COSO can be
The
elaborated as under:
Achieving Objectives: OGeared to the achievement of objectives in one

or more separate but overlapping Categories.
A process consisting of ongoing tasks and activities: It is a means to
an end, not an end in itself.
Effected by people: It is not merely about policy and procedure man-
uals, systems, and forms, but about people and the actions they take
at every level of an organization to effect internal control.
Assurance to senior management: Able to provide reasonable assur-
ance, not absolute assurance, to an entity's senior management and
board of directors.
Adaptable to the entity structure: Flexible in application for the entire
entity or fora particular subsidiary, division, operating unit, or business
process.
09. Answer the following in brief; What are the three categories of objec
tives provided in COS0 International Control Integrated Framework?
June 2017, 2 Marks]
Ans. The COS0 International Control Integrated Framework sets forth the
following three categories of objectives, which allow organizations to focus
on separate aspects of internal control:
S No. OBJECTIVE MEANING

1. Operations These pertain to effectiveness and efficiency of the
Objectives entity's operations, including operational and financial
performance goals, and safeguarding assets against loss.
2. These pertain to internal and external hnancial and
Reporting
Objectives non-financial reporting and may encompass reliability,
timeliness, transparency, or other terms as set forth by
regulators, standard setters, or the entity's policies.
3. Compliance These pertain to adherence to laws and regulations to|
Objectives which the entity is subject.
010. Elucidate principles on Internal Control enunciated by Committee

of Sponsoring Organizations of the Treadway
Commission (COS0).
(December 2019, 5 Marks
Ans. The Committec of Sponsoring Organizations of the Treadway
Commission (COSO) had originally identified five componenis of internal
control, which became widely adopted for use in assessing the etectiveness
of internal controls.
lts more recently updated Iramework identities 17 principles mapped to
the original components. These Principles are as under:
Component 1: Control Environment
Principle 1: Demonstrates commitment to integrity and ethical values
Principle 2: Exercises oversight responsibility
Principle 3: Establishes structure, authority, and responsibility
Principle 4 Demonstrates commitment to competence
Principle 5: Enforces accountability
Component 2: Risk Assessment
Principle 6 Specifies suitable objectives
Principle 7 Identifies and analyzes risk
Principle 8 Assesses fraud risk
Principle 9 Identifies and analyzes significant change
Component 3: Control Activities
Principle 10 Selects and develops control activities
Principle 11:Selects and develops general controls over technology
Principle 12: Deploys control activities through policies and procedures
Component 4: Information & Communication
Principle 13: Uses relevant information
Principle 14: Communicates internally
Principle 15: Communicates externally
Component 5: Monitoring Activities
Principle 16 Conducts ongoing and/or separate evaluations
Principle 17. Evaluales and communicates deficiencies
INTERNAIL CONTROL 13.11
OLE AND RESPONSIBILITIES WITH REGARD TO INTERNAL CONTROL

011. Write short note on the following; CEO/CFO certification.
une 2011, 3 Marks each]
Ans. As per Regulation 17(8) of SEBI (LODR) Regulations, 2015, the
chief Executive Otficers and the Chief Financial Officers shall provide the
compliance certiticate to the Board of Directors as specified in Part Bof
Schedule I
The following compliance certificate shall be furnished by Chief Executive
officer and Chiet Financial Officer:
A. They have reviewed financial statements and the cash flow statement
for the year and that to the best of their knowledge and belief:
These statements do not contain any materially untrue statement
or omit any material fact or contain statements that might be
misleading.
These statements together presenta true and fair view of the listed
entity's affairs and are in compliance with existing accounting
standards, applicable laws and regulations.
B. There are, to the best of their knowledge and belief, no transactions
entered into by the listed entity's during the year which are fraudulent,
illegal or violative of the company's code of conduct.
C. They accept responsibility for establishing and maintaining internal
controls for financial reporting and that they have evaluated the ef-
fectiveness of internal control systems of the listed entity's pertaining
to financial reporting and they have disclosed to the auditors and
the Audit Committee, deficiencies in the design or operation of such
internal controls, if any, of which they are aware and the steps they
have taken or propose to take to rectify these deficiencies.
D. They have indicated to the auditors and the Audit committee
Significant changes in internal control over tinancial reporting
during the year.
Significant changes in accounting policies during the year and
that the same have been disclosed in the notes to the tinancial
statements.
Instances of significant fraud of which they have become aware
and the involvement therein, if any, of the management or an
employee having a signiticant role in the listed entity's internal

control system over financial reporting.
IN'TERNAL CONTR0
13.12
IMPORTANTQUESTIONS FOR EXAMINATION

CONTROL
CLASSIFICATION OF INTERNAL
note on the following; classification of internal contr

01. Write a short
Ans. Internal control can broadly be classilicd into two categories
Accounting controls/financial controls

Accounting controls comprise the plan of organisation and all meth.
ods and procedures that are concerned mainly with and relate to, the
safeguarding of assets and the reliability of the tinancial information.
For example: Maintaining inventory.
Administrative controls
Administrative controls are very wide in their scope. They include all
other managerial controls concerned with decision making process.
Administrative controls have an indirect relationship with financial
records.
For example: Ouality control, works standards, periodic reporting
policy appraisal etc.
TECHNIQUES OF INTERNAL CONTROL a f edi da
02. "A variety of internal control techniques can help prevent impropri
eties." Comment.
Ans. Variety of internal control techniques can help prevent improprieties
covering following points as mentioned below:
There should be clear division of the work.
Segregation of the work should be in such a manner that the work
done by one person is the beginning of the work for
another person.
There should be the clarity of the responsibility.
The work flow process be documented
or standardized so that the
staff may perform the work as
suggested in the work flow chart.
No single persons should be allowed to have access or control over
any important business operation.
There should be job rotation of the staff duties
Staff should be asked to go on mandatory leave
periodically.
periodically
so tna
other person may come to know if someone is playing foul with the
system.
Persons having the charge of the inmportant asscts should not be al-
lowed to have access to the books of account.
Periodical inspection of the physical assets is carricd out to ensure its
physical exislence as well in good working conditions.
METHODS OF INTERNAL CONTROL

03, What are the methods adopted for Internal Control in modern orga-
nization?
Ans. The following methods are adopted for Internal Control in modern
organization:-
Internal Check
Internal check is done by allocation of authority and work in such a
manner so as to keep a check on the day-to-day transactions which
operate continuously as part of routine system whereby the work of
one person is automatically proved independently or is complementary
to the work of another, the object being prevention or early detection
of error and frauds.
Internal Audit
Internal Audit is an:
Independent appraisal function
Established within the organization
To examine and evaluate the activities as a service to the man-
agement
T o assist the members for effective discharge of their responsi-
bilities
T o furnish with analyses, appraisals, suggestions etc.
Flow Charts
The work flow process be documented or standardized so that the
staff may perform the work as suggested in the work flow chart.
Internal Control Questionnaire
An internal control questionnaire is a document which an auditoor
provides to employees of a company beforepertorming an audit. The
guestionnaire is useful to determine which areas the audit should
Tocus on. When employees answer the questions, the auditor knows
whether the company is keeping accurate records overall, and has
evidence that shows who is responsible for which documents. The
13.14 INTERNAL CONTRO1
faster and
company reccivesthe bencfits of having a cheaper, more
internal control questionnaire.
effective audit because of the
Inter firm and Intra firm Comparisons
Inter firm comparison means a comparison

of two or more similar
the competitive position
business units with the objective of linding
to improve the protitability and productivity of those business units
the management of a
tool used by
Thus, inter firm comparison is a
and financial results
company to compare its operating performance
with those of similar companies engaged in the same industry.
You are required by the

04. You are Company Secretary of XYZ Limited.
Chairman of your company to prepare a note for the Board of directors
highlighting the main aspects of internal auditing.
Note to the Board of directors on Internal Audit:
Ans. Following is a
To,
XYZ Ltd.
Subject: Note on Internal Audit
Dear Sir,
internal audit under:
Institute of Internal Auditors has defined
as
assurance and
"Internal auditing is an independent, objective
an organization's
consultingactivity designed toadd value and improve
its objectives by
operations. It helps an organization accomplish
to evaluate and improve the
bringing a systematic, disciplined approach
effectiveness of risk management, control, and governance processes.
The following are the main aspects of internal auditing:
and
1. Review, appraisal and evaluation of the soundness, adequacy
and other operating controls.
application of financial, accounting
of information
2. Ascertaining the adequacy and reliability management
and control systems.
and compli-
3. Ascertaining the achievement of management objectives
ance with established plans, policies and procedures.
utilization and accounting
4. Ensuring proper safeguards for assets-their
thereof.
5. Detection and prevention of fraud and error.
6. Ascertaining the integrity of management data in an organisation.

7. Identitying the arcas of cost reduction, coupled with increased pro-

duction, improved productivity and improved systems.
s. Ascertaining the quality of performance and undertaking 'value for
money exercisees.
9. Compliance with statutory laws and rules including adherence to the
Companies (Auditors' Report) Order, 2003 to avoid adverse comments
from the statutory auditors.
10. Undertaking special reviews and assignmentsdirected by management
to ensure economical and efficient use of resources.
11. To provide for a channel of communicating new ideas to the top
management.
Sd.
Mr. A
Company Secretary
XYZ Ltd.
STEPS FOR INTERNAL cONTROL s l d toalb

05. What are the steps involved in an internal control mechanism?
Ans. In order to establish the internal control mechanism the following
steps should be followed:
Identify the key areas where the internal control mechanism is to be
established.
Every work flow should be so documented that it is not complete if
another person has not checked it out.
The other person's role should start when the first person's role comes
to an end.
Establish the surprise check mechanism where the money matters
are involved.
Reporting of the non-adherence of key compliance areas
Review mechanism of the control units.
Establishment of Vigil Mechanism: The organization should establish
a vigil mechanism as per the provisions of Rule 7 of the Companies
(Meetings of Board and its Powers) Rules, 2014.
INTERNAL CONTROL
13.16
LIMITATION OF INTERNAL CONTROLti

Are there any limitations of internal control? Explain.
96.
Ans. Following are the limitations of internal control:
Internal control cannot change an inherently poor manager intoa
a
good one.
Internal control cannot ensure success, or even survival in casc of shifts
government policy or programs, competitors actions or economic
conditions, since these are beyond the management's control.
Aninternal control system, no matter howwell conceived and operated,
can provide only reasonable and not absolute assurance to manage.
ment and the board regarding achievement of an entity's objectives.
The likelihood of achievement is affected by limitations inherentin
all internal control systems.
Controls can be circumvented by the collusion of twoor more people
and management has the ability to override the system.
Another limiting factor is that the design of an internal control sys
tem must retlect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.
Thus, while internal control can help an entity achieve its objectives, it is
not a panacea.
Q7. According to Regulation 18 of SEBI(LODR) Regulations, 2015 what

is the role of the audit committee and the information to be reviewed by
the audit committee?
Ans. The role of the audit committee shall include the following:
1. Oversight of the listed entity's financial reporting process and the
disclosure of its financial information to ensure that the financial
statement is correct, sufficient and credible.
2. Recommendation for appointment, remuneration and terms of ap
pointment of auditors of the listed entity.
3. Approval of payment to statutory auditors for any other services
rendered by the statutory auditors.
4. Reviewing, with the management, the quarterly hnancial statemens
before submission to the board for approval.
5. Reviewing and monitoring the auditor's independence and pertol
mance, and effectiveness of audit process.
ted
6. Approval or any subscquent modification of transactions of thelistca
entity with related parties.
7 Scrutiny ol inter-corporate loans and investments.

Note: The list above is inclusive and not exhaustive)
(N
Review of information by Audit Committee
The audit committee shall mandatorily review the following information:
1, Management discussion and analysis of financial condition and results
of operations.
2. Statenment of significant related party transactions (as defined by the
audit committee), submitted by management.
3. Management letters/letters of internal control weaknesses issued by
the statutory auditors.
4. Internal audit reports relating to internal control weaknesses.
5. The appointment, removal and terms of remuneration of the chief
internal auditor shall be subject to review by the audit committe.
6. Statement of deviations:
a. Quarterly statement of deviation(s) including report of monitoring
agency, if applicable, submitted to stock exchange(s) in terms of
Regulation 32(1).
b. Annual statement of funds utilized for purposes other than those
stated in the offer document/prospectus/notice in terms of Reg
ulation 32(7).
14 REPORTING
CHAPTER
cORPORATE SUSTAINABILITY REPORTING
01. Role of Government in Sustainability Reporting?

June 2016, 5 Marks]
OR
Attempt the following: Write note on sustainability reporting in emerging
economies. [December 2010, 5 Marks]1
Ans. 'Sustainability reporting' is a process for publicly disclosing an
organization's economic, environmerntal, and social performance. Global
Reporting Initiative (GR) has developed a generally accepted framework
to simplify report preparation and assessment, helping both reporters and
report users gain greater value from sustainability reporting.
In India, the Ministry of Corporate Affairs (MCA) recommends sustainability
reporting. Considering the importance of sustainability in businesses, MCA
had launched Corporate SocialResponsibility Voluntary Guidelines in 2009
Totake this further, in 2011 MCA issued National Voluntary Guidelines on
Social, Environmental and Economical Responsibilities of Btusiness'which
encouraged reporting on environment, social and governance issues.
S i n its (Listing Obligations and Disclosure Requirements) Regulations,
0 5 has mandated the requirement of submission of BRR for top 1000
hsted entities describing initiative taken by them from an environmental,
SOCial and governance perspective in the prescribed tormat
egulation 34(2)() of SEBI (LODR) Regulations, 2015

he annual report shall contain the following
ror the top one thousand listed entities based on market capitalization
alculated as on March 31 of every financial year), business responsibility
port describing the initiatives taken by them trom an environmental,
social and governance
frornd gov perspective, in the format as specified by the Board
trom time to time.
14.1
14.2 REPORTING
PTovided that listed entities other than top one thousand listed compani.
on market capitalization and listed
entities which have lic
Dased
their spccificd securities on SME Exchange, may include these busine
sted
ess
responsibility reports on a voluntary basis in the format as specified
CHALLENGES IN MAIN STREAMING SUSTAINABILITY REPORTING
Q2. Attempt the following; As the company secretary of sound India Itd
you are required by the chairman to prepare a note for the board of di.
rectors highlighting the following
(i) Importance of sustainability reporting
(i#) Available framework for sustainability reporting.
(i#) Challenges involved in main streamingsustainability reporting.
[December2014, 8Marks]
Ans.
(i) Importance of sustainability reporting
Internal benefits of sustainability reporting for companies and orga-
nizations can include:
Increased understanding of risks and opportunities.
Emphasizing the link between financial and non-financial per
formance.
Influencing long-term management strategy and policy, and
business plans.
External benefits of sustainability reporting can include:
Mitigating - or reversing - negative environmental, social and
governance impacts.
Improving reputation and brand loyalty.
Enabling external stakeholders to understand the organizations
true value, and tangible and intangible assets.
(i1) Sustainability report
A sustainability report is a report published by a company or organi
tion about the economic, environmental and social impacts iby
causc
its activities. A sustainability report presents the
everyday
values and governance model, and demonstrates the link
organizat
betiwee
strategy and its commitment to a sustainable global economy. ASus
tainability report is the key platform for communicating sustanab
performance and impacts - whether positive or negative.
REPORTING 14.3

n d i a . considering the importance of sustainability in businesses,
MCA had launched Corporate Social Responsibility Voluntary Guide
lines in 2009
Totake this further, in 2011 MCA issucd National Voluntary (Guidelines

l Social. Evironnnenaland EcoomicalResponsibilities of Business
which encouraged reporting on environment, social and governance
issues.
SEBI in its (Listing Obligations and Disclosure Requirements) Reg
ulations, 2015 vide Regulation 34 has mandated the requirement of
submission of BRR fortop 1000listed entities describing initiative taken
by them from an environmental, social and governance perspective
in the prescribed format.
ii) Following are the challenges in mainstreaming sustainability reporting
1. Government Encouragement: In many jurisdictions, there are
no guidelines on sustainability reporting to encourage the cor
porate sector. While on the other hand, there are voluntary as
well as mandatory guidelines from regulators for reporting on
Sustainability aspects like in India we have SEBI framework of
Business Responsibility Report.
2. Awareness: Lack of awareness about the emerging concept of
sustainability reporting is also a major challenge which the gov-
ernment and corporate governance bodies need to address by
arranging the sustainability awareness programme tor the Pro-
fessionals, Board of Directors and Management in the corporate
sector.
3. Expertise Knowledge: Sustainability Reporting is relatively a
new concept in many jurisdictions and organization found it
very difficult to prepare a sustainability report in the absence ot
expert guidance on the subject. The professional bodies in various
jurisdictions should impart the expert knowledge of sustainability
reporting to their members to develop a good cadre ot experts
in this emerging area of sustainability reporting.
4. InvestorBehaviour:It is arecognizedprinciplethat investorsshould
considerthe Environmental, Social and Governance (ESG) issues
while making investment decisions. There are specitic regulators
guidelines for the institutional investor to be vigilant on voting
aspects and be concerned about the governance practices of the
companies in which they invest.
14.4 REPORTING
KEY DRIVERS OF SuSTAINABILITY REPORTING
03. Answer the following; What are the key drivers of sustainability re.
porting? December 2016, 5 Marks] |June 2015, 5 Marks]

Ans. Sustainability reporting is a process o publicly disclosing an
organization's economic, environmental, and social pertormance. Some
of the key drivers of sustainability reporting are-
1. Regulations: Governments, at most levels have stePped up the pres.

sure on corporations to measure the impact ot their operations on
the environment. The most notable shiBt has been from voluntary to
mandatory sustainability, monitoring and reporting.
2. Customers: Public opinion and consumer preferences are a more
abstract but powerful factor that exerts considerable influence on
companies, particularly those that are consumer oriented.
3. Loyalty: This factor has led the firms to provide much more infor
mation about the products they produce, the suppliers who produce
them, and the product's environmental impact starting from creation
to consumption.
4. NGO's and the Media: Public reaction comes not just from customers
but from advocates and the media, who shape public opinion.
Employees: Those who work for a company bring particular pressure
to bear on how their employers behave; they, too, are concerned cit-
izens beyond their corporate roles.
6. Peer pressure from other companies: Each company is part of an
industry, with the peer pressures and alliances that go along with it
Matching industry standards for sustainability reporting can be a rac
tor; particularly for those who operate in the same supply chain and
have environmental or social standards they expect of their partners.
7. Companies themselves: Corporations, as public citizens, feel their own
pressure to create a credible sustainability policy, with performance
measures to back it up, but with an eye on the bottom line as wel
Increasingly, stakeholders are demanding explicit sustainability re
porting strategies and a proof of the results.
8. Investors: Investors like Institutional investors and stock exchange
CEOs have moved to request increased sustainability reporting trO
listed companies, and environmental, social and corporate governal
indices have been established such as the Dow Jones Sustainabi
Index.
REPORTING 14.5
GLOBAL REPORTING INITIATIVE - SUSTAINABILITY REPORTING FRAME

WORK
04. Explain briefly the following; Global reporting initiative (GRI).

[Decemher 2014, 3 Marks]
OR
Attempt the following; What is the main function of global reporting
initiatives? [June 2010, 5 Marks]
Ans. The GRI Standards represent global best practice for reporting
publicly on a range of economic, environmental and social impacts.
Sustainability reporting based on the Standards provides informatioon

an organization's positive o r negative contributions to
sustainable
about
development.
The modular, interrelated GRI Standards are designed primarily to be
used as a set, to prepare a sustainability report focused on material topics.
Preparing a report in accordance with the GRI Standards provides a n
inclusive picture of an organization's material topics, their related impacts
and how they are managed. An organization can also use all or part ot
selected GRI Standards to report specific information.
GRI Sustainability Reporting Standards (GRI Standards) help businesses,
governments and other organizations understand and communicate the
impact of business on critical sustainability issues.
05. "Report content should be balanced and reasonable presentation of
the organisation's performance." In the light of above statement, discuss
the steps to use the GRI Reporting Framework.
Ans. The Global Reporting Initiative (GRI) had launched the fourth
generation of itssustainability reportingguidelines: the GRIG4Sustainability
Guidelines (the Guidelines) in 2013. The aim of G4, is to help reporters
prepare sustainability reports that contain valuable intormation about the
Organization's most critical sustainability-related issues, and make such
Sustainability reporting standard practice.
Applicability
C applicable to all organizations, large and s1mall, across the world. The
deines are now presented in two parts to facilitate the identification
hporting requirements and related guidance. lt consist of following
two parts
14.6 REPORTING
Part 1- Reporting Principles and Standard Disclosures: It contains tha

reporting principles and standard disclosures and also sets out the criter
ia
to be applied by an organization to prepare its sustainability report in
accordance with the Guidelines.
Part 2 - Implementation Manual: It contains reporting and interpretative
guidance that an organization should consult when preparing ite
sustainability report
Standard Disclosures
Following are two different types of Standard Disclosures
1. GENERAL STANDARD 2. SPECIFIC STANDARD

DISCLOSURES DISCLOSURES
Strategy and Analysis Disclosures on
Management Ap-
proach
Organizational Profile
Identified Material Aspects and Indicators
Boundaries
Stakeholder Engagement
Report Profile
Governance
Ethics and Integrity
6 . What is stakeholder inclusiveness? [December 2016, 5 Marks]

OR
Explain the concept of stakeholder inclusiveness. [June 2015, 5 Marks]
June 2014, 7 marks3
OR
The reporting organization should identify its stakeholders and explain in
its sustainability reporting how it has responded to their reasonable ex
pectations and interests. Elucidate statement by considering stakeholders
inclusiveness. June 2012, 5 Marks]
Ans. 'Stakeholder Inclusiveness' is one of the four core principles in the
GRI G4 Guidelines that help to define report content that is material to the
reporting organization and its stakeholders.

Stakeholders are defined as entities or individuals:
W h o can reasonably be expected to be significantly affected by the
organization's activities, products, and/or services.

Whose actions can reasonably be expected to affect the ability of the
to us
organization successtully implement its strategies and achieve
objectives.
REPORTING 14.7
for stakeholders inclusivenes

Need
ndividuals groups that have interests, rights,
cuakeholders are or or
organization and its activities. Since the stakeholders for an

ownershipin an
an
ou
uanization are scatltered and there may be variation in their expectation

nd interest, stakeholder engagement processes can s e r v e a s tools for
the rcasonable expectations and interests of stakcholders.
nderstanding
The reasonable expectations
and interests of stakeholders a r e a key reference
noint for many dccisions in the preparation of the sustainability report.
should its stakeholders, and explain how it has
identify
The organization
responded to their rcasonable expectations and interests.
SUSTAINABILITY REPORTING FRAMEwORK IN INDIA
o7. What are the different sections of Business Responsibility Reporting

Framework as per LODR Regulations? June 20017, 3 Marks]
OR
What are the major sections of Business Responsibility Report (BRR)?
Ans. As per Regulation 34 of SEBI (LODR) 2015, SEBI has mandated the
requirement of submission of BRR for top 1000 listed entities describing
initiative taken by them from an environmental, social and governance
perspective in the prescribed format.
1. Section A: General Information about the Organisation - Industry
Sector, Products & Services, Markets, other general information.
2. Section B: Financial Details of the Organisation - Paid up capital,
Turnover, Profits, CSR (Corporate Social Responsibility) spend.
3. Section C: Other Details - BR initiatives at Subsidiaries and Supply-
chain Partners.
4. Section D: BR Information Structure, Governance & Policies for
Business Responsibility.
S. Section E: Principle-wise Performance - Indicators to assess pertor-
mance on the 9 Business Responsibility principles as envisaged by the

National Voluntary Guidelines (NVGs).
14.8 REPORTING
INTEGRATED REPORTING
08. What do you understand by integrated reporting?
[June 2017, 3 Mark
Ans. An Integrated Report is:
"A concise communication about how an organisation's stratea
governance, performance and prospects, in the context of its externl
ategy
environment, lead to the creation of value over the short, medium
dium
and long-term".
The primary purpose of an integrated report is to explain to providers o
financial capital how an organisation creates value over time.
Integrated reporting is founded on integrated thinking, which helps
demonstrate inter connectivity ofstrategy, strategic objectives, performance
risk and incentives and helps to identify sources of value creation.
Integrated
Reporting is one step ahead ofsustainability reporting and is set to becomethe
way companies report their annual financial and sustainability information
together in one report.
Aim of integrated report
The aim of an integrated report is to clearly and concisely tell the
organization's stakeholders about the company and its strategy and risks,
linkingits financial and
sustainability performance in a way that gives
stakeholders a holistic view of the organization and its future
prospects.
09. In addition to the Financial Capital, the Integrated
five additional capitals that should
Reporting examines
guide organisation's decision-making
an
and long-term success. Which are these five additional
capitals?
[une 2019, 5 Marks]
Ans. Following are the five additional
capitals which are in addition
financial capital that should guide an organisation's decision-making anato
long-term success - its value creation in the broadest sense:
1. Manufactured capital: ManuBactured capital is seen as human-createu.

production-oriented equipment and tools.
2. Intellectual capital: It is a key element in an
organization's futurc
earning potential, investment in R&D, innovation, human resources
and external relationships, which determine the organizatio
can
competitive advantage.
3. Human capital: It is generally understood to
consist of individual
capabilities and the knowledge, skills and experience of the compan
employees and managers as they are relevant to the task at hand a
REPORTING 14.9
the capacity to add to the reservoir of knowledge, skills and

vell as
Cxperience.
Social and relationship capital: Social and rclationship capital may

include relationships within an organization, as well as those between
an organization and its external stakeholders, depending on where
ar
social boundaries are drawn.
Natural capital: It may be defined as any stock of natural resources

or environmental assets such as soil, water, and atmosphere, ecosys
tems which provide a flow of useful goods or services now and in the
future.
010. "Integrated reporting would build on the existing financial report-

ng model to present additional information about a company's strategy,
gOvernance, and performance."
In light of above sentence, prepare a note on purpose of Integrated report

ing and guiding principles for preparation of such report.
Ans.
Purpose of Integrated Reporting

The primary purpose of an integrated report is to explain to pro-
viders of financial capital how an organisation creates value over
time. An integrated report benefits all stakeholders interested
in an organisation's ability value over time, including
to create
employees, customers, suppliers, business partners, local com-
munities, legislators, regulators and policy-makers.
An integrated report aims to provide insight about the resources
and relationships used and aftected by an organisation - these
are
collectively referred to as "the capitals" in this Framework.
It also seeks to explain how the organisation interacts with thee
external environment and the capitals to create value over the
short, medium and long term. The capitals are stocks of value
that are increased, decreased or transtormed
through the a c
ivities and outputs of the organisation. They are categorized in
thisFramework as financial, manufactured, intellectual, human,
SOcial and relationship, and natural
capital, although organisa-
Tions preparing an integrated report are not required to adopt
nis categorization or to structure their report along the lines of
the capitals.
14.10 REPORTING
Guiding Principles
The following Guiding Principles underpin the preparation and pre.
sentation of an integrated report, informing the content of the report
and how information is presented. These Guiding Principles are an.
plied individually and collectively for the purpOse of preparing and
presenting an integrated report; accordingly, judgment is needed in
applying them, particularly when there is an apparent tension between
them (e.g, between conciseness and completeness).
A. Strategic focus and future orientation: An integrated report should
provide insight into the organisation's strategy, and how it relates
to the organisation's ability to create value in the short, medium
and long term and to its use of and effects on the capitals.
B. Connectivity of information: An integrated report should showa
holistic picture of the combination, interrelatedness and depen-
dencies between the factors that atfect the organisation's ability
to create value over time.
C. Stakeholder relationships: An integrated report should provide
insight into the nature and quality of the organisation's relation
ships with its key stakeholders, including how and to what extent
the organisation understands, takes into account and responds
to their legitimate needs and interests.
D. Materiality: An integrated report should disclose information
about matters that substantively affect the organisation's ability
to create value over the short, medium and long term.
E. An integrated report should be concise: An integrated report in-
cludes sufficient context to understand theorganisation's strateg
governance, performance and prospects without being burdened
with less relevant intormation.
F. Reliability and completeness: An integrated report should include
all material matters, both positive and negative, in a balanced
way and without material error.
G. Consistency and comparability: The information in an integrateu
report should be presented:
O n a basis that is consistent over time.
In a way that enables comparison with other organisations to tne
extent it is material to the organisation's own ability to create value
over time.
REPORTNG 14.11
O11. Sustainability reporting is an intrinsic element of
Integrate report.
Elaborate. [December 2018, 3 Marks]
hs. Sustainability reporting' considers the relevance of sustainability to
Ans.
ann Organization
organi and also addresses sustainability
priorities and kev topics,
focusing on the umpact of sustainability trends, risks and opportunities on
the long-term prospects and financial pertormance of the organization.
On the other hand Integrated reporting is an integrated representation of
the kev factors that are material to its present and future valuc creation.
Integrated reporters build on sustainability reporting foundations and
disclosures in preparing their integrated report.
Sustainability reporting' vs. 'Integrated reporting'
Although the objectives of sustainability reporting and integrated reporting
mav be different, sustainability reporting is an intrinsic element of integrated
reporting.
Sustainability reporting is fundamental to an organization's integrated
thinking and reporting process in providing input into the organization's
identification of its material issues, its strategic objectives, and the assessment
of its ability to achieve those objectives and create value over time.
cORPORATE SOCIAL RESPONSIBILITY REPORT
012. The Ministry of Corporate Affairs issued the Corporate Governance

Social Responsibility Voluntary Guidelines 2009, which emphasize that
every business should design and formulate a CSR policy to guide the
Outline the core
strategic planning and a roadmap for its CSR initiatives.
June 2018, 5 Marks]
elements of CSR policy.
Ans. Core elements of a CSR Policy are as follows:
1. Care for all stakeholders: The companies should respect the interests
of, and be responsive towards all stakeholders, including shareholders,
employees, customers, suppliers, project aftected people, society at
large etc. and create value for all of them.

2. Ethical functioning: Their governance systems should be under pinned
in
by Ethics, Transparency and Accountability. They should not
engage
business practices that are abusive, unfair, corrupt or anti-competitive.
. Respect for workers' rights and welfare: Companies should provide a
humane and which
Workplace environment that is safe, hygienic and
all emplovees
upholds the dignity of employees. They should provideskills for career
wIth access to training and development of necessary
advancement.
14.12 NPORING
4 Respeet for Human Rlghts: Companies slhoulkt Tespeet human tieh.

tor all and avoid vomplicity with human ights aliis's by them or hu
thind party
S. Respect for Bnviroment: Conpanies slhouhl take mcasures tohest
nd prevcnt polluti; eevee, manape aml roluce wastc, shoula
manage uaturalresourees n asustainalble naneT andensuncoptiu
Use of resounnes like land and water ete.
o. Activities for Soclal and Inelusive Developnent: Depenling uponthei
cone competeney anul business interest, connpanies sloull undertake
activities tor oronnie anud sinial aderelopncil ol comunities aud
geographical aneas, particularly in the viciity ol their operatioms
013. You have been recently appointed as a Company Secretary of a large

company which has incurred expenditures on vartous CSR actlvities during
the year. Advise the Board about the particulars to be ensured In Annual
Report for disclosures on Corporate Soclal Responsiblity (CSR) under
Companies Act, 2013 by the Board. [December 2018, 5 Marks
Ans. As per Section 134 of the Companies Act, 2013. the Board of the
Company is mandated to propare a CSR Report.
The Companies (CSR Policy) Rules, 2014 provide for the lomat tor
Teporting CSR ctivities anually. The tormat lor the annual report o
CSR activities is as follows:
1. A briet outline of the company's CSR poliey, including overview of
projects or progranms proposed to be undertaken and a reterence to
the web-ink to the CSR policy and projects or programs.
2. The composition otf the CSR
Comuittee.
3. Average prolit
net of the compauy for last three financial years.
4. Preseribed CSR Expenditure.
5. Details of expenditure ineurred on CSR activities during the linanil
Year
a. Total amount be spent lor the linaneial
to
year.
b. Amount unspent, il anN.
6. In case the connpany has tailed to spend the two per cent ot the a
erage net prolit of the last three tinancial years or any part there.
the company shall provide the reasons for not
spending the amou
in its Board report.
7. A responsibility statement ol the CSR Committee that the in
mentation and monitoring ol CSR Poliey, is in compliance with CS
objectives and Poliey of the conpany.
mnan
15 ETHICS AND BUSINESS

CHAPTER
ETHICS
01. In a branch of ABC Bank, Branch Manager throughout the year has
heen under acute pressure to achieve the business targets. At the year-end,
finds that despite his has the
he best efforts, he not beenable to achieve
leader. Simultaneously, he found that there are
targets given by his team
On 31st
various cash credit limits sanctioned which are not being utilized.
March, he makes debit entries as withdrawals in such unutilized cash credit
limits and transfers to current accounts of the borrowers and again reverses
these entries on 1st April. In addition, to avoid the mounting pressure of
reduction in NPAs, he makes credit transfer entries in cash credit limits
not transacted since last six months and reverses these entries on next day
after year-end, i.e. 1st April.
In this way, he has been able to manage the achievement of his deposits
and advances targets. Also, he has temporarily engaged a boy as attendant.
As to employ a casual staff, he was required compliance of laid down pol-
icy of the bank, he shown payments made to him as water and cleaning
charges under different names. He argues that as no loss has been caused
to any one, hence he is right.
In the light of above answer the following questions:
01(). Evaluate his actions in the light of ethical practices and mention
whlch types of ethical issues are there at his branch.
i) What do understand by 'Ethics in Compliance'? Describe by citing an

Xample and a case study involving issues of ethics in compliance.
Ans.
9 In the given case, the Branch Manager, in order to achieve the targets
assigned to him adopted the following unethical practices:
L Making debit entries in unutilized cash credit limits and transfer
to current account of the borrowers.
15.1
15.2
ETHICS AND BUSINESS
ii. Making credit transfer entries in cash credit

since last 6 months and limits not
after the year end. reversing the said entries on Isttransacto.
ted
April ie
i.
Temporarily engaging an attendant and showing payments
to him as water and mad,
In
cleaning charges.
light of the above the ethical
issues may be summarized as
a. Window under:
dressing of the financials by intlating deposits and to
press non-performing assets (NPAs), he makes sun.
ever-greening
by manipulating books of account.NPAs
in violation of RBI directives of
amounts to cooking of the balance sheet of the Thic
branch without real
business. Hence these are issues of Ethics in Accounts and
b. Toavoid Finance.
compliance of laid down procedure to employ a casual worker,
he shows the payments as water and
cleaning in charges
miscellaneous
expenses. Hence this is an issue of Ethics in compliance.
Ans. (i) Compliance is about obeying and
adhering to rules and authority
with letter and spirit. The motivation for
being compliant could be to do
the right thing out of the fear
of being caught rather than a desire to abide
by the law. An ethical climate in an organisation ensures that compliance
with law is fuelled by a desire to abide by the laws.
Organisations that value
high ethical values comply with the laws not only in letter but go beyond
what is stipulated or expected of them.
Ethical compliance
Ethical compliance helps companies to develop a work culture that abides
by the workplace laws and reduces the costs associated with fines and
lawsuits. One of the disadvantages of an ethical compliance program is that
it requires the comprehensive support of management in order to ensure
its effectiveness. If members of the management team decide to apply ther'
own version of corporate ethics to the way they manage their departments,
then this clash of principles can cause confusion in the workplace. For
example, a manager who tends to compromise when his fellow employees
are involved in taking bribe, it may set a precedence of undermining the
entire corporate culture.
02. "What is considered ethical behaviour in one society might be con*

sidered unethical in another. For example, euthanasia (mercy killing) 1s
permitted in some countries but it is considered strictly unethical in most

of the other countries."
In the light of the above statement discuss the common features of eth
ics.
June 2017, 5 Marks
ETHICS AND BUSINESS
15.3
Ans.
The common features of ethics may be listed as follows:
Ethics is a conception of right or wrong conduct. Ethics tells us wheen
Qur behaviour is moral and when it is immoral. It deals with the
fundamental human relationship, how we think and behave towards
others and how we want them to think and behave towards us.
Ethics relates to the formalised principles derived from social values.
It deals with the moral choices that we make in the course of
per-
forming our duties with regard to other members of society. Hence,
it is relevant in the context of a society only.
Ethical principles are universal in nature. They prescribe obligations
and virtues for everybody in a society. They are important not only
in business and politics but in every human endeavour.
There exist no sharp boundaries between ethical and non-ethical.
Therefore, people often face ethical dilemmas wherein a clear cut
choice becomes very difficult.
The concepts of equity and justiceare implicit in ethics. Fair and eq
uitable treatment to all is its primary aim.
Ethics and legality of action do not necessarily coincide. What a
society interprets as ethical or unethical ends up expressed in laws.
The legality of actions and decisions does not necessarily make them
ethical. For example, not helping an injured person in a road accident
may be unethical but not illegal.
Thus, the statement What is considered ethical behaviour in one society
might be considered unethical in another, is correct.
03: Write short notes on the following; Theory of Relativism.

Ans. Theory of Relativism
Theory of Relativism promotes the idea that some elements or aspects of
Cxperience or culture are relative to ie. dependent on, other elements or
aspects. It holds that there are no absolute truths in ethics and that what
S morally right or wrong varies from person to person or trom society to
sOciety.
he term oflen refers to truth relativism, which is the doctrine that there is
uO absolute truth, i.e. that truth is always relative to some particular trame
relerence, such as asociety or a culture. For exanmple, killing animals tor

sport(
(Uke bull fighting) could be right in one culture and wrong in another.
15.4
ETHICS AND UISINESS
BUSINESS ETHICS
04: "Good corporate

governance practices cannot guarantee
success, but the absence of such corporate
governance definitely lead to questionable
practices and corporate failures, which surface suddenly and
Discuss this statement and massively"
highlight the need for business ethics.
[June 2019, 5 Marks
OR
Briefly comment on the following; Business ethics play a vital role for an
organisation. [June 2014, 3 marks]
Ans. Good corporate governancegoes beyond rules and
regulations that the
Government can put in place. It is about the ethics and the values which
drive companies in the conduct of their business.
Ethics is also the first line of defense against corruption, while law
entorcenment is remedial and reactive. It is, therefore, all about the trust
that is established over time between the companies and their different
stakeholders through their ethical business conduct.
Need of Business Ethics
The need for business ethics may be highlighted in following points-
Ethical conduct is in the long-term interests of businessmen. Abusi
ness enterprise that is honest and fair to its customers, employees, and
other stakeholders earns their trust and goodwill. It ultimately results
customer satistaction, healthy competition, industrial growth and
high earnings.
Businesses must balance their desire to maximize profits against the
requirements of stakeholders. To address this unique aspect of busi-
ness, rules are articulated to guide it to earn profits without harming
individuals or society as a whole. While referring to business activity
profile, Mahatma Gandhi once mentioned that all business entrepre
neurs should ask themselves the question whether the activities they
are contemplating would be of some use to the common man.
Ethical business behaviouris not only about good business but about
good citizenship as well. Morally conscious businessmen have created
names and built greal business empires. They serve customers win
good quality products at fair prices, treat their employees with great
respect, reward their shareholders with good returns and pay ihe
taxes honestly.
A business organisation that adheres to a code of conduct gains
han.
competitive advantage and builds long-term valuc. On the other
ETHICS AND BUSINESS 15.5
unethical practices lead to the ultimate downfall of big organisations

o0.
Business can prosper only when a society is stable and peaceful.

Unethical practices at times create distrust, disorder and turmoil in
society.
Thus Good corporate governance practices cannot guarantee corpo
rate success, but the absence of such governance delinitely
lead to
questionable practices and corporate failures, which surface suddenly
and exert a massive impact.
05. Green washing is a form of corporate misrepresentation. Explain.

June 2014, 5 Marks]
OR
"Green washing is an evil practice amongst the corporates." Comment.

June 2016, 5 Marks]
OR
Discuss the following; Green Washing. [December 2017, 3 Marks]
Ans. Green washing is a form of corporate misrepresentation where a
initiatives that
company presents a green public image and publicize green
are false or misleading. A company might release misleading claims or even
true green initiatives while privately engaging in environmentally damaging
practices. Companies try to take advantage of the growing public concern
and awareness for environmental issues by promoting an environmentally
responsible image.
Green washing is used by companies to win over investors (especially those
interested in socially responsible investing), create competitive advantage in
the marketplace, and convince critics that the company is well-intentioned.
There is a profit-driven motive to greenwashingas
well-green products
are among the fastest growing segments in the market. Internationally,
the increase in green advertising claims has become a cause tor concern.
06. Briefly comment on the following statements; Ethical conduct is in

the long-term interest of business. [June 2016, 2 Marks]1
ans. Ethical conduct is in the long-term interests of business. A business
erprise that is honest and fair to its customers, employees, and other
dkeholders earns theirtrust and goodwill. It ultimately results in customer
DTaction, healthy competition, industrial growth and high earnings.
Busi
nesses must balance their desire to maximise prolits against the
Tequirements of stakeholders.
15.6 ETHICS AND BUSINESS
CHARACTERISTICS OF ETHICAL DECISION
07. Write short note on the following; Characteristics decision,

of ethics
June 2011, 3 Marks]
Elhical Dilemna, characteristics
Ans. According to Sucane, in her book,
decision are stated:.
charactcristics of ethical
and iheory (2008), following
1. Most ethical decisions have mixed outcomes.
2. Most ethical decisions have personal implications.

multiple alternatives.
3. Most ethical decisions have
4. Most ethical decisions have extended consequences.
5. Most ethical decisions have uncertain consequences.
ORGANISATION STRUCTURE AND ETHICS
08. Discuss the importance of organization's

structure in the study of
business ethics.
OR
structure and ethics.
Discuss briefly the following; Organisation
OR
concentrated
In a centralized organization decision making authority is
in the hands of top level managers and little authority is delegated to
the
lower levels in the light of this statement. Discuss the importance of an
organization structure in the study of business ethics.
une 2013, 5 marks]
OR
An organization's structure is a significant factor to the study of business
ethics. Comment June 2012, 5 marks]
Ans. In a centralized organization, decision makingauthority is concentrated
in the hands of top-level managers, and very little authority is delegated
to the lower levels. Responsibility, both internal and external, rests vith
top management.
Applicability: This structure is especially suited fororganizations that make
high-risk decisions, and whose lower-level managers are not highly skilled
in decision-making. It is also suitable for organizations in which
processes are routine and elticiency is of primary importance.
producton
lized organizalions stress on formal rules, policies, and procedures,

C d Dp by elaborate control systems. Their codes of ethics may speciBy
techniqucs to be used tor decision-making.
back
suanization's structure is important to the study of business ethics.

An o r g a n i
structure touches on many issues related to ethics. Such as:

Aanisational
Organ
The alienation experienced by workers doing repetitive work.

The feelings of oppression created by the exercise of authority.
The responsibilities heaped on the shoulders of managers.
advance
The power tactics employed by managers who are anxious
to
their career ambitions.
Health problems created by unsafe working conditions.

The absence of due process for non-unionised employees.
you think that an organisation having

centralized organisation
09. Do June 2015, 2 Marks]
unethical acts? Why?
structure can lead to
decision making authority is concentrated
Ans. In a centralizedorganization,
and little authority is delegated to lower
in the hands of top-level managers,
levels. Responsibility, both internal and external, rests with top management.
These organizations are usually extremely bureaucratic, and the division
of labour is typically very well defined. Centralized organizations stress on
formal rules, policies, and procedures, backed up with elaborate control
systems.
Centralized organizational structures may lead to unethical acts because of
the top down approach and the distance between employee and decision
maker. If the centralized organization is very bureaucratic, some employees
may behave according to "the letter of the law" rather than the spirit.
010. Writing code of conduct supporting it at top levels and communicating

to employees is just beginning are should have an ethics committee
a
comprising of independent non-executing directors enumerate the state

a n d state the functions of ethics committee. June 2011, 5 Marks]
Ans. Companies should have a committee of independent non-executing

CLOrs who are responsible for ensuring that systems are place in the
pany to assure employ compliance with the code of ethics
C Tole of Ethics Committee may involve the following:
Review of the standards and procedures.
Facilitate compliance.
Due diligence of prospective employees.
15.8 ETICS AND BUSINESS
Oversight of communication and training ol ethics programm

ime.
Monitor and audit compliance.
Enforcement of diseiplinary mechanisn.
Analysis and follow-up.
FUNDAMENTAL ETHICAL PRINCIPLES
Q11. Over the number of years Seasons Ltd., fully owned by

Calmitech
Corportation Ltd., a listed entity, of which you are now the companv
secretary, has adopted aggressive growth strategy via targeted
ed acquisition
acquisltion
together with organic growth plan. Therefore, the disclosure requirements
are based upon the listing rules. Recently Seasons acquired
for geographic exposure, revenues and profits.
Hijobs Ltd.
During the negotiation
process there were issues regarding management structure, values and due
diligence. Post completion the process of acquisition the problems started
to emerge like lack of data
provided in due diligence, reflected the fact
that it either didn't exist or was
incomplete. Now it was time for prepa
ration of the year end accounts. There issues
regarding incomplete
were
accounting records and incorrect exchange rates. In short preparation of
the Annual report and the financial statements
You investigated relatively limited available
was a significant challenge.
information on the branch
and tentatively concluded that is not material.
i. What would you do knowing that disclosure of such
information to
the auditors and the Board may
delay the parent company's result
announcement too the market?
ii. What fundamental ethical
principles would you take into consider
ation for making a prudent decision?
[June 2017, 5 Marks each
Ans.
i The basic
principle of Corporate Governance is to maintain the ethica
standards, adequate disclosures, transparency and work in the st
of all the stakeholders. interc
Being a Company Secretary of the company:
I would act in the best interest of
the company and
findings immediately to the Board of directors, disclose
parent company and the auditors. Board ot
I n addition, I would look
for a code of conduct which provides
guidance on such matters.
Proper qualitative and quantta
tative
assessment on
materiality of the new facts can the
best interest of the

be initiated
company.
ETHICS AND BUSINESS
15.9
Alcan may be lormed to
expedite correcting the entries and
making correct disclosures.
Althoug, Ihe process imay deler the declaration of results in the mar
ket, but it is betler than declaring the wrong results and then
provide
sirnilicant additional disclosures at a later date. This delay for the
broader interest is inevitable.
Thefollowing ethicalprinciples would be considered toforma prudent

decision:
Integrity Accounts and reports should be prepared in accor

dance with accounting standards and other principles so that
they rellect the true and lair poSition of the company.
Honesty - The aim should be to be honest to thecompany for
the interest of various stakeholders. Truthfulness and correct
disclosures cannot be sacrificed at any cost for immediate gains.
Objectivity - Disclosures must be made at adequate places sup-
ported by proper annexures and other related evidences. In case
there is a delay in making disclosures, it should be justified with
proper reasons.
Professional Competence Protfessional ethics and standards

including due care and diligence should be maintained in all
circumstances.
Confidentiality Conlidentiality of the company alfairs should
be maintained. The situation should be controlled to avoid panic
in the organisation in order to ensure that the market standing
and the stock prices are not negatively alfected.
ETHICAL DILEMMA
012. Write short note on the following; Ethical dilemma.

OR
Involves
Ierly comment on the following statements; An'ethical dilemma'
and what is
alion, when a person is indecisive as to what is right
June 2016, 2 Marks]
wrong.
Ans. An ethical lilemma irnvolves a situation that makes a person question
to do. Dilemma is a situation
that requires
A the right'or'wrong'thing unfavourable or mutually
hoice between
en options that are or seem equally
ex Ve t involves the need to choose from among two or more morally
ETHICS AND BUSINESS
15.10
of action, when o n e
choice prevents clecting the,
selecting the other
acceptable courses
unacceplable alternatives
or, the nced to choose betwcen cqually
and dil ficult to
resolve. E.
These dilemmas can be highly complex
answer, wnereas, complex ethu
dilcmmas involve a 'right' v e r s u s 'wrong' chGic4
decision between a right
another
and right ce
dilemmas involve a
of the Mentor Products Ltd. you.

are
Q13. You are a company secretary
made responsible for tender filing

for the company your companyis looking
department a junior worker
forward to win the tender by a government
with your competitor Genius Produet
joins your company after working his previous company
informs you that in
Ltd. for 5 years. The worker
the company and that he had knw
he has access to the bids made by He
standards of cost were set by that company. offers for
ledge of what information of the competitor
writing the bid by providing
assistance in
ethical dilemma. Explain with reasons.
How would you resolve the
of the tender?
i. Would take input from him for preparation
you
or
your own statement,
ii. Avoid such input and found on
iil. Ask him the company for proposing to leak trade secret of
to leave
competitor as that effect his integrity.
decide to retain him how will you ensure that
such things do
iv. If you
not happen in future. June 2014, 2 Marks each)
Ans.
i No, we would not take inputs from him for preparation of the tender
because it is against ethics.
i Yes, we will avoid such input and focus on our own standard because
if our competitor knows the leakage of information they will ask tor
retendering.
ii Yes, we will ask him to leave the company for proposing to leak traue
secret of competitor as that reflects his integrity because for some
gains we can suffer a great loss by the said employee to leak our se
crets to our competitor in future.
iv. We will post him in any other division where our confidential matc
should not be known to him.
Q14. What are the areas in which a company may face ethical issues?
Explain with the help of case study as to how investors can force etn
issues on company's agenda. June 2016, 5 Marks
Ans. A company may lace ethical issues in different areas. Some ot
ese
issues are given below:

ETHICS AND BUSINESS
15.11
The ethical issues in finance that
fronted with include: companies and employees are con
In accounting -window dressing,
misleading financial analysis.
Related party transactions not at arm length.
Insider trading, securities fraud leading to
financial markets. manipulation of the
Fake reimbursements.
hThe ethical issues faced by Human Resource
Management include:
Discrimination issues, i.e., discrimination on the bases of age,
gender, race, religion, disabilities etc.
Sexual harassment.
Discrimination of whistle-blowers.
c. The ethical issues confronted in marketing area include:
Pricing: price fixing, price discrimination and price skimming.
Anti-competitive practices, like manipulation of supply, exclusive
dealing arrangements and tying arrangements.
Misleading advertisements.
d. The ethical issues confronted in production area include:
Defective, addictive and inherently dangerous products.
Ethical relations between the company and the environment
include pollution, environmental ethics and carbon emissions
trading
Ethical problems arising out of new technologies, for example,
genetically modified food.
Case Study on how
investors can enforce ethical issues on company's agenda
lesco a UK based Supermarket Chain
Company faced an unprecedented
vOt over the meagre wages it pays to workers in the developing world
o
Supply its supermarkets with everything from cheap clothing to fruit.
nareholders at the company's annual meeting in London also voiced
anger at a controversial pay scheme for chief executive Sir Terry
Cahy, which could see him pocket over £11 million if Tesco's expansion
o the US market succeeded. 8.75% of shareholders retused to back the
Shny'sremuneration policy while 17.71% refused to back Sir Terry's
special US bonus.
ETICS AND BUSINESS
15.12 throughout the

ABCBank,
Branch Manager
b u s i n e s s targets. At the
year
ve.hag
015. In a branch of the
to achieve to achiend,
under a c u t e pressure he has not been able
been best efforts, he found that ththe
he finds that despite his Simultaneously,
being utilized, ore

leader.
by his team not
targets given sanctioned
which are
credit limits such unutilized cashe
various cash debit entries as
w i t h d r a w a l s in
and again reva
March,he makes
borrowers
current accounts of the verses

limits and transfers to avoid the mounting pressuro
e of
In addition, to
these entries on 1st April.
credit transfer
entries in cash credit lim
reduction in NPAs,
he makes entries on next dday
r e v e r s e s these
six months and
.
not transacted since last
after year-end, i.e. 1st April.

the a c h i e v e m e n t of his deposita
he has been able to manage
In this as attendant
has temporarily engaged boy
way, a
Also, he
and advances targets. of laid down pol.
casual staff, he was required compliance
As to employ a
made to him as water and cleaning
of the bank, he shown payments
icy
n a m e s . He argues
that as no loss has been caused
charges under different
to any one, hence he
is right.
above answer the following
questions; Evaluate his actions
In the light of
of ethical issues
and mention which types
in the light of ethical practices December 2018, 5 Marks]
are there at his branch.
in order to achieve the targets
given case, the Branch Manager,
Ans. In the
unethical practices:
assigned to him adopted the following
unutilised cash credit limits and transfer
to
() Making debit entries in
current account of the borrowers.
since
entries in cash credit limits not transacted
(i) Making credit transfer the
said entries on Ist April i.e. after
last 6 months and reversing the
year end.
made to
(iti) Temporarily engaging an
attendant and showing payments
him as water and cleaning charges.
summarised under:
light of the above the ethical issues may be
as
In
and to sup
() Window dressing of the financials by inflating deposits
press non-performing assets (NPAs), he
makes ever-greening of NPAs
in violation of RBI directives by manipulating books of account. Inis
amounts to cooking of the balance sheet of the branch without rea
business. Hence these are issues of Ethics in Accounts and Finance
(i) Toavoid compliance oflaid down procedure toemploy a casualworkC
ous
he shows the payments as water and cleaning chargesi miscelac

expenses. Hence this is an issue of Ethics in compliance.
RESOLVING AN ETHICAL DILEMMA

STEPS TO
Dilemma is situation that request a choice between options that
a
016.
exclusive in the light of this
are seen equally unfavourable o r mutually
Elaborate the ethical dilemma. State the steps to resolve an
statement. June 2011, 5 marks]
ethical dilemma.
OR
of Universal Development Ltd. the compa-
You are the company secretary
ny often
faces ethical dilemma. The board wants to circulate a guidance
to resolve ethical dilemma. Draft guidance note
for
note for its manager [June 2010, 7 marks]
of the board.
the consideration and approval
Ans.
To,
Universal Development Ltd.
RESOLVING ETHICAL DILEMMA
Subject:
Dear Sir,
what
An ethical dilemma involves a situation that makes a person question
individuals think about their
is the 'right' o r 'wrong' thing to do. They make
obligations, duties o r respor.sibilities. These dilemmas c a n be highly complex
and difficult to resolve. Easier dilemmas involve a 'right' versus 'wrong'
ethical dilemmas involve a decision between a
answer; whereas, complex
be resolved.
right and another right choice. However, any dilemma needs
to
1. What are the options?

List the alternative courses of action available.
2. Consider the consequences
Think carefully about the range of positive and negative consequences
associated with each of the different paths of action available.
Who/what will be helped by what is done?

Who/what will be hurt?
What kinds of benefits and harms are involved
What are their relative values?
What are the short-term and long-term implications?
3.
Analyse the actions
Actions should be analysed in a different perspective i.e. viewing the
action per se disregard theconsequences, concentrating insteadon the
actions and looking for that option which seems problematic. How do
ike honesty,fair
the options measure up against mo al principles ike honesty, lairness,
and recognition of social and environmental vulnerLes
Cquahy,
n the case you are considering, is therea way to see rability;
more important than the others? principle:as
4. Make decision and act with commitment
Now, both parts of analysis should be brought together anda consci

and infornmed decision should be made Once the decision is made.CIOus
on the decision assuming responsibility for it. ,act
5. Evaluate the system

Think about the circumstances which led to the dilemma with th
intention of identifying and removing the conditions that
to arise.
allowed i
Sd/.
Mr. X
Company Secretary
Q17. Apex Pharmaceuticals Company Ltd. is a well reputed multina-
tional company dealing in manufacturing and
marketing of life saving
drugs and formulations. Company's Research and Development (R&D)
Department is actively engaged in development and formulations of new
drugs in general and life saving drugs in particular. While experimenting
with a chemical molecule, R & D department sees the
possibility that a
molecule may be developed into a drug that may prove very helpful in
the treatment of a rare, painful and life threatening genetic disease, for
which no effective drug is available at present in the market, but which
afflicts to only one child in one million. However, development of the drug
will require investment of huge sum of investors' money of the company,
despite the drug may not have saleability.
The R & D department of the company brings this to the notice of Mr.
Ram, who is the CE0 of the company. Taking the above facts into con-
sideration, answer;
i. What dilemma Mr. Ram is facing?
ii. As a CEO, in place of Mr. Ram, how youwould have acted in sucn
situation? December 2017, 5 Marks
Ans.
i. Dilemma is situation that requires a choice between options that
a
a
or seem equally unlavourable or mutually exclusive.
Cthical dilema involves the need tochoose from among twoor more
a l l acceptable courses of action, when one choice prevents se-
etingthe other;or, the need to choose between equally unacceptable
alternatives. Fasicr dilemmas involve a 'right' versus 'wrong' answer
hercas complex ethical dilemmas involve a decision between a right
and another right choice.
lu the present case Mr. Ram is certainly in dilemma. He is required
tochoose between carrying out the development of a drug for a rare,

Dainful and lile threatening disease which afflict to only one in a mil-
lion and the action of spending huge sum of shareholder's money. As
socially
one can see, both are positive and ethically right choices. As a
a serious
responsible person, he has to think in terms of eliminating
must be careful in dealing with shareholder's
but at the same time he
classic case of ethical dilemmna.
money. Thus, it is a
ii. As CE0 in place
of Mr. Ram, I would have opted for the following
course of action to resolve this ethical dilemma:
1. Defining the problem clearly.
2. Getting the collection of the statistical data across the globe, the
previous history of such type of genetic disease and probable
cause of its spreading in the coming tinme.
3. Searching and developing all possible optionsavailable:.
4. Evaluating each available option carefully in term of pros and
cons of each of them.
5. Taking the senior management (Board of Directors, etc.) in con
fidence and keep them apprising of the situation.
6. Comparing positive and negative consequences of each option.
7. Choosing the best available action keeping resources and other
the company mind.
prevailing situations of in
8. Properly implementing the decision taken and keeping the fol-

low-up of the samne.
018. What are the causes of ethical dilemma and how will the senior
anagement handle ethical dilemmar une 2015, 5 Marks
.An ethical dilemma involves a situation that makes a person ques
hds the right'or 'wrong' thing to do. They make individuals think about
obligations, duties or responsibilities. These dilemmas can be highly
p e x and difficult to resolve. Easier dilemmas involve a 'right' versus
wrong' answer
answer; whereas, complex ethical dilemmas involve a decision
betwee
cen a right and another right choice. Ethical dilemmas are caused
ETHICS AND BUSINESS
15.16
as there exist
therefore.
nosharp
people often on-ethical
boundaries between cthical and non-eth
face cthical dilcmmas wherein a cear c t
ar cut
and,
becomes very diflicul.
choice
Resolving Ethical Dilemma
Steps to an
1. Considering the options available

2. Considering Consequences
3. Analysing Actions
commitment
4. Decision making and
5. Evaluating system
cODE OF ETHICS
019. A codeofethics should reflect upon to management's desire for com.

pliance with the values rules and policies that support an ethical climate.
Elucidate. [December 2012, 5 Marks
OR
Write short note on the following; Code of ethics.
June2014, 3Marks][December 2010,3Marks)
Ans. Code of ethics outlines a set of fundamental principles which could
be used as the basis for operational requirements (things one must do),
operational prohibitions (things one must not do). It is based on a set of
core principles and values and is by no means designed for convenience.
Corporate code of ethics often contains six core values which include
Trustworthiness
Respect
Responsibility
Fairness
Caring
Citizenship
020. Most of the companies begin the process of establishing organization
al ethics programme by developing codes of conduct. What are the cor
values or principles contained in these codes of conduct. Briefly discus
the legal provisions in respect of codes of conduct in India and USA
June 2011, 6 Marks
OR
r company is listed in the Bombay Stock Exchange there is a proposal
Y o u rc o n
sel-upits ibusiness in USA. You

ts required to prepare a brief note for the
are
sman explaining the code of conduct and business ethicsin both the
c h a i r m a n
c o u n t r i e s .
[December 2011, 7Marks]
Ans.
The C h a i r m a n
XYZ L i m i t e d
on code of conduct and Business Ethics

Sub: Note
Dear Sir,
Ethics India
Code of conduct and Business
1. Regulation 17(5)
code of conduct for
(a) The board of directors shall lay down
a
all members of board of directors and senior management

of the listed entity.
duties of
(b) The code of conduct shall suitably incorporate the
independent directors as laid down in the Companies Act,
2013.
2. Regulation 25(5)
An independent director shall be held liable, only in respect of
commission by the listed entity which
such acts of omission or
had occurred with his knowledge, attributable through process-

connivance or
of board of directors, and with his
consent or
es
with respect to the provisions
where he had not acted diligently
contained in these regulations.
3. Regulation 26(3)
senior management
All members of the board of directors and
with the code of conduct of
personnel shall affirm compliance
on an annual basis.
board of directors and senior management
4. Regulation 16(d)
the listed
shall mean officers/personnel of
enior Management" team excluding
entity who are members of its core management
comprise
this shall all members
board of directors and normally
the executive directors, including
ofmanagement onelevel below
all functional heads.
States or A m e r c a
Code conduct and Business Ethics United
of
America.Section 406 of
the Sarbanes Oxley.Sarbanes
Oxley Act,
the United States of they have codes
to disclose whether
q u i r e s public companies
those c o d e s
of
for certain
also to disclose any waivers
and the Regulation
S, Section 406(a)
of
C m b e r s of senior m a n a g e m e n t .
requires companies to
disclose applies to their prin-
written code of ethics that
whether they have a financial officer,
principal accounting
principal
Cpal executive officer, performing
similar
Tunctons.
Oncer or controller, or persons

these individuals.
A n y waivers of the code of ethics for
Any changes to the code of ethics.
Consumerism.
Ethical
the following; 3 Marks]
021. Write short notes [December 2018,
on
that do not harm

c o n s u m e r i s m is the
purchasing of products
Ans. Ethical and to m i n i m i s e
a product,
in producing
o r exploit the
workers who help aim at the
c o n s u m e r practices
e n v i r o n m e n t . Ethical
their impact o n the trade.
of the objectives of socially responsible
artisans a s designers, using
fulfilment
industries that hire local with a metal
Supporting local with reusable bags, drinking
shopping think
cruelty-free cosmetics, waste-consumers now
a tumbler
to reduce plastic
straw, o r carrying
chain.
ethical supply and
about the deals with the ethical
consumerism
ethical
context of
Thus, in the global value chain from
production, i.e. sourcing
ot product ideal
moral aspects ot the products. The
ethical consumer
to retailing
materials, down c a n have a significant
role, through their
individual c o n s u m e r s
implies that ethical corporate practices.
decisions, in promoting
daily purchasing
cODE OF CONDUCT u h ts d a r
Elucidate the following; Code of Conduct.

022. [December 2016, 5 Marks]
Conduct or the Code of Business Conduct contains

The Code of ot
guide actions of the Board
Ans,
that
andards of business conduct must
and Senior Management of the company. A code of conduct
Directors statements bu
document tnat may contain s o m e inspiration
is a written code
o r unacceptable types of behaviour. A
11Sually specities acceptable to
is more a k i n to a regulatory set of rules and as such tends
of conduct
debate about specific actions.
elicit less
cEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015

D
qulation 17(5)ofSEBI(Listing Obligations and Disclosure Requirements)
Regula
Pegulations, 2015 provides that the board shall lay down a code of conduct
for all Board members and senior management of the Listed Entity.
or a
The code of conduct shall be posted on the website of the Listed Entity. All
Roard members andseniormanagement personnelshall affirm compliance
with the code on an annual basis. The Annual Report of the Listed Entity
chall contain a declaration to this effect signed by the CE0.
Companies Act, 2013
The Code of Conduct of a company shall suitably incorporate the duties of

Independent Directors as laid down in the Section 149(8) of the Companies
Act, 2013 which provides that the company
and the Independent Directors
shall abide by the provIsions specified in Schedule IV.
CONTENTS OF ACODE OF CONDUCT a oltet

023. Elucidate the following; Contents of a code of conduct.
June 2015, 5 Marks]
OR
The code of conduct for each company summarises its philosophy of doing
business. In the light of the above statement, enumerate the contents of
such code. June 2014, 5 Marks]
Ans. The code of conduct may include the following:
Company Values
Avoidance of Conflict of Interests
Accurate and timely disclosure in reports and documents that the
company files before Government agencies as well as in the company's
other communications
Compliance of applicable laws, rules and regulations including Insicder
Trading Regulations
Maintaining confidentiality of the company aftairs
Slandards of business conduct for the company's customers, com-
munities, suppliers, shareholders, competitors, employees

Frohibition for the Directors and senior management trom taking
COrporate opportunities for themselves or their lamilies
Keview of the adequacy of the Code annually by the Board
in any
O authority to waive off the Code should be given anyone
to
circumstances.
44. The code of conduct of a company summarizes its philosophy of

aoing business the exact details of this code area matter of discretion
enumerate the principles of drafting the code of conduct as following in
most of the [December 2018, 5 Marks
companies.
OR
code of conduct of each company summarises its philosophy of do.
ing business the exact details of this code are a matter of discretion but
there are some common principles in drafting of the code in most of the
companies. What are these principles. December 2010, 6 Marks
-
Ans. Code of conduct, which is popularly known as Code of Business

Conduct contains standards of business conduct that must guide actions
of the Board and senior
management of the company.
The Code of Conduct for each company summarises its philosophy of doing
business. Although the exact details of this code are a matter of discretion
the following principles have been found to occur in most of the companies:
1. Use of company's assets.
2. Avoidance of actions involving conflict of interests.
3. Avoidance of compromising on commercial relationship.
4. Avoidance of unlawful agreements.
5. Avoidance of offering receiving monetary
or other
or
inducements.
6. Maintaining confidentiality.
7. Collection of information from legitimate sources only.
8. Safety at workplace.
9. Maintaining and Managing Records.
10. Free and Fair competition.
11. Disciplinary actions against the erring person.
ADVANTAGES OF BUSINESS ETHICS
025. Ethics is the study of moral decisions

that are made by us in the
course of performance of our duties and its
advantages.
OR
"Companies showing commitment to ethical conduct
form in comparison to those which do not show." consistently outper-
Comment.
OR
HOw do good business ethics practices help in attracting and retaining

alent in the organization and achieve customer satisfaction.
June 2011, 5 Marks]
OR
Acommitment by corporate management of follow an ethical code of
confers a variety a benefits. What are these benefits?
OR
You are the company secretary of Innovative Products Ltd. The board of
directors desires to know the advantages of business ethics draft a note
for consideration of the board of directors. [December 2012, 5 Marks]
Ans.
To
Innovative Products Ltd.
Subject: RESOLVING ETHICAL DILEMMA
Dear Sir,
Business Ethics: Business ethics (also known corporate ethics) is a form

as
of applied ethics or professional ethics, that examines ethical principles

and moral or ethical problems that can arise in a business environment.
More and more companies have begun to recognize the relation between
business ethics and financial performance. Companies displaying a "clear
commitment to ethicalconduct consistently outperform those companies
that do not display an ethical conduct. Adherence of business ethics results
inthe following benefits-
1.
Attracting and retaining talent
The ethical climate matters a lot to the employees. A company that
adheres to ethical values and dedicatedly takes care of its employees is
rewarded with equally loyal and dedicated employees. Talented people
Iike to offer their services on continuous basis in such organisations
which adhere to ethical values.
2. Investor loyalty
nvestors are concerned about ethics, social responsibility and repu-

lion of the company in which they invest. Investors are becoming
nore and more aware that an ethical climate provides a foundation
Tor
efficiency, productivity and profits.
3. Customer satisfaction
Customer satisfaction is a vital factor of a successtul business strat.
Cgy. Repeated purchases/orders and an enduring relationship with
mutual respect are essential for the success of the company. Ethical
conduct towards customers builds a strong competitive position for
the company.
4. Regulators
Regulators eye companies functioning ethically as responsible citizens.
The regulator need not always monitor the functioning of the ethically
sound company.
Further, any organisation that acts within the confines of business ethics
not only earns profit but also gains reputation publicly.
Sd/.
Mr. X
Company Secretar
Innovative ProduCts Ltd
g26."In the globalised world, ethical assessments are based on relativism."

Comment on this statement in the light of business practices adopted by
corporates in different parts of the world. June2016, 5 Mark]
Ans. In the globalised world, ethical assessments are based on relativism.
Some elements or aspects of experience or culture are relative to, ie,
dependent on, other elements or aspects. There are no absolute truths in
ethics and that what is morally right orwrong varies trom person to person
or from society to society. The term often refers to truth relativism, which
is the doctrine that there is no absolute truth. The truth is always relative
to some particular frame of reference, such as a society or a language or
a culture. For example, killing animals for sport (like bull fighting) could
be right in one culture and wrong in another.
Adjustments in the holiday calendar, dress code, formality in business
dealings, promotional policies adopted by the companies, all vary across
regions. Banks in Middle East do not charge interest on housing loans; they
buy property and sell at higher prices to be paid in form of instalments
Similarly, Mc Donald changes its ingredients in similar products to matcn
worldwide cultural sensitivity.
ETHICS AND BUSINESS
15.23
INDIAN ETHOS
027. Describe the following terms: "Indian Ethos".

Ans. Indian Ethos in Management refers to the values and practices that
can contibute to service, leadership and management. According to
Indian ethos the long-term solution lies in an inner discipline or education
which brings a greater light, strength, energy and discrimination to our
mind and heart and our higher aspirations and ultimately transforms our
consciousness and life.
The mental, moral and psychological discipline described in these Indian
spiritualtraditions provides a practical system of "value education' which
can lead to a deeper and more lasting moral transformation than the
mostly intellectual and superficial approach to ethics taught in modern
academic and management education. The present ethical debate in the
corporate world is focused mostly on values like honesty, integrity, fairness
ortransparency.But the scope of ethics is not confined to these values only
Thus the essence of good governance and leadership lies not in the
paraphernalia of systenms and procedures but on the quality of people
who create, govern or operate the systems, which is knows as Sanathana
Dharma (the eternal essence), and have been influenced by various strands
of Indian philosophy.
028. Compliance should be ethical and in spirit of good intention for

compliance of laws. In view of this, describe the term Compiance with
Spirit of Law'. [December 2019, 5 Marks]
Ans.
Meaning of compliance
In the context of corporate governance, compliance means adhering
to the law. Ethics is the intent to observe the spirit of law. In other
words, it is the expressed intent to do what is right. In the wake of
recent corporate scandals, a program that strongly emphasizes both
ethics and compliance is good business.
Meaning of ethical compliance
An ethical compliance management programme ensures that the
mechanisms are in place to provide early warning of deviations trom

Sudelines and regulations. It is essential to create or expand a culture
Of trust, enthusiasm, and integrity - criticalattributes that can produce
neasurable results in terms of productivity, emplovee satistaction,

Customer satisfaction, and, ultimately, brand equity.
Conclusion
It is true to say that 'Compliance should be ethical and in spieris.
good intention for compliance of laws. The enterprise response.
compliance mandates seems to be to create and implement what
to
tev.
er compliances are prescribed - to 'get it done. The goal is to simni.
meet the letter of the law'. The effort is directed towards completin.
Compliance tasks as quickly as possible so all could return to reaiting
business tasks. But ensuring compliances as per the spirit of lawi
more important.
16 CSR AND SUSTAINABILITY
CHAPTER
cORPORATE SOCIAL RESPONSIBILITY (CSR)

01. Corporate Social Responsibility (CSR) is also called corporate citi-
zenship or corporate responsibility.
Discuss. June 2010, 5 Marks]
environmental and economic
Ans. CSR is way firms integrate social,
a
concerns into their values,

culture, decision making, strategy and operations
in a transparent and accountable thereby establish better
manner and
create wealth and improve society. CSR is also
practices within the tirm,
of business.
called Corporate Citizenship or Corporate Responsibility
According to Business for Social Responsibility (BSR)
business in a manner
"Corporate social responsibility is operating
a
which meets or excels the ethical, legal, commercial and public
business."
expectations that a society has form the
those activities, which are essential
Business entity is expected to undertake
socialdimension.
aspect of business has a
forbettermentof the society. Everymeans business
Corporate Social Responsibility open and transparent
values and respect for employees,
practices that are based on ethical
to deliver sustainable
communities and the environment. It is designed
to shareholders.
value to society at large as well as
and 'corporate social responsi
2. Justify why 'corporate sustainability'
and different theoretical path although
bilty' have different background sustainability and
BCholars and practitioners often interpret corporate
orporate social responsibility as being nearly synonymous.
OR
and
Narrate brie between corporate sustainability
briefly the relationship
Corporate social responsibility.
16.1
16.2 CSR AND) SUSTAINABILITY
Ans. Scholars and practitioners often interpret Corporate Sustainabilit

and Corporate Social Responsibility aas being nearly synonymous, pointing
to similarities and the common domain. The two concepts have different
backgrounds and different theoretical paths.
Corporate Sustainability can be considered as the attempt to adapt the
concept of Sustainable Development to the corporate setting, matching
the goal of value crcation with environmental and social considerations.
Corporate Sustainability includes an attempt to assimilate the environmental
and social dimensions into business operations: processes, products and
procedures. In practicalterms, the Corporate Sustainability Approach leads
to a very concrete and pragmatic problem; how to measure performance
based on the three dimensions outlined and how natural and social values
can be incorporated into corporate accounting.
Corporate Social Responsibility approach lays emphasis; besides
economic and legal responsibilities, companies are expected to satisfy
other requirements, relevant to contormity to social norms and voluntarv
contributions to the community in which they operate. Another important
Corporate Social Responsibility approach developed during the 1980s in
the light oft the growth of the stakeholder approach, firms have obligations
to a broader group of stakeholders than the simple shareholders, where a
stakeholder is any group or individual who can affect or is affected by the
achievement of the firm's objectives.
03. Attempt the following; Distinguish between corporate sustainability

and corporate social responsibility.
June 2014,5 Marks] [December 2012, 5 Marks]
Ans. Following are the differences between corporate sustainability and
corporate social responsibility:
Corporate Social Responsibility
Corporate Sustainablity
Corporate sustainability indicates new Asa corporate citizen every corporateis
philosophy as an alternative to the | duty bound to its society wherein they
traditional growth and profit maximi- operate and serve. Although thereis no
sation model under which sustainable hard and fast rules, CSR activitiesneed
development comprising environmental to be clubbed and integrated into the
protection, social justice and equity | business model of the company.
and economic development are given
more significant focus while recognizing|
simultaneously corporate growth and |
profitability.
CSR AND SUSTAINABILITY
16.3
CSR AT ALL?
WHY
ABusiness cannot exlst in Isolatlon; It cannot be oblivlous to Societal
Development". Elaborate this statement.
ltis rightly said that busincss cannot exist in isolation; business cannot
An
he oblivious to sociclal devclopnent. The social responsibility of business
n he integrated into the business purpose so as to build a positive synergy
ca
between the two.
Points explaining the synergy between the two arc as follows:

1. CSR creates a lavourable public image, which attracts customers
Reputation or brand cquity of the products of a company formed
d customers trust the products of such a company and are willing
to pay a premium on its products.
2.It builds up a positive image encouraging a sense of loyalty towards
the organization, helping in creating a dedicated workforce proud of
its company.
3. Society gains through better neighbourhoods and employment op-
portunities, while the organization benetits Iroma better community
which is the main source of its workforce and the consumer of its
products.
4. Public needs have changed leading to changed expectations from
consumers. The industry/business owes its very existence to society
and has to respond to the needs of the society.
5. The company's social involvement discourages excessive regulation
or intervention from the Government or statutory bodies, and hence
gives greater freedom and flexibility in decision-making.
6. The internal activities of the organisation have an impact on the ex-
ternal environment, since the society is an inter-dependent system.
. Abusiness organisation has a great deal of power and money, entrusted
upon it by the society and should be accompanied by an equal amount

of responsibility. In other words, there should be a balance between
the authority and
responsibility.
Ihe good public image secured by one organisation by their social
responsiveness encourages other organizations in the neighbourhood
or in the professional group to adapt themselves to achieve their social
responsiveness.
he atmosphere of social responsiveness encourages co-operative
dttude between groups of companies. One company can advise or
Ove social problems that other organizations could not solve.
16.4 CSR ANID SUSTAINABILITY
its employees and

10. Companies can better addrcss the gricvances ol its emplovees
Create employment opportunitics for the unemployed.
(Note: This list is ineclusive and not exhaustive)
FACTORS INFLUENCING CSR
05."Modem business organizations are givinghigher attention on dischars.

arg
ing their social responsibilities." Elaborate and discuss the factors which
led to increasing attention being devoted to CSR by these organizations
OR
The term Corporate Social Responsibility refers to the concept of business
being accountable for how it manages the impact of its processes on stake
holders and takes responsibility for producing a positive effect on society".
What are the factors influencing corporate social responsibility?
Ans. It is true that modern organisations have become more social
responsibility conscious in comparison to old or traditional organisation
a n d they are paying higher attention towards the discharge of their social
responsibility. One of the possible reasons is that these organisations has
realised that it is in their own interest to discharge social responsibility.
Many factors influencing Corporate Social Responsibility (CSR), some of
them are as under:
a Globalization coupled with focus on cross-border trade, multinational
enterprises and global supply chains is increasingly raising CSR con
cerns relating to Human Resource Management practices, environ
mental protection, and health and safety, among other things.
Governments and Inter-governmental bodies, such as the United Na-
tions, the Organisation for Economic Co-operation and Development
and the International Labour Organization have developed compacts
declarations, guidelines, principles and other instruments that outlne
social norms for acceptable conduct.
C. Advances in communication technology are making
it easier to ta
corporate activities and disseminate information about them
d Consumers and investors are showing increased interest in suPpOrting
tion
responsible business practices and are demanding more intorm
to
on
how companies are addressing risks and
social and environmental issues.
opportunities related
CSR AND SUSTAINABILITY 16.5
Citizens many countries are making it clearthat corporations should

in
.
no matter where
mect standards of social and environmental carc,
they operale.
of the limits of government legislative
There is increasing awareness
all the issues that
and regulatory initiatives to effectively capture
social responsibility addresses.
corporate
effective approach to CSR
oBusinesses are recognizing that adopting
an
risk of business disruptions, open up new opportunities,

can reduce
and enhance brand and company reputation. on CSR.
The legislative requirements prescribing mandatory spending
h.
CSR
BOTTOM LINE APPROACH OF
TRIPLE
social, and environ-
economic
Line is made up of
06. The Triple Bottom and profit.
and indicated by the phrase people, planet
mental aspects June 2016, 5 Marks]
Elucidate.
OR
the
of corporate social responsibility (CSR)
Within the broader concept Discuss the
of triple bottom line (TBL) is gaining recognition.
concept [June 2012, 5 Marks]
TBL.
need to apply the concept of
OR
Line Approach of CSR.
Discuss the following; Triple Bottom 2017, 3 Marks]
[June 2014, 3 Marks] [December
coined in 1994 by John Elkington.
Ans. Triple Bottom Line is a phrase that business goals
Bottom Line proposed
The concept of the Triple which they
and environment within
are inseparable from the society "Social, Economic
The Bottom Line (TBL) is made up of
operate. Triple Planet, Protit
Environmental" aspect and
is indicated by the People,
und
phrase.
fair and beneficial business
to
People' (Human Capital) pertains in which a
practices towards labour and the
community and region
corporation conducts its business.
Health, safety, di-
People issues faced by the organisation includes:
versity, ethnicity etc.
sustainable environmentalpractices.
Planet' (Natural Capital) refers to
water, bio-diversity
include: Climate change, energy,
Flanet concerns
and land use.
is the reflection of
is bottom line shared by all customers. It
Profit has on its business
activities
dsung economic impact the organisation
16.6 CSR AND SUSTAINABILITY
and that too after meeting all costs that would protect society
cnvironment. and
Profit includes: Creating Employment, generating innovation, pav
taxes, wealth creation paying
The need to apply the concept of TBL is caused due to -
(a) Increased consumer sensitivity to corporate sOcial behaviour

r.
(b) Growing demands for transparency from shareholders/stal
holders.
ake
(c) Increased environmental regulation.
(d) Legal of compliances and defaults.
costs
(e) Concerns over global warming.

( Increased social awareness.
(g) Awareness about and willingness for respecting human rights,
(lh) Media's attention to social issues.
CORPORATE CITIZENSHIP BEYOND THE MANDATE OF LAW
07. Discuss briefly the following: Corporate Citizenship.

OR
Corporate Citizenship is a commitment to improve community well being
through voluntary practices. Comment [December 2017,3 Marks]
Ans. 'Corporate Citizenship' is a commitment to improve community well.
being through voluntary business practices and contribution of corporale
resources leading to sustainable growth. Corporate citizenship involves the
social responsibility of businesses and the extent to which they meet legal.
ethical and economic responsibilities, as established by shareholders. Ihe
term corporate citizenship implies the behaviour, which would maximize a
company's positive impact and minimize the negative impact on itssoc
and physical environment.
08. "Social, environmental and economical issues are fundamental o

corporate to sustain in long run", In view of this statement, define Co
porate Sustainability and describe key aspects, companies as a corpora
citizen, should focus. [December 2018, 5 Marks
Ans. The contribution ofsustainable development tocorporate sustainabiu
is twofold:
on
1. First, it helps in setting out the areas that companies should focus
i.e., environmental, social, and economic performance.
Sccondly, it proVides a common societal goal tor corporations, gov

rments, and civil society to work towards ccological, social, and
economic sustainability.
.ever, Sustainable development by itself does not provide the necessary
H aments for why companies should care about these issues. Those argu-
argui
from corporate social responsibility and stakeholder theory.

ncnts come
Corporate sustainability
CorDorate sustainability
is approach that creates long-term
a business
risks deriving
harcholder value by embracing opportunities and managing
environmental and social developments. Corporate
from economiC,
built around social and
cILStainability describes business practices
environmental considerations.
and practices that aim to
Corporate sustainability encompasses strategies
the stakeholders today while seeking to protect, support
meet the needs of the
and natural r e s o u r c e s that will be the need of
and enhance the human
future.
the required to focus on the
As a good corporate citizen, companies are
following key aspects:

Absolute Value Creation for the Society.
Ethical Corporate Practices.
Environmental Protection.
Worth of the Earth through
Equitable Business Practices.
Corporate Social Responsibility.

Innovate new technology/process/system
to achieve eco-efficiency.
Creating Market for All.
holistic Partnership.
Switchingoverfrom the Stakeholders Dialogue
to
Compliance of Statutes.
so as to be good
9. What are the areas a company should focus upon
2015, 5 Marks]
Corporate citizen? [June 2013, 5 Marks] [June
to tocus on the
companies are required
S. As a good corporate citizen,
following key aspects: set
Organisations should
Absolute Value Creation for the Society: Once it is
t s goal towards creation of absolute
value to the society.
in long
a corporate n e v e r
looks back and its sustainability
Cnsured,
run is built up.
16.8 CSR AND SUSTAINABLITY
2. Ethical Corporate Practices: In the short run, cnterprise can

through non-cthical practices. However those cannot be sustai
long run. Society denics accepting such products or services sustainedin
3. Worth of Earth through Environmental Protection: Resources t .
have economic and social value should be preserved for lonoh
use and be priced properly alter considering environmental and
costs. Social
4.
Equitable Business Practices: Corporates should not divulge themseck
in unfair means and it should create can did business practices, ensi
healthy competition and fair trade practices. Isure
5. Corporate Social Responsibility: As a Corporate Citizen, every corno.
rate is duty bound to its society wherein they operate and
serve. CSR
activities need to be clubbed and integrated into the business
model
of the Company.
6. Innovate new technology/process/system to achieve eco-efficiency:
Innovation is the key to success. Risks and crisis can be
eliminated
through innovation.
7. Creating Market for All:
Monopoly, unjustified subsidies, price not
reflecting real economic, social environmental cost, etc. are hindrances
to sustainability of a business. Simultaneously, a corporate is to build
up its products and services in such a way so as to cater all segments
of customers/consumers. Customer contidence is essence to
corporate
success.
8. Switching over from Stakeholders Dialogue to holistic Partnership:
A business enterprises can advance their activities very positively it
it makes all of stakeholders partner in its progress. It not only builds
confidence of various stakeholders, but also helps the management
to steer the business under a
very dynamic and flexible system
9. Compliance of Statutes: Compliance of statutes, rules and regulations,
standards set by various bodies ensure clinical check up of a corporate
and it confers societal license to the corporate to run and operate n
the society.
TATA STEEL A COMPANY THAT ALSO MAKES

STEEL
Q10. "Tata steel's Vision strikes a balance between economic value well
as ecological and societal value". Comment as
une 2018, 5 Marks
Ans. Yes, Tata Steel's Vision strikes a balance
between economic va t o
well as ecological and societal value. Its visions statements is
'We aspi
the global steel industry benchmark for Value Creation and Corporate
Citizenship
to the initial years, Tata Steel's CSR interventions were more aS a 'provider
where the community was given support for its overall needs,
ta society
approach led
the shift in
hoth for sustenanceanand development. Gradually,
to Tata Steel being 'enabler focusing building community
on capacity
on providing technical support
through training prOgrammes; focusing interventions of Tata Steel focus on
aid. At present, CSR
rather than giving
life of people. It guides
'<Uustainable development' to enhance the quality of
its race to excel in all areas of sustainability. JRD Tata
the Company in
believed:
theChairman of the Tata Group
"tocreate good working condilions,to pay the best wages to its employees
are not enough for the
and provide decent housing to its employees
be to discharge its overall
industry, the aim of an industry should where
social responsibilities to the community and the society large,
at
industry is located"
for decades uses its skills and
Guided by this mandate, Tata Steel has back to the
extent it can reasonably afford, to give
resources, to the
the first to
fair share of the product of its efforts. It
was
community a
even belore these were made statutory
establish labour wellare practices,
laws across the world.
in 1912, free medical aid
The Company also instituted an eight-hour workday
with pay, Workers Provident
in 1915, a Welfare Department in 1917, leave
Fund and Workmen's Compensation in 1920
and Maternity Benefit for
ladies in 1928.
of the United Nations
The Company supports and propagates the principles
to the Worldsteel
Global Compact as a Founder Member, is a signatory
Charter and the Afirmative Action programme of
supports
Sustainability
the Confederation of Indian Industry.
ata Steel's approach has evolved from the concept that the
to business
society. The responsibility
wcalth created must be continuously returned tosocial, environmental, and
O combining the three elements of society Steel. Today,
onomic is of utmost importance to the way of life at Tata
-
Steel Works,
lata Steel's CSR activities in India encompass the Company's
On ore mines and collieries, reaching out to the city of Jamshedpur, its
of Jharkhand, Odisha
Pr-urban areas and over 800 villages in theisstates
characteristic ot all Tata
and Chhattisgarh. Community involvement a form of financial
the
elGroup companies around the world. It can take
of time, skills and
provision of materials and the involvement
upport, wide range of
Stasm of employees. The Group contributes to a very
SOC1a, cultural, educational, sporting, charitable and emergency assislance
programmes.
Sustainability in an emerging mega trend and is a measure of good
Corporate governance. Explain. [June 2015, 5 marks]

Ans. Sustainability is an emerging megatrend and is a measure of good
COrporate governance. Over the years, environmental issues have steadily
encroached on businesses' capacity to create value tor customers
shareholders, and other stakeholders. Globalized workBorces and supplv
chains have created environmental pressures and attendant business
liabilities.
The rise of new world powers has intensified competition for natural
resources and added a geopolitical dimension to sustainability. Externalities
Such as carbon dioxide emissions and water use are fast becoming material
meaning that investors consider them central to a firm's pertormance
and stakeholders expect companies to share intormation about them.
These forces are magnified by escalating public and government concern
about climate change, industrial pollution, food satety, and natural
resource depletion, among other issues. Governments are interceding with
unprecedented levels of new regulation. Consumers in many countries are
seeking out sustainable products and services or leaning on companies to
improve the sustainability of traditional ones.
Further fueling this megatrend, thousands of companies are placing
strategic bets on innovation in energy etficiency, renewable power,

resource
productivity, and pollution control. Sustainability, in today's competitive

globalised world, is one of the most commonly discussed terms as a part ot
viability and credibility of the organisations. Most executives knowthat how
the
they respond to the challenge of sustainability will profoundly affect
competitiveness and perhaps even the survivalot theirorganizations. The top
management of an organisation can no longer afford to ignore sustainability
as a central factor in their company's long-term competitiveness.
GLOBAL PRINCIPLES AND GUIDELINES
012.Write short note on the following; Social Accountability International

Standard. December 2018, 3 Marks][June 2013, 3 Marks|
Ans. SA 8000 Standardisoneoftheworld's first auditable social certification
standard. It is based on IL0, UN and national law conventions, andadoptsa
managenment systemapproachin ordertoensure that companies that adopt
this approach also comply with it. This standard ensures the protection of basic
human rights of workers. The nine basic elements of this standard include
1. Child labour
and compulsory labour
2. Forced
and safety
3. Health
ol assOCiation and the right to collective bargaining
4. Freedom
5. Discrimination
6. Disciplinary practices
7. Working hours
8. Remuneration
9. Management systems.
facilities in India that have been
According to SAAS, there are 695
with this standard. Out ofthese, Aditya Birla Chemicals (India)
accredited Birla tyres, Dr
Bhilai Steel Plant Steel Authority of India Limited,
Limited, Infrastructure Limited figure
Laboratories Limited and Reliance
Reddy's within India.
prominently in the list of certified facilities
following; Social accountability and the AA

013. Describe briefly the
1000.
Ans.
Ethical Accountability
Institute of Social and
standards which
series of standards is a series of
Account Ability's AA1000 sustainable.
to become accountable, responsible and
enable organisations
It consists of:
standard
() AA1000 Accountability Principles (AP)
(i) AA1000 Assurance Standard (AS)
AA1000 Stakeholder Engagement (SE) standard.
(ii)
formulated through a multi-stake-
Since these standards have been is,
e n s u r e that those impacted (that
holder consultation process, they
and civil societies) stand to gain.
enterprises, governments
1000AP standard by tocusing
Group Plc has adopted the AA
he Vodafone
on three broad areas:
a
to develop and implement
Inclusivity (stakeholder engagement
strategic approach to sustainability). material
effort required for each
) Materiality (assess the management reports).
ISSue and determine the content of sustainability
with solutions to material
issues and chal
esponsiveness (respond
lenges). Refer Ans No. 12
Social Accountability International (SAI):
16.12 CSR ANID SUSTAINABILITY
Q14. Explain briefly the following; CSR standard ISO-26000.
December 2015, 5 marksl

[December 2014, 3 marksi
December 2012, 3 mark
Ans. IS0 26000 is an international standard which
provides guidance on
principles of social responsibility andon waystointegrate socially responsible
behaviour into existing organizational strategies, systems, practices
and
processes. This is a not a certification and a guidance tool provided by the
ISOwhichenablesorganisations to underst and the meaning and significance
of social responsibility.
It is
important to note that this is only a guiding tool. Hence, organisations
which comply with these standards are self-certified. It covers six core
areas of social
responsibility, including:-
a. Human rights
b. Labour practices
c. Environment
a. Fair operating practices
e. Consumer issues
f. Community involvement and development
This ensures a holistic approach to the concept of social responsibility and
sustainable development. It intends to assist organizations in contributing
to sustainable development. It is intended to encourage them to go beyond
legal compliance, recognizing that compliance with law is a fundamental
duty of any organization and an essential part of their social responsibility.
It is intended to promote common understanding in the field of social
responsibility, and to complement other instruments and initiatives for
social responsibility, not to replace them. ISO 26000 is not a management
system standard. It is not intended or appropriate for certification purposes
or regulatory or contractual use.
Q15. Discuss in brief the following; Global Compact Self-Assessment

Tool. June 2018, 3 Marks] [Decemnber 2017, 3 Marks each]
Ans. The Global Compact Self-Assessment Tool is an easy-to-use guide
designed for use by companies of all sizes and across sectors committea o
upholding the social and environmental standards within their respective
operations. The tool consists of 45 questions with a set of three to nnc
indicators for each question.
It consists of management section and for other sections, including humai
rights, labour, environment and anti-corruption and relate to the principie
Global Compact. The tool is in line with the UN guiding principles

the UN
Business and HHuman Rights. For a small company, this tool acts as
0Business
sure to the company's pertormance in all areas of the UN Global
o n
Compact and how well these issues are managed. Fora large organization,
a.
his tool helps to continuously improve existingpolicies andIsystems, engage

this tool he.
suppliers or other stakeholders and improves internal and
liaries,
s u b s i d i a .
external reporting.
GLOBAL COMPACT'S TEN PRINCIPLES, 2000o

UNITED NATIONS
What the objectives of this initía
016. What is the global compact?
are
tive?
Ans. The UN Global Compact is a strategic policy initiative for businesses

with ten
that are committed
to aligning their operations and strategies
in the areas of:
universally accepted principles
Human rights,
Labour
Environment
Anti-corruption
the Global Compact
Objective of Global Compact: By incorporating
and establishing aculture
principles into strategies, policies and procedures,
their basic responsibilities
of integrity, companies are not only upholding
for long-term success.
to people and planet, but also setting the stage
has issued ten
Principles of UN Global Compact: The UN Global Compact
which are derived from the Universal Declaration of
Human
principles Fundamental
Rights, the International Labour Organization's Declaration on
Environment and
Principles and Rights at Work, the Rio Declaration on
Development, and the United Nations Convention Against Corruption.
Communication on Progress (COP): Global Compact incorporates a
known the Communication
transparency and accountability policy as
on Progress (COP). It is an annual disclosure to stakeholders on progress
of the UN Global Compact in
nade implementing the ten principles
in
the areas of human rights, labour, environment and anti-corruptIOn, ana
on the
Supporting broader UN development goals. The COP is posted
Global Compact website by business participants. Failure to issue a CF
willchange a participant's status to non-communicating and can eventualy
dd to the expulsion of the participant.
Q17. "The UN Global Compact incorporates a transparency and account

801lty policy known as the communications on progress (COP)." Elabo
June 2016, 5 Marks|
rate.
and accountability
Ans. Ihe UNGlobal Compact incorporates atransparency its
Progress (COP). Following
are
policy known as the Communication on
key points:
annual disclosure to
The Communication on Progress (COP) is an
the principles of
ten
stakeholders o n progress made in implementing
the UN Global Compact in the a r e a s
of human rights, labour, environ.
ment and anti-corruption,
and in supporting broader UN development
goals.
The COP is posted on the Global Compact website by business par
participant's status to
Failure to issue a COP changes
ticipants.
a
lead to the expulsion of the

non-communicating and c a n eventually
participant.
The COP helps drive continuous sustainability pertormance improve-
ment within the company.
T h e cOP provides investors with sustainability performance informa-
tion of companies, thus allowing for a more effective integration of
environmental, social and governance (ESG) considerations in their
investments and resulting in a more effective allocation of capital.
The COP is an important demonstration of a company's commitment
to transparency and accountability and it serves as an effective tool
for multi stakeholder dialogue.
018. Attempt the following; Explain briefly the role of business in sus-
tainable development in the light of UN Global Compact initiative.
OR
Discuss the UN global compact a strategic
police iitiative in the areas of
human rights labour environment and
align with these principles?
anti-corruption how can companies
June 2015, 5 Marks]
OR
What do you know about UN Global
and mention Principles as Compact? Give brief introduction
pronounced by the Compact.
Ans. The UN Global
Compact is
are committed to aligningtheir strategic policy
a
init iative for businesses that
operations
accepted principles in the areas and strategies withten universally
of human
rights, labour, environment
CSR AND SUSTAINABLITY 16.15
By incorporating the Gobal Conpact principles into

nti-corruption.
a n d
ategics, olicies and procedures, and cstablishi a culture of integrity,

companics are not only upholding their basic responsibilities to people arnd
b u t also setting the stage for long-term success.
pkan
UN
The UN Global Compact's Ten Principles are derived from the Universal
Delaration of Human Rights, the International Labour Organization's
Deci
undamental Principles and Rights al
Declaration on Fu Work, the Rio
Delaration on Environment and Development, and the Unitcd Nations
Convention Against Corruption. These Principles arc:
Human Rights
Principle l: Businesses should support and respect the protection of

internationally proclaimed human rights.
Principle 2: Make sure that they are not complicit in human rights abuses.
Labour
Businesses should uphold the freedom of association and the
Principle 3:
effective recognition of the right to collective bargaining.
Principle 4 The elimination of all forms of forced and compulsorylabour
Principle5: The effective abolition of child labour.
Prineiple 6 The elimination of discrimination in respect of employment
and occupation.
Environment
Principle 7 Businesses should support a precautionary approach to
environmental challenges;
Principle 8 Undertake initiatives to promote greater environmental
responsibility.
Principle 9 Encourage the development and diffusion of environmentally
friendly technologies.
Anti-corruption
Principle 10 Businesses should work against corruption in all its forms,
including extortion and bribery.
NATIONAL VOLUNTARY GUIDELINES ON SOCIAL, ENVIRONMENTAL

AND ECONOMIC RESPONSIBILmIES OF BUSINESS 2011
019
viCuss the core principles of natlonal voluntary guidelines on social
ironmental and economic responsibility of business.
June 2017, 5 Marks] [December 2014, 5 Marks]
CSR AND SUSTAINABILITY
16.16
OR
"Businesses should support inclusive growth and equitable development
Mention core elements of this principle of National Voluntary Guideline
on Social, Environment and Economic Responsibilities of Business-2011
Ans. National Voluntary Guidelines on Social, Environmentaland EconOmic
Responsibilities of Business were released by MCA in July, 2011. These
guidelines have been formulated keeping in view the diverse sectors within
which businesses operate, as well as the wide variety of business organizations
that exist in India today - from the small and medium enterprises to large
corporate organizations.
The National Voluntary Guidelines on Social, Environmental and Economic
Responsibilities of Business framework has 36 parameters reflecting nine
key principles related to responsible business practices. The Guidelines
encompassing nine Principles and related Core Elements identify the
areas where responsible practices need to be adopted and the Reporting
Framework provides a standard disclosure template which can be used by
businesses to report on their performance in these areas.
Principles and the core elements

1. Businesses should conduct and govern themselves with Ethics, Trans
parency and Accountability.
2. Businesses should provide goods and services that are sate and con-
tribute to sustainability throughout their life cycle.
3. Businesses should promote the wellbeing of all employees.
4.
Businesses should respect the interests of, and be responsive towards
all stakeholders, especially those who are disadvantaged, vulnerable
and marginalized.
5. Businesses should respect and promote human rights.
6. Business should respect, protect, and make efforts to restore the en-
vironment.
7. Businesses, when engaged in influencing public and regulatory policy,
should do so in a responsible manner.
8. Businessesshould support inclusive growthand equitable development.
9. Businesses should engage with and provide value to their customers
and consumers in a responsible manner.
hiscuss in brief the following;

Q 2 0 .D i s c u s s
Government Role in improving Sus
tainabillty
Covernment docs play an important and even critical role in improving
Annability. In 2011, Ministry of Corporate Affairs (MCA), Govt. of India

sUthe first voluntary reporting framework for reporting on Business
Guidelines (NVG) on
onsibility in the form of 'National Voluntary of Business'.
and Economic Responsibilities
Respor
ial,Environmental
Social
nernments are interceding with unprecedentedlevels of new regulations,

Governmen
Responsibility Reporting in India for top 500

Business
tL SEBI mandated for others, Integrated
mpanies besides the voluntary reporting
jsted compa
Atrica and many other jurisdictions are placing similar
orting in South
about the sustainability aspects in
Report
reQuirement on
companies to report
to financial intormation.
addition
COMMITTEE
cORPORATE SOCIAL RESPONSIBILTY
CSR committee.
021. Discuss in brief the following; Functions of June 2017, 3 Marks]
Ans. Section 135 of

the Companies Act, 2013 provides that companies
in the said section shall constitute a Corporate Social Responsibility
specified
Committee (CSR Committee) of the Board.
In accordance with section 135 of the Companies Act, 2013, the Corporate
Social Responsibility Committee shall:
a Formulate and recommend to the Board, a Corporate Social Respon-
sibility Policy which shall indicate the activities to be undertaken by
the company in areas or subject, specified in Schedule VII.
b. Recommend the amount of expenditure to be incurred on the activities
referred to in clause (a).
c Monitor the Corporate Social Responsibility Policy of the company
trom time to time.
Further, the CSR Committeeshould institute atransparent monitoring
mechanism for implementation of the CSR projects or programs or
activities undertaken by the company.
2. Milkworld Ltd. started milk collection in the district it was situated
wIth a collection of 511 Kgs. of milk from 180 farmers. The companyset
veterl-
system of direct and efficlent contact with farmers. Company
as and agronomists supervise the millk routes and advise tarmers on
haw 15Ses including proper feed for the herds. Milk storage facilities
ave been:
en set-up close to the farmers, veterinary services are provided free
16.18 CSR AND SUSTANABILITY
and medicines provided at wholesale price. The company assists farmera

in artificial insemination programmes for their cattle, and helps them in
obtaining subsidy and loans.
By working very elosely with the farmers of the district and its local ad.
ministration, the company has helped to raise the quality and hygiene of
the milk produced and improved the health and lifestyle of the farmers
and other residents. Its contribution to the creation ot prOsperity on an
ongoing and sustainable basis has not only transformed the district into
a prosperous and vibrant milk district today, but also a thriving hub of
industrial activity.
On the basis of facts given in above case, what are your observations
pertaining to performance of the company on corporate social responsi
bility? [June 2016, 7 Marks|
Ans. In the given case, Milkwood Ltd. has provided following services to
the farmers, who are stakeholders of the company. These services are the
tine examples of the corporate social responsibility activities undertaken
by the company.
themilk routes.
The Company veterinarians and agronomists supervise
The Company advises farmers on various issues including proper feed
for the herds.
Milk storage facilities have been set up close to the farmers.
Free Veterinary services are provided.
Medicines provided at wholesale price.
tor
T h e company assists farmers in artificial insemination programs
their cattle.
Providing subsidy and help in procuring loans.
T h e company has helped to raise the quality and hygiene of the milk
produced and improved the health and life style of the farmers and
other residents.
district
The company was working very closely with the farmers in the
abovementioned
and local administration. The company had undertaken
tarmers
activities which were mutually beneficial to the company as well as
and local community of that district. The ongoing social responsibility
activities of the company not only resulted into the transformation
of the
makings
district into a prosperous and vibrant milk district but also helped
it a hub of industrial activities.
The clearly shows that the company had deep faith in "Stakeholder
case
social responsibIlity
Theory" of Corporate Governance and in discharging
d s its stakeholders. It is an example of mutual benefit concept of

ial responsibility as business cannot cxist and operate in isolation.
soc
GUSTAINABLE DEVELOPMENT
023. Corporate sustainability encompasses strategies and practices that

ain to meet the needs of stakeholders today which reaching to protect
support and cnhance the human and nature resources that will be needed
in the future.
In the light of this statement discuss the key drivers which need to be
garnered to ensure sustainability. [December 2011, 5 Marks]
OR
Why sustainability is considered an imperative in the present age?
Ans. Sustainability is interchangeably used for the term 'sustainable
development'. It can be defined as a 'strategy' by which businesses and
communities approach growth, economic development, or even their daily
activities in a manner that either preserves or improves their environment
and/or quality of life. Sustainability is an emerging megatrend and is a
measure ot good corporate governance.
Need for Sustainability
These forces are magnified by escalating public and governmental concern
about climate change, industrial pollution, food satety, and natural resource
depletion, among other issues. Consumers in many countries are seeking
out sustainable products and services or leaning on
companies to improve
the sustainability of traditional ones.
Thus, it be concluded that the top management of an organisation
can
can no longer afford to ignore sustainability as a central factor in their
companies' long-term competitiveness.
024. Sustainable development is a broad concept that balances the need
foreconomic growth with environmental protection and social equity.
Define sustainable
development and its principles.
[December 2019, 5 Marks] [December 2012, 5 Marks] [December
2016, 5Marks]
OR
sCuss fundamentals principles of sustainable development.
OR
What is sustainable development? Discuss principles of sustalnable
,5 Marks
do
inable de
velopment agreed upon by the world community. [June 2018,. Marks
OR
Discuss the concept of sustainable development.
June 2010, 5 Marks
that balances the nee
Ans. Sustainable development is a broad concept
Tor economic growth with environmental protection and socCial equity. ltis
a process of change in which the exploitation of resources, the direction of
investments, the orientation of technological development, and institutional
Cnange are all in harmony and enhance both current and future potential
to meet human needs and aspirations. Sustainable development is a broad
Concept and it combines economics, social justice, environmental science
and management, business management, politics and law.
Sustainable Development indicates development that meets the needs of

the present generation without compromising with the ability of the future
it is to foster
generations to meet their needs. The principle behind which metssuch
through technological and social activities the
development
needs of the current generations, but at the same time ensures that the
needs of the future generation are not impaired.
The fundamental principles of sustainable development as agreed by the
world community are as under:
Principle of Intergenerational Equity: Need to preserve natural
resources for the ftuture generations.
Principle of Sustainable Use: Use of natural resources in a prudent
manner without or with minimum tolerable impact on nature.
Principle of Equitable Use or Intergenerational Equity: Use of natural
resources by any state/country must take into account its impact on
other states.
Principle of Integration: Environmental aspects and impacts of
socio-economic activities should be integrated so that prudent use ot
natural resources is ensured.
025. Mentlon any ten sustainability terminologles.[June 2015, 5 Marks]

Ans. There are various terminologies related to the sustainability. These
are as follows:
1. Carbon footprint 6. Greenhouse effect

2. Carbon offsetting 7. Global warming
3 .C a r b o n n e u t r a l 8. Ethical consumerism
4. Ecologicalfootprint 9. Clean Development Mechanism (CDM)
5.Greenwashing
10. Environmental performance index
following statement; Ecological footprint is a measure

Explain the
Q26. Expl
demand on the earth's eco-systems.
f human
human demand earth's

Ans, Ecological footprint is a measure of
on eco-
earth's ecological capacity

wstems.It compares human demand with planet land
the amount of biologically productive
1o regenerate it. It represents
and sea area regenerate the resources a human population
to
needed
absorb and render the corresponding waste harmless,
consumes and to
prevailing technology and resource management practices.
oiven
brief the following; Carbon footprint vis-a-vis ecological

027. Discuss in June 2017, 3 Marks each]
footprint.
Ans.
Carbon footprint
carbon footprint is an estimate of how much carbon is produced
to support your lifestyle. Essentially,
it measures your impact on the
Factors that con-
climate based on how much carbon you produce.
tribute to your carbon footprint include travel methods and general
home energy usage. Carbon footprints can also be applied on a larger
countries. The word 'carbon'
Scale to companies, businesses and even
in the phrase 'carbon footprint' is often used as a
short-cut to describe
methane and nitrous
the main greenhouse gases carbon dioxide,
-
OXide - in terms of carbon dioxide equivalents.
Ecological footprint
earth's eco-sys-
Ecological footprint isameasure of human demand
on
tems. It compares human demand with planet earth'secologicalcapacity

productive
to regenerate it. It represents the amount biologically
of
land and sea area needed to regenerate the resources a human popP
waste
ulation consumes and to absorb and render the corresponding
armless, given prevailing technology and resource management
practices.
028. Discuss the following; Carbon Offsetting.
Anm reduce the amount of carbon that an
hddrbon offsets are used to
a l or institution emits into the atmosphere. Carbon offsets work
CSR AND S U S T A I N A B I L I T Y
16.22
in financial system where, instead of reducing

a
its own carbon
arbon use, a
companr can conmply with
emissions caps by purchasing an offset
an independent organization. The organization will then use that mon.from
offset
oney t
fund a project that would reduce carbon in the atmosphere. An indivi
can also cngage himself with this system, and similarly pay to offset h
Sor
her own personal carbon usage, instcad ot or in addition to, taking diro.
rect
measures such as driving less or recycling.
029. Distinguish between carbon footprint and carbon offsetting.

Ans.
Carbon footprint
A carbon footprint is an estimate of how much carbon is produced
to support your lifestyle. Essentially, it measures your impact on the
climate based on how much carbon you produce. Factors that con-
tribute to your carbon footprint include travel methods and general
home energy usage. Carbon footprints can also be applied on a larger
scale to companies, businesses and even countries. The word 'carbon'
in the phrase 'carbon footprint'is often used as a short-cut to describe
the main greenhouse gases - carbon dioxide, methane and nitrous
oxide - in terms of carbon dioxide equivalents.
Carbon offsets
Carbon offsets are used to reduce the amount of carbon that an indi
work
vidual or institution emits into the atmosphere. Carbon offsets
in a financial system where, instead of reducing its Own carbon use,
an oftset
a company can comply with emissions caps by purchasing
use that
from an independent organization. The organization will then
money to fund a project that would reduce carbon in the atmosphere
An individual can also engage himself with this system, and similarly
pay to offset his or her own personal carbon usage, instead of or
addition to, taking direct mecasures such as driving less or recyclin8
030. Write short notes on the following; Montreal Protocol on Substances

that deplete the Ozone Layer. December 2018, 3 Marks]
Ans. Montreal Protocol on Substances that Deplete the Ozone Layer
The Montreal Protocol on Substances that Deplete the Ozone Layer the
It was
Montreal Protocol) is an international agreement made in 1987.
substanc
designed to stop the production and import of ozone depleting arths
and reducetheirconcentration in theatmosphere to helpprotect thee

ozone layer.
CSR AND SUSTAINABILTY
16.23
1otocol ol the Vienna Convention for the Protection of the Oone
ninternational ireaty designed toprotect the oone laver hy phasing
h e production ol numerous substances believed to he responsible for
depletion. The treaty was opened for signature 16th Scptember
on
7 ndentered into lorce on 1 January 1989, followed
1987, by a first meeting
Helsinki, May 1989. Since then, it has undergone seven revisions, in 1990
J ondon), 1991 (Narobi), 1992(Copenhagen), 1993 (Bangkok), 1995(Vicnna),
(Lom
O97 (Montreal), and 1999 (Beijing). Due to its widespread adoption and
nlementationit has been hailed as an example of exceptionalinternational
coperation. Since the Montreal Protocol came into eflect, the atmospheric
(oncentrations ol the most important chlorofluorocarbons and related
echlorinated hydrocarbons have eitherlevelledoffordecreased. It is believed
that if the international agreement is adhered to the ozone layer is expected
to be recovered by
2050.
031. Discuss in brief the following; Life Cycle Assessment.

Ans. Life Cycle Assessment tracks the environmental impact of a product
from the use of its raw materials to the end of its useful life. LCA is an
important tool for developing an environment self-portrait and tor tinding
ways to minimize harm. A good LCA can shed light on ways to reduce the
resources consumed and lower costs all along the value chain.
A LCA looks this complete circle and measures environmental impact
at
at every phase. It provides the foundation for understanding the issues a
company must address and clues to help find Eco-Advantage.
BRUNDTLAND COMMISSION
032. Write short note on the following; Brundtland Commission.

Ans. The Brundtland Commission, formally the World Commission on
Environment and Development (WCED), known by the name of its Chairman
oroHarlem Brundtland, was convened by the United Nations in 1983.
ne
Commission was created to address growing concern "about the
ACcelerating deterioration of the human environment and natural resources
the consequences of that deterioration for economic and social
development."
stablishing the Commission, the UN General Assembly recognized that
ronmental problems were global in nature and determined that it was
lor sustainable
interest of all a t i o n s tocstablish policics

ommon
development. Commission, Our Common

Futurc, published
ot policies
the Brundtland and the change
: port of dcvclopment is quitc
sustainable in the report
nT987, deals with of this term
n e c d e d tor achieving that.

The definitio
well known and often citcd: the needs of the
that meeis
development is
development
generalions
to mee
SUstamable fulure
compromising
the ability of
witliout
Pesent
their o172 7eeds.
CHANGE, 2015
PARIS AGREEMENT ON CLIMATE
5 Marks]
Discuss.
[December 2018,
Agreement?
033. What is Paris strengthen
the global response
central aim is to temperature rise
Ans. The Paris Agreement's keeping the global
by
of climate change Celsius
levels and
to the threat above pre-industrial
1.5
well below 2 degrees even
turther to
increase
this century temperature
efforts to limit the
to p u r s u e
Nations
degrees Celsius. to the United
in Paris, Parties
Parties
C o n f e r e n c e of the reached a landmark
At the 21st Climate Change (UNFCCC)
Convention on and intensify the
Framework and to a c c e l e r a t e
combat climate change
to carbon future.
low
agreement sustainable
investments
needed for a
actions and common cause to
brings all nations into a
Paris Agreement and adapt to
Objective: The efforts to combat climate change
undertake take
ambitious c o u n t r i e s to do so.
to assist developing
enhanced support
its effects, with leaders signed the
Paris Agreement
175 world
22 April, 2016, This w a s by far the largest
On Earth Day, in New York.
Headquarters single day.
at United Nations international agreement o n a
ever to sign an
numberof countries
sUSTAINABILITY INDICES
a s s e s s m e n t criterla
corporate sustainability
2011, 5 Marks each]
enumerate
034. State and
sustainability index. [June
under the Dow Jones
-
OR
What is Dow-Jones sustainability index?
Attempt of the following; June 2013, 5 Marks]
indicestrackung
Sustainability Indices a r e the first global
Ans. The DowJones companies
of the leading sustainability-driven
the financial performance Jones Sustainability
Wortu
launched in 1999, The Dow
worldwide, it w a s
ndex (DJSI Worid) comprises more than 300 companies that represent
.he top 10 of theleading sustainability companies out of the biggest 2500
in the Dow Jones World Index.
Oanies
o m p a n i c e
to addition to the composite DJSI World., there are six specialized subset
odexes excluding alcohol, ex gambling. ex-tobacco. ex-armaments &
Aear1s. ex-alcohol, tobacco, gambling. armaments & firearms indexes
and ex-alcohol. tobacco, gambling armaments & firearms, and adult
entertainment.
035. Describe corporate sustainability assessment criteria under the Dow

Jones Sustainability Index. December 2015, 5 Marks]
Sustainability Indices launched in 1999 the

Ans. The Dow Jones
are
first global indices tracking the financial performance of the leading

sustainability-driven companies worldwide. The Dow-Jones Sustainability
World Index (DJSI World) comprises more than 300 Companies that
represent the top 10% of the leading sustainability Companies out of the
biggest 2,500 Companies in the Dow Jones World Index. In addition to the
composite DJSI World, there are six specialized subset indexes excluding
alcohol, ex gambling, ex-tobacco, ex-armaments & firearms, ex-alcohol,
tobacco, gambling, armaments & firearms indexes, and ex-alcohol. tobacco.
gambling armaments & firearms, and adult entertainment. Corporate
Sustainability Assessnment Criteria under the Dow-Jones Indices is as under:
DIMENSION CRITERIA WEIGHTAGE ( )
Economic Codes of Conduct/Compli-
5.5
ance/ Corruption && Bribery
Corporate Governance 6.0
Risk & Crisis Management 6.0
Depends on Industry
IndustrySpecific Criteria
Environment Environmental Performance| 7.0
(Eco-Efficiency)
Environmental Reporting 3.0
Industry Specific Criteria Depends on Industry
Social Corporate Citizenship/Philan-3.5
thropy
Labour Practice Indicators 5.0
HumanCapital Development5.5
Social Reporting 3.0
Talent Attraction & Retention 5.5
Industry Specific Criteria Depends on Industry
Q36. What is ESG index? How does it work? June 2014, 5 Marks
OR
Discuss in brief the following; Environment, Socialand Governance(ESc
Index. [December 2019, 5 Marks] [June 2018, 3 MarSG)
ks]
Ans. ESG describes the environmental, sOCial and corporate governane.
nce
issues that investors consider in the context of corporate behavio
ur.
Integration of ESG refers to the active investment management processe
that include an analysis of environmental, social and corporate governance
risks and opportunities and sustainability aspects of the companv
pertormance evaluation.
The ESG index employs a unique and innovative methodology that quantifies
a company's ESG practices and translates them into scoring system which
is then used to rank each company against its peers in the market.
Key Performance Indicators
Environment- Energy use and efficiency, Greenhouse gas emissions,
water use, use of ecosystem services impact & dependence and
innovation in environment friendly products and services.
Social- Employees, poverty and community impact and supply chain
management.
Governance-Codes ofconduct and business principles, accountability,
transparency and disclosure and implementation-quality and consis-
tency.
037. Discuss the following; Standard and Poor's ESG India index.
December 2017, 3 marks each]
Standard & Poor's ESG India index provides investors with exposure to a
liquid and tradable index of 50 of the best performing stocks in the Indian
market as measured by environmental, social and governance parameters.
The index employs a unique and innovative methodology that quantifiesa
company's ESG practices and translates them into a scoring system which
is then used to rank each company against their peers in the Indian market.
Its quantitative scoring system offers investors complete transparency.
The creation of the index involves a two stepprocess, the first of which uses
a multi-layered approach to determine an 'ESC' score for each company
The second step determines the weighting of the index by score. Index
constituents are derived from the top 500 Indian companies by total market
capitalizations that are listed on National Stock Exchange of India Ltd. (NSE).
CSR AND SUSTANABLITY 16.27
C A S ES T U D y
For the purpose of generating employment in Banaras, leathera

038.
started which consumes large
0ry is being water
industry
a anmount of water and
d i sc
ch containing putrescible organic and toxic inorganic
ha r g e s w a s t e
into the river resulting in death of all aquatic life. Whether court
ials into
erials tanneries to continue as it is
working in
d allow the owners of the
sho
o r direct them to stop working? Give reasons.

hlic interest
public
is similar to the case M.C. Mehta v. Union of India

case
Ans. The given
AIR
(AIR1988SC
1037/also known as the Kanpur Tanneries or Ganga Pollution
ase
cas
wherein the Supreme Court had held that:
Where in public interest of some of the tanneries
litigation owners
in Ganga and not setting up a

discharging effluents from their factories
in spite of being asked to do so for several years
nrinary treatment plant
notice to them, even to enter appearances in the
did not care, in spite of
their to take appropriate steps to
Supreme Court to express willingness
establish the pre-treatment plants it was held that so far as they were
concerned on order directing them to stop working their tanneries shoule

be passed. lt was observed that Ihe effluent discharged from a tannery is ten
times noxious when compared with the
domestic sewage water which flows
was further observed that
into the river from any urban area on its bank. lt
considered as irrelevant
the financial capacity of the tanneries should be
whilerequiring them to establish primary treatment plants. Just like a n
worker cannot be allowed
industry which cannot pay minimum wages to it
to exist, a tannery which cannot set upa primary treatment plant cannot be
permitted to continue to be in existence for the adverse effect on the public
which is likely to ensure by the discharging of the trade effluents
at large
rom the tannery to the river Ganga would be immense and it willoutweigh
any tnconvenience that may be caused to the management and the labour
employed by it on account of its closure.
ence, looking to the judgement given by the Apex Court in the given
case, the owners of tanneries cannot be allowed to pollute e wate by
the hazardous material irrespective of the tact that this being
ucing
the
employment generation activity.
989. What is the measure of liability of an enterprise which is engaged
hazardous or inherently dangerous industry, where by any chance
aa e n t occurs, persons die or get injured? Answer with reference to
CSR AND) SUSTAINABILITY
16.28
the Oleum Gas leak case by narrating in brief the issues ralsed hy
petitioner and important Judgements pronounced by the Apex oy the
Apex cohe
court
December 2018, 5 Markal
Ans. The Oleum Gas Leak case came into limelight atter it got ori
in a writ petition filed in the Supreme Court by the environmentalie
interest litigation.
and
lawyer M.C. Mchta, as a public
Facts
On December 4, 1985 a major leakage of oleum gas took place from
one of the units of Shriram, and this leakage aftected a large numberod
people, both amongst the workmen and the public in general. This gas
leak followed by another disaster i.e., within twO days, another leakape
took place as a result of escape of oleum gas from the joints of a pipe. The
Delhi Administration issued two orders, on the behest of Public Health
and Policy, to cease carrying on any further operation in the unit, and to
remove such chenmical and gases from there.
The Inspector of Factories and the Assistant Commissioner (Factories)
issued separate orders on December 7th and 24th, 1985 to shut down
both the plants. Aggrieved, Shriram filed a writ petition challenging the
two prohibitory orders issued under the Factories Act of 1948, and
interim permission to reopen the caustic chlorine plant.
Held
The Apex Court said that it is not possible to adopt a policy of not having any
chemical or other hazardous industries merely because they pose hazard
or risk to the community. If such a policy was adopted, it would mean the
end of all progress and development. Such industries, even if hazardous
have to be set up since they are essential for the economic development
and advancement of well-being of the people. We can only hope to reduce
the element of hazard or risk to the community by taking all necessan
steps for locating such industries in a manner would pose least nsk
which
or danger to the community by maximizing safety requirements.
NATIONAL GuIDELINES ON RESPONSIBLE BUSINESS CONDUCT (NGR

BC), 2019
040. Prepare a brief note on National Guidelines on Responsible Busine

Conduct
(NGRBC),
Ans. The Ministry of Corporate Affairs has revised the National Voluntary
Guidelines on Social, Environmental and Econonmic Responsib1nu
Business, 2011 (NVGs) and has released the National Guidelines o Re
nsible BusinessConduct (NGRBC) in March 2019. These guidelines urge

sinesses to actualise the principles in letter and spirit. The annexure 3 of
Guidelines details the reporting framework associated with thc National
theG
Cuidelines for Responsible Business Conduct.
Guideli
consists of three sections:

It
aSection A: General Disclosures, covering operational, financial and
Ownership related information.
h Section B: Management and Process Disclosures covering the struc-
tures, policies and processes to integrate the Guidelines.
Section C: Principle-wise Performance Indicators covering how well
businesses are pertorming in pursuit of these Guidelines.
Businesses may use this reporting framework to voluntarily disclose their
commitment to and pertormance against their economic, social and en-
vironmental impacts. A growing number of businesses are already doing
this and are reporting several benefits, internal and external, as a result of
their commitment to disclosure and reporting.
RISK-ADJUSTED RETURN ON CAPITAL RAROC

041. What is Risk-adjusted return on capital (RAROC) and how is it
calculated? June 2019, 5 Marks]
Ans. Risk-adjusted return on capital (RAROC) is a profitability metric that
can be used to analyse return in relation to the level of risk taken on. It can
be used to compare the performance of several investments with differing
levels of risk exposure. RAROC was developed by Bankers Trust in the
late 1970s and early 1980s in response to regulatory interest in the capital
ratios of financial institutions and the implementation of capital adequacy
regulations. RAROC is often used by banks to determine the amount of
capital required to support the bank's activities.
RAROC is defined as the ratio of risk adjusted return to economic capital.
ne economic capital is the amount of money which is needed to secure the
Survival in a worst-case scenario, it is a buffer against unexpected shocks
n
market values. Economic capital is a function of market risk, credit risk,
and operational
risk, and is often calculated by VaR (Value at Risk).
KAROC system allocates capital for two basic reasons:
Risk management
Performance evaluation
The formula used to calculate RAROC is:
RAROC R-E- EL + Income from Capital/Capital)

Where R = Revenue, E = Expenses, EL = Expected losses, Ineo.
Capital = Capital Charges X Risk free rate Income from

17 ANTI-CORRUPTION AND
ANTI-BRIBERY LAWS IN INDIA
CHAPTER
BRIBERY CODE
ICSI ANTI
the following terms:
01. Describe
"Foreign Public Official" as per ICSI Anti-Bribery Code.
(a"Disciplinary Mechanism" under 1CSI Anti-Bribery Code.
Ans.
() Foreign public official means any person holding a legislative, exec-
utive, administrative or judicial office of a foreign country, whether
appointed or elected, whether permanent or temporary, whether paid
or unpaid and includes a person who performs a public function or
provides service for a foreign country.
(i) As per clause 9 'Sanctions for Non-compliance' of ICSI Anti Bribery
Code any non-compliance of the Code is subject to disciplinary mech-
anism. The company shall set up disciplinary mechanism as approved
by its Board, for non-compliance of any part of t he Corporate Anti-
Bribery Code.
The discipinary mechanism shall include:
Nature of offence
Penalty of the office
Competent Authority
LOKPAL
2. Discuss in brief the composition of Lokpal and its powers.
June 2019, 5 Marks]
Ans.
1.
Composition of Lokpal
17.1
IN INDIA
17.2 ANTI-CORRUPTION AND ANTIL-3RIBERY LAWS
Lokpal is a statutory, multi-member body which has no constitutional
backing. It consists of one Chairperson and a maximum of 8 members
Chairperson
A person becomes eligible for the appointment as Chairpcrson
of Lokpal if he is:
A former Chicf Justice of India,
A former member of Supreme Curt or an eminent person
with impeccable integrity and outstanding ability.
H e should have adequate knowledge and 25 years of expe.
rience in the matters of the anti-corruption policy, finance,
vigilance, law and management, and public administration.
Members
Out of 8 permissible members:
50% are from the judiciary: Judicial members should cither
be former Judge of Supreme Court
a or a former Chief
Justice of a High Court.
Rest 50% of members are from
OBC/SC/ST/women and
minorities: If he is a person of
impeccable integrity and
outstanding ability having special knowledge and expertise
of not less than
twenty-five years in the matters relating
to anti-corruption
policy, public administration, vigilance,
finance including insurance and
ment.
banking, law and manage-
2. Powers of
Lokpal
The inquiry wing has the search and seize
to
movable and immovable power objects both
These reports would be taken objects and make
reports based on them.
for further up by the 3- member Lokpal benches
the allegedly
scrutiny. The benches would
give the opportunities tor
corrupt officers to say in their defense.
benches would undertake After this, the
any of the following
If the officers are found alternatives
sanction to the guilty, the benches would grant their
prosecution
against them. The benches can wing or CBI to file
also charge sheets
direct the concerned
ernment
departments to start proceedings
If the officers
gov-
are found against them.
innocent, the benches would
filing of the closure of case direct the
Supervisory powers reports before the
Special Court.
Search and seizure of Lokpal (Section 25)
(Section 26)
ANTLCNRUPTON AND ANTIIRIBERY 1AWS IN INDIA 17.3
o k p a l to havVC powe's of civil court in certain cases (Scction 277)
P o w r ot Lokpial to ulilise services of olficers of Central or State
iorrmenn (Section 28)
Provisional attachnent of assets (Section 29)
Contumation of attachent of assets (Section 30)
. Contisealim ot assets. proceeds, receipts and benefits arisen or
r o r r e d by means of corTuption in special circumstances (Sec-
tion 3 )
Power ot Lokpal to recommend transfer or suspension of public

servant connected with allegation of corruption (Section 32)
Power of Lokpal to give directions to prevent destruction of
rcords during preliminary inquiry (Section 33)
Power to delegate (Section 34)

DELHI SPECIAL POLICE ESTABLISHMENT ACT, 1946
Q1. Write a note on the following; Constitution and powers of special

police establishment as per Delhi Special Police Establishment Act, 1946
Ans. Constitution and powers of special police establishment are provided
under Section 2 of Delhi Special Police Establishment Act, 1946. They are:
Notwithstanding anything in the Police Act, 1861 (5 of 1861), the Cen-
tral Government may constitute a special police force to be called the
Delhi Special Police Establishment for the investigation in any Union
territory of offences notified under section 3.
t Subject to any orders which the Central Government may make
in this behalf, members of the said police establishment shall have
throughout any Union territory, in relation to the investigation ofsuch
offences and arrest of persons concerned in such offences, all the
pOwers, duties, privileges and liabilities which police officers of that
Union territory have in connection with the investigation of oftences
committed therein.
Any member of the said police establishment of orabove the rank of
Sub-Inspector may, subject to any ord rs which the Central Govern:
ment may make in this behalf, exercise in any Union territory any of
the powers of the officer in charge of a police station insuch
the area n
Ch he is for the time being and when so exercising powers
shall, subject to any such orders as aforesaid, be deemed to be an
17.4 ANTI-CORRUPTION AND ANTI-BRIBERY LAWS IN INDIA
officer in charge of a police station discharging functions of such

an
officer within the limits of his station.
PREVENTION OF CORRUPTION ACT, 1988 (THE PCA)
Q2. Explain the following; Purpose and extent of Prevention of Corrup

tion Act.
Ans. The Prevention of Corruption Act, 1988 (No. 49 ot 1988) is an Act ofthe
Parliament of India enacted to combat corruption in government agencies
and public sector businesses in India. This law defines who a public servant
is and punishes public servants involved in corruption or bribery. It also
punishes anyone who helps him or her commit the crime corruption or
bribery. It extends to the whole of India except the State of Jammu and
Kashmir and it applies also to all citizens of India outside India.
The PCA deals only with bribery of public servants. It does not extend to
bribery or corruption in the private sector, i.e. where a public servant is
not involved. That said, a private person/entity will be liable for inducing
a public servant to commit an act that is prohibited by the PCA, by corrupt
or illegal means or by exercising personal influence.
CENTRAL VIGILANCE COMMISSION ACT, 2003

03. Briefly explain the concept of Central Vigilance Commission 0
Ans. The Central Vigilance Commission (CVC) is the body constituted
by the Government in the year 1964 on the proposal of the Santharam
Committee on the Prevention of Corruption. The body was established
with an intention to check corruption in the Government departments.
The Commission is an independent statutory body exempted from the
authority of the executive. The CVC attained statutory recognition by an
ordinance of 1998 and in September 12, 2003 the ordinance was replaced
by The Central Vigilance Commission Act enacted by the Legislative
Department under the Ministry of Law and Justice. The main purpose ot
the Act was to establish the Central Vigilance Commission to investigate
the offences punishable under the Prevention of Corruption Act, 1988 by
the public servants working under the Central Government, Corporations
constituted under the Act of Parliament, Government companies, and local
bodies owned and managed by the Centre.
SOLVED PAPER - DEC. 20200
(NEW SYLLABUS)
PART I
Director of ABC Co. Ltd., a listed company

Oue.1. Rakesh is the Managing 2018 an allegation
having its registered office in Bangalore. In December,
Director's immediate family members and Alfa Co. Ltd.
of the Managing
contract from ABC Co. Ltd. entering into a quid
which got a Rs. 1,000 crore
surtaced in the public domain. The matter was personally
pro quo deal
enguired by the Chairman of the Board of Directors and nothing improper
"Whistle
was found. In March, 2019 anothercomplaint from an anonymous
non-adherence to code to conduct, conflict
Blower" was received alleging
Director while dealing "with
of interest and quid pro quo by the Managing
certain customers.
Ltd.
by the Board of Directors of ABC Co.
as
The allegations were refuted
malicious and baseless" but when the controversy started getting
being
blown out of proportion the company stated in a regulatory filing that its
Board had decided to institute an independent enquiry in the matter and
Director had been asked to go on
pending such enquiry, the Managing make proper disclosure
leave. The enquiry revealed that Rakesh did not
about his family links with the corporate customer
to
the Board. It also
to "contict of interest and due
transpired that Rakesh gave scant respect
contracts to Alfa Co.
disclosure or recusal requirements" while awarding
Lid. with which his close family members had business interests. Upon
the
the of the
findings being made public, Rakesh resigned and
enquiry
his resignation as "termination for cause"
Company stated that it will treat
and will also stop payments of unpaid beneits due to him.
In the background of the aforesaid case, answer the following question:

his duties as a director of ABC
(a) How,ifso, has Rakesh failed to discharge
SEBI LODR have been breached
Co. Ltd.? Which regulations of the
by him?
0 State the characteristics of an effective Board of Directors.
P.1
P.2 SOLVE PAPER DEC. 2020 (NEW SYILABUS)
(c)Analyze the performance of the Board of Directors in handlina

complaints against Rakesh, the Managing Dircctor ot ABC Co. Ltd
the
( ) Discuss the principles for Corporate Governance in order toimprve
the practices followed by ABC Co. Ltd. to prevent such situations fro
recurring. (5 Marks each)
Ans. 1.
(a) In the present case, Rakesh has clearly failed to discharge his duties zas
a director of ABC Co. Lid. as according to thec facts of the case; the enquiry
revealed that Rakesh did not make proper disclosure about his family links
with the corporate customerto the Board. Further Rakesh gavescant respect
to "conflict of interest and due disclosure or recusal requirements" while
awarding contracts to Alfa Co. Ltd. with which his close family members
had business interests. Thus Rakesh has violated various provisio
Companies Act, 2013, SEBI (LODR) Regulations 2015, OECD Principles of
Corporate Governance, Related Party Disclosures etc.
(b) Following are the characteristics of an effective Board of Directors:
T o be able to undertake functions efficiently and effectively, the Board
must possess the necessary blend of qualities, skills, knowledge and
experience.
Each of the directors should make quality contribution to the orga-
nizations policies, operations and management.
Board should have a mix of the following skills, knowledge and expe
rience:
Operational or technical expertise, commitment to establish
leadership
Financial skills
Legal skills
Knowledge of Government and regulatory requirement.
Board induction and training: Directors must have a broad under
standing of the area of operation of the company's business, corpo
rate strategy and challenges bcing faced by the Board. Attendance at
is
continuing education and professional development programmes
essential to ensure that directors remain abreast of all developments,
which are or may impact their corporate governance and other relatcu
duties.
Ce
The Board must monitor and evaluate its combined pertorma
and also that of individual directors at periocdic intervals, using C
performance indicators besides peer review. The Board should esta
SOLVED PAPER DEC. 2020 (NEW SYLLABUS) P.3
lish an appropriate mechanism for reporting the results of Board's

pertormance evaluation.
Board independence: Independent Board is essential for sound corpo-
rate governance. This goal may be achieved by associating sufficient
number of independent directors with the Board.
d According to the facts of the present case upon the findings of the
enquiry being made public, Rakesh resigned and the company stated that
will treat his resignation as "termination for cause" and will also stop
nayments of unpaid benetits due to him. Action taken by the company was
not justitied. Mere resignation and stopping payments of unpaid benefits
is not sufficient in law. Formal legal proceedings must be initiated against
Rakesh to make good the losses. Penal action must be initiated against
Rakesh to ensure dubious activities of such nature are not repeated.
ABC Co. Ltd. should
(d)In order to prevent such situations from recurring,
inculcate the following practices:
Separation of role of chairman and chief executive officer: It is per-
that
ceived the roles of chairman and chief executive officer
separating
(CEO) increases the effectiveness of a company's board.
Directors training, development and familarisation director's training:
An important aspect of Board effectiveness would be appropriate
attention to development and training of directors. Director orientation/
induction should be seen as the first step of the board's continuing
improvement.
Director's Development: Professional development should not be
be
merely another training schedule rather it
must more
treated as
structured so as to sharpen the existing skills and knowledge

of direc-
tors. It is a good practice for boards to arrange for an ongoing updation
of their members with changes in governance, technologies, markets,
products, and so on through:
Ongoing education
Site visits
Seminars
Various short term and long term Courses
Directors: Regulation 25(7)
Familiarisation ProgrammeforIndependent that the listed entity shall
of SEBI (LODR) Regulations, 2015 provides
familiarise the independent directors through various programmes
about the listed entity, including the following
a. Nature of the industry in which the listed entity operates
b. Business model of the listed entity.
P.4 SOLVED PAPER IEC, 2020(NEW SYI.LABUS)
.Roles, rights, responsibhilities ol independent directos.

d Any other relevant infornation
No. 2 O. No. 2A
Altempt all parts of either O.
or
policy. (5 Mark
Que. 2. (a) Write a short note on Dividend distribution policy. (5 Mal
(h) "A responsible business activity contributes to good public policy and
to human rights in the communities in which it operates." Explain
the
responsibilities of business provided in the Caux Round Table's (CRT
Stakeholder Management Guidelines. (5 Marks
(c)The Audit Committee of Polar Lid, a companylisted with BSE, consists
of three directors, Ashish, Nitin and Rekha. Ashish is the chairman of the
Audit Committee and is also the CEO of Polar Lid., Nitin and Rekha are
independent directors and all three directors are tinancially literate. Rekha
is a Chartered Accountant with more than 15 ycar's experience in finance
and accounting.
Discuss the above constitution of the Audit Committee in the light of the
legal requirements in this regard. (5 marks)
Ans. 2.
(a) Regulation 43A of SEBI (LODR) Regulations, 2015 provides that
The top five hundred listed entities based on market capitalization
(calculated as on March 31 of every financial year) shal formulate a
dividend distribution policy which shall be disclosed in their annual
reports and on their websites.
The dividend distribution policy shall include the following parameters
() The circumstances under which the shareholders of the listed
entities may or may not expect dividend.
(b) The financial parameters that shal be considered while decaring
dividend.
() Internal and external factors that shall be considered for decla
ration of dividend.
(d) Policy as to how the retained earnings shall be utilized.
(e) Parameters that shall be adopted with regard to various classes
of shares:
Ifthe listed entity proposes todeclare dividend on the basis ofparameters
in addition to clauses (a) to (e) or proposes to
change such additio
parameters or the dividend distribution policy contained in any of the
parameters, it shall disclose such changes along with the rationale lo
the same in its annual report and on its website.
SOLVED PAPER DEC. 2020 (NEW
SYLLABUS) P.5
The listcd entities other than top live hundred listed entities based on
arket capitalization may disclose their dividend distribution policies
On.
1 a voluntary basis in their annual reports and on their websites.
CRT Stakeholder Management Guidelines provide that as a global
cOrporate cilizen, a responsible usiness actively contributes to good public
ew and tohuman nghts in the communities in which it operates. Business
to:
herefore has responsibility
t h e r e f o r e
a
Respect human rights and democratic institutions, and promote them

wherever practicable.
h Recognize government's legitimate obligation to society at large and
support public policies and practices that promote social capital.
CPromote harmonious relations between business and other segments
of society.
d Collaborate with community initiatives seeking to raise standards of
health, education, workplace safety and economic well-.being.
e Promote sustainable development in order to preserve and enhance
the physical environment while conserving the earth's resources.
f.Support peace, security and the rule of law.
&Respect social diversity including local cultures and minority com-
munities.
h. Be a good corporate citizen through on going community investment
and support for employee participation in community and civic alfairs.
(c) Facts: The Audit Committee of Polar Ltd, a public listed company
consists of three directors, Ashish, Nitin and Rekha. All there directors are
fnancially literate. Ashish is the chairman of the Audit Committee and the
CEOof Polar Ltd., Nitin is an independent director. Rekha is an independent
directors and a Chartered Accountant with more than 15 year's experience
inhinance and accounting
Legal provisions: A qualified and independent Audit Committee shall
comprise of:
Minimum three Directors as members.
Two-thirds of the members of audit committee shall be Independent
Directors.
All members of Audit Committee shall have knowledge of financial
knowt-
alters of Company, and at least one member shall have good
cdge of accounting and related financial management espertse.
I h e Chairman of the Audit Committee shall be an Independent Direc-
tor
P.6 SOLVED P'APER - DEC. 2020 (NEW SYLILABUS)
Conclusion: The Audit Committee of Polar Ltd. comprises three Director.

as members thercby fullilling the condition ol having minimum thre
as members. Nitin and Rekha are independent
directors therch
DrectoS
fulfilling the condition; Iwo-thirds of the members of audit committe shall
be Independent Directors.
Ail there directors, Ashish, Nitin and Rekha are financially literate and at
of and related
east one member should have good knowledge accounting
inancial management expertise i.e. Rekha being a CA and all there being
financialyliterate fulfil this condition as well.

The Chairman of the Audit Committee should be an Independent Director.
Ashish is the chairman of the Audit Committee however is not an independent
director as per the given facts of the case.
Polar Ltd. is not
the composition of the Audit Committee of
Iheretore conditions as laid down in
legally viable as it does not fulfil the necessary
2015.
Companies Act, 2013 and SEBI (LODR) Regulations
OR (ALTERNATE OUESTION TO Q. NO. 2)
Que. 2A.
i KLIP Travels Ltd. (KLIP) is a BSE listed company in the travel indus
There has been a major
try. Arun Kumar is the Chairperson KLIP.
of
KLIP with
re-shuffle in the composition of the Board of Directors of
inducted as
several old directors retiring and many new individuals
to give an
directors. The Chairperson of the company, Arun, is keen
Board but is
Induction kit to the newly inducted members on the
unsure of its contents. As the Company Secretary of KLIP, prepare
the induction kit. (5 Marks)
ii You are Company Secretary of

XYZ Insurance Co. Ltd. The Board oft
based on
Directors of your company requires you to draw up a policy
India.
the principlesspelt out in the stewardship code for insurers in
(5 Marks)
Governance
iti. Discuss the need for Internal Audit as a tool for Corporate
(5 Marks)
in the present day organizations.
Ans. 2A.
(i) An induction kit to be given to new director should contain the following
Memorandum and Articles of Association with a summary of most
important provisions
Brief history of the company
Current business plan, market analysis and budgets
SOLVED PAPER DEC, 2020 (NEW SYLLABUS) P.7
All relevant policics

and procedures, such as a policy for obtaining
independent proBcssional advice for directors
Protocol, procedures and
dress code for Board mectings, gencral
meetings, statt social events, site visits etc. including the involvement
of partners
Press releases in the last one year

Copies of recent press cuttings and articles concerning the company
Annual report for last three years
Notes on agenda and Minutes of last six meetings

Board
Board committee meeting schedule
Board's meeting schedule and
Description of Board procedures
based on the principles spelt out in the stewardship
(i) Stewardship policy
code:
XYZ LTD.
STEWARDSHIP CODE
I. INTRODUCTION AND SCOPE

the Company invests its funds in various types
As part of its Investment Policy,
shares issued by various investee companies.
of securities including equity
The Insurance Regulatory and Development Authority of India ("IRDAI") has
and implemented by the insurers
prescribed stewardship principles to be adopted to
("Stewardship Principles"). Insurers are required adopt a Code based on the
Stewardship Principles. Accordingly, this Stewardship Code was approved by the
Board of Directors on..... and shall be effective from.
II. Definitions
"Company" means XYZ Ltd.
1938
"Act" means the Insurance Act,
and Development
"Authority" or "IRDAI' m e a n s the Insurance Regulatory
Authority of India.
Insurers in India.
"Guidelines" means Guidelines on Stewardship Code for
II. STEWARDSHIP PRINCIPLEs
|1. Key Stewardship Responsibilities
|.1. Primary Stewardship Responsibilities: The Company shall:
ot investee
l a k e into consideration, the corporate governance practices
Companies, when undertaking buy and sell decisions.
. Enhance shareholder/investor valuethrough productive engagement with
investee companies.
P.8 SOLVED PAPER DEC. 2020 (NEW SYLLABUS)
c. Vote and engage with investee
companies on matters including e.
mental. social and governance principles in a manner
which is in thnviron-
interests of its shareholders/investors.
d Be accountable to
shareholders/investors within the parameters of ore
sional confidentiality and regulatory regime. profe
1.2. Discharge of Stewardship Responsibilities: The Company shall
stewardship responsibilities through: discharue i.
a
Voting on shareholders' resolutions, as may be necessary to
protect the lnu
interest of its shareholders and policyholders.
term
b. Advocating for
responsible corporate governance practices in the investee
companies.
1.3. Disclosure of
Stewardship Code: This Stewardship Code and amendrnent
thereto, shall be disclosed on the website of the Company.
Any amendment or
modification to this Code shall also be disclosed on the website.
1.4. Disclosure of Stewardship Activities: The
Stewardship Offhcer shall report the
requisite compliance with the Stewardship Code to the Investment Committee
from time to time.
2. Managing Conflict of Interest
2.1. A conflict of interest exists where the interests
or benefits of the
Company
conftict with the interests or benefits of its shareholder/policyholders or the
investee company.
2.2. Avoid conflict of interest: The Access employees of the Company shall
undertake reasonable steps to avoid actual or potential confict of interest
situations. In the event of any doubt as to whether a particular transaction would
create (or have the potential to create) a confict of interest, Access Employees
shall consult with the Stewardship Officer.
2.3 Identifying conflict of interest: While dealing with investee companies, the|
Company may be faced with a confict of interest, inter alia, in the following
instances, where:
a The Company and the investee company are part of same group.
b. The investee company is a client of the Company.
c.The investee company is partner or holds an interest, in the overall business
or is a distributor for the Company.
d A nominee of the Company has been appointed as a director or a key man
agerial person of the investee company.
A director or a key managerial person of the
e.
Company has a
persona
interest in the investee company.
2.4. Manner of managing conflict of interest: The Company will manage
of interest by requiring the Access Employees to
cou
a Avoid conflicts of interest where possible.
-
SOLVED PAPER - DEC, 2020 (NEW SYLLABUIS)
P.9
h Identity and disclose any contlicts of interest.
C.Carelully manage any conflicts of interest.

dFollow this Code and respond to any brcaches.
a Monitoring of Investee Companies: The Company shall monitor all investee
companies.
4. Active
Intervention in the Investee Company
in the acts/omissions
4.1 Applicability: The Company shall consider intervening
cost) m o r e than
of an investee company, in which it has invested (acquisition
of the immediately
16of the Investment Assets of the Company, as at the end
lower.
preceding quarter o r 50 crores, whichever is
for intervention shall be decided
4.2 Intervention by the Company: The decision on all available facts of
by the Stewardship Officer on a case to case basis based
investee company at that point of time.
shall consider
5.Collaboration with other Institutional Investors: The Company
shareholders when it believes a
collective engagement with other institutional
collective engagement will lead to a higher quality and/or a better response from|
the investee company.
The Company may approach, or may be approached by, other institutional
shareholders to provide a joint representation to the investee companies to
address specific concerns.
6. Voting and disclosure of voting activity

shareholder resolutions
6.1 The Company may exercise its votingrights and vote on
in the interest of policyholders.
ofinvesteecompanies, a s may be deemed necessary
6.2 Voting decisions shall be made in accordance with the Company's voting
policy, which is available on the website of the Company.
resolutions which are not consistent with
6.3 The Company shall vote against
the Company's voting policy.
shall
7. Reporting of Stewardship Activities On an annual basis, the Company
in the prescribed format.
report the compliance status of this Code to the Authority
annual basis by the
|IV. Review of the Code The Code shall be reviewed on
be incorporated in the
Investment Committee or whenever any changes are to
Code due to any amendment in the Guidelines on Stewardship Code
certain
V. EffectiveDate: Pursuant to the observations received from IRDAI,
amended Code approved
modifications weremade in the original Code and the
was
bythe Board of Directors at its meeting held on ...
The amended Code is effective from.

7) Internal Audit is an independent managenment function, which involves
with a
aContinuous and critical appraisal of the functioning of an entity
Cw to suggest improvements thereto and add value to and strengthen
SOLVED PAPER
DEC. 2020 (NEW SYLLABUS)
P.10
the overall governance

mcchanism ol the entity tity's strategic
including entity'e e
and internal control system.

Tisk management
necd to have somne
is sourccd in the
The demand for auditing
verification to reduce record-keeping
errors
ors, as
of independent business and non-business organiz t
fraud within
misappropriation, and
Internal Audit is an independent appraisal activity within
organizati
an
practices, compliance with Dolie.

for the review of systems, procedures,
other operations as a basis for servica
policies
for accounting, financial and to
It is a tool of control:
management.
effectiveness of the working of ann corga-
a. To m e a s u r e and evaluate the
nization.
b. To ensure that all the laws, rules and regulations governing the oner.
ations of the organization are adhered to.
c. To identify risks and also suggests remedial measures, thereby acting
as a catalyst for change and action.
Que. 3. Write short notes on
(a) Factors to be kept in mind for planning to mitigate compliance risk.

(b) Mission and objectives of International Corporate Governance Network
(ICGN)
(c) Regulation 30(3) of SEBI (LODR), 2015 regarding disclosure of events
upon application of materiality guidelines.
Matters that cannot be discussed in Board meeting conducted
(d) a
through video-conferencing.
(e) Matters to be discussed under "Management Discussion and Analysis
to be disclosed in Annual Report of listed companies. (3Marks each)
Ans. 3.
(a) Following are the factors to be kept in mind for planning to mitigate
compliance risk:
a. Impact of failures of compliance that would create significant brana
risk or reputational damage.
b. Impact of that damage on the organization's market value, sales, prot.
customer loyalty, or ability to operate.
C.
ldentification of compliance missteps that could cause the organiZau
to lose the ability to sell or deliver
d
products/services.
How should the compliance program design, technology, Pr eses.
Si-
and resource requirements change in light of growth plans, acy
tions, or product/ category/service expansions?
SOLVED PAPER DEC, 2020 (NEW SYILLABUS) P.11
Is the organization doing enough inlorm customers, investors, third

to
vision and values?Is it making
partics, and other stakeholdersabout its
of ethics, compliance, and risk management investments as
the most
potential competitive differentiators?
and benefits at the centralized
Total compliance costs; beyond salaries most
level and how are costs aligned with
the significant compliance
fines, penalties,
risks that could impact the brandorresult significant
in
litigation?
the compliance function? Does it have a seat
How well-positioned is
"at the table" in assessing
and influencing.strategic decisions?
and professional exposures of executive management
h. The personal
and the board of directors with respect to compliance.
Governance Network ("ICGN") is a not-for-
(b) The International Corporate and not having share capital under
profit company limited by guarantee
1995.
the laws of England and Wales founded in
ICGN's mission
ICGN's mission is to promote effective standards of corporate governance
sustainable
andinvestor stewardship to advance efficient markets and
economies world-wide.
Objective of ICGN
It has four primary purposes:
and
a To provide an investor-led network for the exchange of views
information about corporate governance issues internationally.
b. To examine corporate governance principles and practices.
c. To develop and encourage adherence to corporate governance stan-
dards and guidelines.

d To generally promote good corporate governance.
Ihe Network's mission is to develop and encourage adherence to corporate
gOvernance standards and guidelines, and to promote good corporate
governance worldwide.
()Regulation 30(3) of the Listing Regulations 2015specitiesthat the listed
'A' of Schedule lll,
nty shall make disclosure of events speciBied in Part
based on application of the guidelines for materiality. The board of directors
of the listed entity shall authorize one or more Key Managerial Personnel
Or the purpose of determining materiality of anevent or intormation and
the purpose of making disclosures to stock exchange(s) under this
and the contact details of such personnel shall be disclosed
egulation also
Ue stock exchange(s) and as well as on the listed entity's website.
(d) Answer: As per rule 4 of the Companies (Meeting of Board and.

Powers) Rules, 2014, the following types of matters cannot be disce its
in a board meeting conducted through vidco conterence: discussed
1. Approval of the annual financial statements.
2. Approval of the Board's report.
3. Approval of the prospectus.
4. Audit Committee Meetings for consideration of accounts.
5. Approval of the matter relating to amalgamation, merger, demerger
acquisition and takeover. erger,
(e) Management Discussion and Analysis' should include discussion on
the following matters which are to be disclosed in Annual
Report of listed
companies:
1. Industry structure and developments.
2. Opportunities and Threats.
3. Segment-wise or product-wise pertormance.
4. Outlook
5. Risks and concerns.
6. Internal control systems and their
adequacy.
7. Discussion on financial
pertormance with respect to operational per.
formance.
8. Material developments in Human Resources/Industrial Relations
front, including number of people employed.
9. details of significant changes (ie. change of 25% or more as
to the immediately previous financial
compared
year) in key financial ratios,
along with detailed explanations therefor, including:
a. Debtors Turnover
b. Inventory Turnover
c. Interest Coverage Ratio
d. Current Ratio
e. Debt Equity Ratio
f. Operating Profit Margin (%) (vi) Net Profit Margin (b) or sec-
tor-specitic cquivalent ratios, as applicable.
10. Details of any change in Return on Net Worth as compared to the
immediately previous linancial year along with a detailed explanation
thereof.
PART II
4. (a) Discuss in briet Enterprise Risk Management, its components

Oue.
and limitations. (5 Marks)
tool and that could save time, money
'Risk analysis is an essential
one
statement and bring out the use of risk analysis.

and reputations." Explain the (5 Marks)
direct and immediate impact on business,
id'Non-financial risks do not have hnancial
are very serious and later do have ignificant
but the consequences List the non-f1nancial
well if not controlled at the initial stage."
as
impact
encountered during the course of business by a business entity.
risks (5 Marks)
S. Types of Non- Meaning

Financial Risks
No. Business risks implies uncertainty in prohts or danger
1. Business/
loss and the events that could pose a risk due to
some
Industry & of
future, which business to
Services Risk unforeseen events in causes
fail. Business risk refers to the possibility of inadequate

profits or even losses due to uncertainties e.g, changes
increased
in tastes, preferences of consumers, strikes,
obsolescence
competition, change in government policy,
various risk
etc. Every business organization contains
elements while doing the business. Such type of risk
may also arise due to
business dynamics, competition
relation risk etc.
risks affecting tarifft prices, customer
2. Strategic Risk Business plans which have not been developed properly
and comprehensively since inception may lead to strategic
risk. For example, strategic risk might arise from making
from the substandard execution
poor business decisions,
of decisions, from inadequate resource allocation, or
from a failure to respond well to changes in the business
environment.
3.
Compliance Risk| This risk arises on account of non-compliance or breaches
laws/regulations which the entity is supposed
to
of
adhere. It may result in deterioration of reputation in
public eye, penalty and penal provisions.
Fraud Risk Fraud is perpetrated through the abuse of systems,
controls, proceduresand working practices. It may be
perpctrated by an outsider or insider. Fraud may not
be usually detected immediately and thus the detection

should be planned for on a proactive basis rather than
on a reactive basis.
P.14 SOLVED PAPER DEC, 2020 (NEW SYLLABUS)
Types of Non Meaning

S.
No. Financlal Risks
Irom the negative public .
Reputation Risk This type ol risk ariscs
5. Such type ol risk may arise from.c.g. from the pinion.
o assess compliance risk and c
and control re
resut
in harm to existung or potential business relationc:
Transaction risk arises due to the tailure or inadeguar.
ships.
6. Transaction Risk
of internal system, information channcls, emplove.
integrity or operating processes.
What is meant by handling of risk? Explain risk retention as a method of
handling risk. (5 Marks)

Ans. (a) 'Enterprise risk management' deals with risks and opportunitios
ties
value creation or preservation, defined as follows:
affecting
Enterprise risk management is a process, effected by an entity's board
of directors, management and other personnel, applied in strategy setting
and across the enterprise, designed to identity potential events that may
affect the entity, and manage risk to be within its risk appetite, to provide
reasonable assurance regarding the achievement of entity objectives."
Components of Enterprise Risk Management

interrelated components.
Enterprise risk management consists of eight
These are derived from the way management runs an enterprise and
are integrated with the management process. These components are:
Internal Environment -Theinternalenvironment encompasses the

tone of an organization, and sets the basis for how
risk is viewed
and addressed by an entity's people, including risk management
and risk
philosophy and ethical values, and the
appetite, integrity
environment in which they operate.
Objective Setting- Objectives must exist before management can
identify potential events affecting their achievement. Enterprise
risk management ensures that management has in place a proce
to set objectives and that the chosen objectives support and align
with the entity's mission and are consistent with its risk appetie
Event Identification Internal and external events atfectng
achievement of an entity's objectives must be identified, distin
guishing between risks and opportunities.
Opportunities are channeled back to management's stralegy
objective-setting processes.
Risk Assessment: Risks are analyzcd, considering likclihood and

impact, as a basis tor determining how they should be managcd.
Risks are assessed on an inherent and a residual basis.
Risk Response: Management selects risk responses - avoiding,
accepting. reducing, or sharing risk - developing a set of actions
to align risks with the risk tolerances and risk appetite.
entity's
Control Activities: Policies and procedures are established and
implemented to help ensure the risk responses are effectively
carried out.
Information and Communication: Relevant intformation is idern-
tified, captured, and communicated in a form and timeframe
that enable people their responsibilities. Effective
to carry out
communication also occurs in a broader sense,
across, and up the entity.
flowing down,
Monitoring: The entirety of enterprise risk management is
monitored and modifications made as
Monitoring
necessary.
accomplished through ongoing management activities,
is
evaluations, or both. separate

Limitations of Enterprise Risk Management
Limitations of enterprise risk management
an
management from having absolute assurance preclude

a board and
as to achievement of
the entity's objectives.
Following are these limitations:
Human judgment in decision making can be
Decisions on responding faulty.
to consider the
to risk and
establishing controls need
relative costs and benefits.
Breakdowns can occur because of human
errors or mistakes. failures such as
simple
Controls can be circumvented
by collusion of two or more
Management has the ability to
override people.
ment decisions. enterprise risk manage-
6) Afteridentification of the risk
the risk
which helps to parameters, the second stage is of
undermine identify and
key business initiativesmanage potential analysing
lo or
projects. problems that could
carry out a Risk
Analysis, first identify
estimate the likelihood the
that these threats possible threats and then
shouldbe objective and should be
will
materialize. The analysis
Scenario based industry specitic.
analysis may be Within the
industry, the
may occur and its adopted taking into consideration
cvents that
of
alternative ways to achieve possible
the given target.
Risk Analysis can be complex, as it requires drawingof detailed inf..

such as project plans, financial data, security protocols,,marketingfalin
marketingfo
and other relevant information. However, it's an essential planCasts
rmation
and one that could save time, money, and reputations. tool,
Risk analysis is useful in the following situations:
While planning projects, to help in anticipating and neutralizina
sible problems.
While deciding whether or not to move forward with
project a
While improving safety and

managing polenlial risks in the workplace
ce.
While preparing for events such as equipment or
technology failure
theft, staff sickness, or natural disasters.
While planning for changes in environment, such as new
competitors
coming into the market, or changes to government policy.
When all the permutations-combinations of possible
are listed while analysing the risk
events/threats
parameters and the steps taken to
manage such risks, the risk matrix is designed/popped-up before the
decision making and implementing authority
(c) The ownership of risk should be allocated. Responsibilities and
accountabilities of the persons handling risks need to be identified and
assigned. The persons concerned when the risk arises, should document it
and report it to the higher ups in order to have the
carly measures to get
it minimized. Risk may be handled in the
following ways:
i Risk Avoidance
ii Risk Retention/absorption it may be active or positive
-
ii Risk Reduction
iv. Risk Transfer
Risk Retention/absorption: Handling the unavoidable risk internally and
the firm bears/absorbs it due to the fact that either because insurance
cannot be purchased of such type of risk or it may be of too expensive to
cover the risk and much more cost-effective to handle the risk internally.
Usually, retained risks occur with greater frequency, but have a lowet
severity. An insurance deductible is a common example of risk retenu
to save money, since a deductible is a limited risk that can save money o
insurance premiums for larger. There are two types of retention metnou
for containing losses as under:
Active Risk Retention: Where the risk is retained as
part of delibera
management strategy after conscious evaluation of possible loss
and causes.
Passive Risk Retention: Where risk retention occurred through neg-

ligence. Such type of retaining risk is unknown or because the risk
taker either does not know the risk or considers it a lesser risk than
it actually is.
PART III
Attempt all parts of either O. No. 5 or 0. No. 5A

Oue. 5. (a) Describe the essentials of an effective compliance program.
(b) Internal control can help an entity in achieving its objectives but it is
not a panacea." Discuss.

Discuss the
(). What do you mean by Corporate Sustainability Reporting?
benefits and key drivers of sustainability reporting. (5 Marks)
Ltd. Shirley, the newly
(d) You are Company Secretary of Super Chef of internal
appointed CEO of Super Chef Ltd., is not clear about the conceptcontrols of
control and her role and responsibilities with regard to internal
short
the company. She approaches you to understand the s a m e . Prepare
a
note to brief Shirley on Internal control and her role and responsibilities
in this regard. (5 Marks each)
Ans. 5.
under:
(a) The elements of an Effective Compliance Program may be listedas
1. High level company personnel who exercise effective oversight: The
organization's governing body should be knowledgeable about the
effective complianceprogram and should have oversight ofit. The gov-
erning body should have the overall responsibility for the compliance
the effectiveness of it. Specific individuals
program and shall ensure
shall have overall responsibility for the day to day operations of the
compliance program.
2. Written policies and procedures: The employees of the organization
should be made known the legal requirements so that employees
understand their obligations. The employees should be encouraged
to report suspected fraud and other irregularities without fear.
3. Training and education: The employees of the organization should
be provided reasonable training to understand the organization's
compliance programme and its policies and process.
4. Lines of communication: Information about the compliance progranm
must be widely communicated at all levels of an organization. To
enhance the effectiveness of the compliance program, the programm
must establish lines of communication whereby, employees and agents
P.18 SOLVED PAPER - DEC. 2020 (NEW SYLLABUS)
may seck guidance and report concerns, including the opportunit.

to report anonymously (such as a compliance hot linc: The e
are
assurances that there will be no retaliation lor good faith reportinng
5. Standards enforced through well-publicized disciplinary guidelines:The
organization's compliance and ethics program should be promoteda
enforced consistently through well-publicized guidelines that provida
incentives to support the complance and ethics program, disciplinary
measures for disobeying the law, the organization's policies, or th
requirements of the compliance and ethics program.
6. Internal compliance monitoring: The organization shall take rea.
sonable steps, including monitoring and auditing, to, ensure that the
organization's compliance and ethics program is tollowed, periodically
evaluate the effectiveness of the organization's compliance program.
7. Response to detected offenses and corrective action plans: After mon-
itoring and auditing of the compliance program, the organization shall
take reasonable steps to, respond appropriately to any violations of
the law or policies to prevent future misconduct, modify and improve
the organization's compliance and ethics program.
(b) Internal control can help an entity achieve its objectives; however it is
not a panacea due to its following limitations:
Internal control cannot change an inherently poor manager into a

good one.
Internal controlcannot ensure success, or even survival in case of shifts
in government policy or programs, competitors' actions or economic
conditions, since these are beyond the management's control.
Aninternal controlsystem, no matterhow well conceived and operated,
can provide only reasonable-- not absolute--assurance to management
and the board regarding achievement of an entity's objectives.
The likelih0od of achievement is affected by limitations inherent in
all internal control systems.
Controls can be circumvented by the collusion of two or nmore people,
and management has the ability to override the system.
Another limiting factor is that the design of an internal control sys-
the
tem must reflect the fact that there are resource constraints, and
benefits of controls must be considered relative to their costs.
(c) Sustainability reporting is a process for publicly disclosing an
organization's economic, environmental, and social performance. Gloda
Reporting Initiative (GR) has developed a generally accepted framewors
SOLVED PAPER - DEC. 2020 (NEW SYLLABUS) P.19
a simplify report preparation and assessment, helping both reporters and

to
veport users gain greater value from sustainability reporting.
Benefits of sustainability reporting

Emphasizing the link between financial and non-financial performance.
Influencing long term management stratcgy and policy, and business
plans.
Streamlining processes, reducing costs and improving efficiency
Benchmarking and assessing sustainability performance with respect
olaws, norms, codes, performancestandards, and voluntary initiatives
in publicized environmental, social and
Avoiding being implicated
governance failures.
Key drivers of sustainability reporting

Regulations: Governments, at most levels have stepped up the pres-
sure on corporations to m e a s u r e the impact
of their operations on the
environment. Legislation is becoming more innovative and is coverinng
an ever wider range of activities. The most
notable shift has been from
voluntary to mandatory sustainability, monitoring and reporting.
Customers: Public opinion and consumer preferences are a more
abstract but powerful factor that exerts considerable influence on
companies, particularly those that are consumer oriented. Customers

significantly influence a company's reputation through their purchasing
choices and brand.
Loyalty: This factor has led the firms to much more infor-
provide
mation about the products they produce, the suppliers who produce
them, and the product's environmental impact starting from creation
to disposal.
NGO's and the media: Public reaction comes not just from customers
but from advocates and the media, who shape public opinion. Advo-
cacy organisations, if ignored or slighted, can damage brand value.
Employees: Those who work for a company bring particular pressure
to bear on how their employers behave; they, too, are concerned cit
izens beyond their corporate roles.
P.20 SOLVED PAPER DEC. 2020 (NEW SYILLABUS)
(d)
To,
Ms. Shirley
CEO
Super Chef Ltd.
towards Internal Control
Subject: Role and responsibilities
Dear Ma'am
Internal Control means:
"A system or plan of accounting and financial organization within a huus
ness comprising all the methods and measures necessary for safeguardino
its assets, checking the accuracy of its accounting data or otherwise sub.
stantiating its financial statements, and poliCing previously adopted rules,
procedures, and policies as to compliance and effectiveness"
The chief executive officer is ultimately responsible and should assume
ownership" of the system. More than any other individual, the chief exec.
utive sets the "tone at the top" that affects integrity and ethics and other
factors of a positive control environment. In a large company, the chief
executive fulfils this duty by providing leadership and direction to senior
managers and reviewing the way they're controling the business. Senior
managers, in turn, assign responsibility for establishment of more specihc
internal control policies and procedures to personnel responsible for the
unit's functions. In a smaller entity, the influence of the chief executive,
often an owner-manager is usually more direct. In any event, in a cascad.
ing responsibility, a manager is effectively a chief executive of his or her
sphere of responsibility. Of particular significance are financial officers and
their staffs, whose control activities cut across, as well as up and down, the
operating and other units of an enterprise
According to Regulation 17(8) of SEBI (LODR) Regulations, 2015, you
shall provide the compliance certificate to the board of directors as specihe
in Part B of Schedule II.
The following compliance certificate shall be furnished by you
A.
You have reviewed financial statements and the cash flow statement
for the year and that to the best of your knowledge and beliet
a. These statements do not contain
any materially untrue statemc
oc
or omit any material fact or contain statements that might
misleading.
h. Thesestalementstogetherpresent atruc and tairviewof the listed

entity's alfairs and are in compliance with existing accounting
standards, applicable laws and regulations.
B. There are, to the best of your knowledge and belief, no transactions
entered into by the listed entity's during the year which are fraudulent,
illegal or violative of the company's code of conduct.
C. You accept responsibility for establishing and maintaining internal
controls for financial reporting and that you have evaluated the
effectiveness of internal control systems of the listed entity's pertain-
disclosed to the auditors and
ing to financial reporting and you have
of such
the Audit Committee, deficiencies in the design or operation
internal controls, if any, of which you are aware and the steps you
have taken o r propose to take to rectify these deficiencies.
D. You have indicated to the auditors
and the Audit committee:
i Significant changes in internal control over financial reporting
during the year.
in accounting policies during the year and
ii Significant changes
that the same have been disclosed in the notes to the financial
statements.
become a w a r e
iii Instances of significant fraud of which you have
and the involvement therein, if any, of the management
or an
listed entity's internal

employee having a significant role in the
control system over financial reporting.
Thanking You
Mr. A
Company Secretary
Super Chef Ltd.
OR (ALTERNATE QUESTION TO Q. NO. 5)

the process of
Que.6. (a) The Board of Directors of Fresco Pvt. Ltd. is in
the Company
ewing the list of laws applicable to the company. As
of Fresco Pvt. Ltd., advise the Board on the components of a
Oecretary
ODust internal compliance reporting prOgram.
which companies
Corporate reporting is an essential m e a n s by
co and stewardship
o nicate with investors as a part of theiraccountability
Obligation."
P.22 SOLVED PAPER - DEC. 2020 (NEW SYLLABUSs)
Comment and list out the expccted intormation required by investors

( ) "Risk can arise or change due to crcumstances. Comment and poi
nt
out the cireumstances which result into risks for an cntity.(5 Marks
(dInternal check refers to allocation of dutics in a scicntific way so that r
one is responsible for all phases ol the transactions." Explain the essenti
al
features of lnternal check in the light of above statement. (5 Marks
Ans. (a) For a robust internal compliance reporting program Fresco Pyt
Ltd. should:
1. Understand compliance obligations: The primary element to man-
age compliance is to understand compliance obligation in the light
of strategic goals and objectives. Compliance obligations stem from:
Laws and regulations, industry or generic standards, internal policies,
processes and procedures and contracts executed with clients and
other stakeholders.
2. Assess risks: Once compliance obligations are established, a compli
ance risk assessment exercise should be undertaken to identify risks,
causes, the areas they impact and the consequences thereot. A risk
analysis to have better understanding of the risks should follow. Such
an analysis should consider the factors affecting the consequences and
likelihood of these consequences occurring as well as the controls in
place.
3. Address all compliance risks: An enterprise should ensure an effec-
tive action plan to address all compliance risks with clear ownership.
responsibility, accountability and closure timelines. To ensurerisksare
addressed effectively, the management should ensure that all employ-
ees with compliance obligation are competent. Periodic training and
awareness must becarriedout and any other medium to communicare
assigned responsibilities should be explored. A continuous commu-
nication mechanism is required to ensure all employees understand
compliance and contribute to it by reporting risks and dischargng
their responsibilities effectively.
4. Evaluate performance: A mechanism to measure and monitor the
performance of the compliance practices and its impact on strate
goals and objectives must be developed. It can be done by seekng
and
feedbacksfrom clients, stakeholders, suppliers, vendors, employees
government agencies are a g0od sourceof data to ascertain complian
pertormance. Governance mechanisms in the form of manageme
reat
grca
reviews, internal audits and periodic compliance reporting give
insights on the pertormance of compliance practic
Cxpects the followingintormation:
) InvestorS
Business model and strategy.
Intangible factors and sustainability (1.c. economic, environmental

social) commitments.
Impacts and pertormance that attect a company's value today andits

ability to create value in the future.
4. Key aspects of corporate governance.
5. Internal controls.
6. Human rights/diversity practices and policies.
7.Kev financial ratios
the following circumstances:
Risks can arise or change due to
1. Changes in operating environment: Changes in the regulatory or

operating environment can result in changes in competitive pressures
and significantly different risks.
2. New personnel: New personnel may have a different focus on or
understanding of internal control.
3. New or revamped information systems: Significant and rapid changes
in information systems can change the risk relating to internal control.
4. Rapid growth: Significant and rapid expansion of operations can strain
controls and increase the risk.
5. New technology: Incorporating new technologies into production
processes or information systems may change therisk associated with
internal control.
6. New business models, products, or activities: Entering into business
areas or transactions with which an entity has little experience may
introduce new risks associated with internal control.
7. Corporate restructurings: Restructurings may be accompanied by statt
reductions and changes in supervision and segregation of duties that
may change the risk associated with internal control.
8.
Expanded foreign operations: The expansion or acquisition ot toreign
operations carries new and often unique risks that may affect internal
control, for example, additional orchanged risks from foreign currency
transactions.
9. New
accounting pronouncements: Adoption of new accounting prin-
ciples or changing accounting principles may affect risks in preparing
N
Ote Students can write any five points of their choice)
OIVD IAP D 2020 (NIW YIJABUS)
P.24
() l'ollowing e ilhe ensential features ol lilernal Check

I Thee shuld D poper divinion ol WOrk and responsibilities
dutien ol eanh peren shoud d a

be properly delincd
so s
2. The each individual.
as to s
lix
delinite enonibilities ol
PONsilbilitien ol giving abolule conlrol to anybody should not h
be left
l nehecked.
4 Too ueh conlidenee ona peron should be avoided.
5. The duties of sMall shud be olaled and one person should not be
allowed lo occupy i parlicular arca ol operalion lor long.
6 Necesary naleguards should be provided s) as to avoid collusion
thoughts which quitle often leads to comnission of fraud.
7. The person handling cash, stock, securities should be given compulsorv
leave so ias to prevent their having uninterrupted control.
8. Physical inventory ol lixcd assets and stocks should be taken period.
ically.
9. Assets should be protected from unauthorised use.
10. Toprevent loss or misappropriation of cash, mechanical devices such
as the aulomatic cash register, should be employed.
(Note: Students can wrile any live points of their choice)
PART IV
Que. 6A. (a) A Code of Ethics' and a 'Code of Conduct' are often confused
or used interchangeably. Discuss. (5 Marks)
(h) Explain the concept and need to apply the Triple Bottom approach
for CSR. (5 Marks)
Ans. (a) The terms "Code of Ethics" and "Code of Conduct" are often
mistakenly used interchangeably. They are, in fact, two unique documents.
Codesofethicsgoverndecision-making, and codesofconduct govern action.
represent two common ways that companies self-regulate.
Similarities between Ethicsguidelines attempt to provide guidance about values

"Code of Ethlcs" and and choices to influence decision making.
"Code of Conduct Conduct regulations assert that some specific actions
are appropriate, others in appropriate. In both cases
Ihe organization's desire is to
obtain a narrow range
acceptable behaviours from employees.
Both aresimilar as they are used in an
attempt to encoul
specific forms of behaviour by employees.
SONRDPAPRR DEC 2020 (NEW SYLABUS) P.25
piterenees between tlhic al standards generally are wide ranging and non
t e of Hhies"and sile, designed to provide a set of values or decision
ade of Conduet" nnaking approaches that cnable emplovees to make
independent judgments about the nmost appropriate course
actio1.
Conduct standards generally require a fairly clear set of
epectations about which actions are required, acceptable
or prohibited.
Violation of code of ethics may not lead to action against
the employvee but violation of code of conduct may lead
to disciplinary action.
b) nple Bottom Line' is a phrase coined in 1994 by John Elkington.
The coneept ot the Triple Bottom Line proposed that business goals are
inseparable trom the society and environment within which they operate.
The lnple Bottom Line (TBL) is made up of Social, Econonmic and
Enironmnial 'aspect and is indicated by the People, Planet, Profit phrase.
People (Human Capital) pertains to fair and beneficial business

practices towards labour and the community and region in which a
corporation conducts its business.
Planet (Natural Capital) refersto sustainableenvironmental practices.
Planet concerns include: Climate change, energy, water, biodiversity
and land use.
Profit' is bottom lineshared by all customers. It is the retlection of
lasting economic impact the organisation has on its business activities
and that too after meeting all costs that would protect society and
environment.
The need to apply the concept of TBL is caused due to -
(a) Increased consumer sensitivity to corporate social behaviour.

b) Growing demands for transparency from shareholders/stakeholders.
()Increasedenvironmental regulation.
(a)Legal costs of compliances and defaults
(e) Concerns over global warming.
) Increased social awareness.
3 Awareness about and willingness for respecting human rights.
h) Media's attention to social issues.
Growing corporate participation in social uplittment
SOLVED PAPER JUNE' 2021
-
(NEW SYLLABUS)
PART I
Que. 1. ABC Ltd., is a Joint Venture between an Indian Companv and a
Multi-National Company. In present Covid pandemic situation, a Boor

Meeting through video conference was held on 29th October, 2020 atta
items was approval of tho
shorter notice of 3 days. One of the agenda
30th September, 2020.
financial statements for the quarter ended
One of the Directors joined late in the Board Meeting and was not present
while discussing one agenda item. None of the Independent Directors were
present. The Company needs funds and is proposing to issue rights shares
Board recommended increase in authorised share capital as well as approved
December, 2020.
31st
convening of an EGM through Video Conference
on
The Board discussed on a business proposal at length in the Board Meeting

When minutes were circulated by the Company Secretary, both the joint
venture nominee Directors on the Board of the Company had different
views on the discussions made and suggested modifications to the minutes
which were not in harmony with the minutes circulated by the Company
Secretary.
Chairman of the Board of Directors is nominee of Indian Company. He is
firm that Chairman's decision is final in finalising the nminutes of the meeting
Based onthe above facts, answer the following questions:
(a) Discuss whether the financial statements can be approved in Board
Meeting through Video Conferencing?
() What is the procedure to be followed by the CompanySecretarywhen
conducting Board Meeting through Video Conferencing as per S5
(c) How is proceeding of the Meeting is recorded by the Company
retary in the Board Meeting? Discuss on recording and finalisatno
of minutes in light of the provisions of applicable SS-1.
Exam held in the month of August.
P.26
SOLVED PAPER JUNE 2021 (NEW SYI.ILABUS) P.27
?
C a n EGM be held through Vidco Conferencing
(5 Marks each)
Ans. 1.
Rule 4 of the Companics (Mecting of Board and its Powers)
ia) As per
in a board
Rules, 20O14, the tollowing types of matters cannot be discussed
conductcd through vidco conference:
meeting
1. Approval ot the annual financial statements.
2. Approval ot the Board's report.
3. Approval of the prospectus.
of accounts.
4. Audit Committee Meetings for consideration
5. Approval of the matter relating to amalgamation, merger,
demerge,
acquisition and takeover.
the
For the period beginning from the commencement of Companies
Amendment Rules, 2020 and ending
(Meetings of Board and its Powers)
on the 3 1st December 2020,
the meetings on matters referred above may
other audio visual m e a n s in a c c o r -
be held through video conferencing or
of Board and
dance with rule 3. [Substituted by the Companies (Meetings
dated 28th September, 2020;]
its Powers) Third Amendment Rules, 2020,
Therefore there is no bar on approval of financial statements through
video conferencing.
Com-
Author's Note For the period beginning from the commencement of the
-
Amendment Rules, 2020 and ending

panies (Meetings of Board and its Powers)
on the 30th June 2021, the meetings on matters referred to in sub-rule (1) may
be held video or other audio visual means in accordance
conferencing
through
with rule 3. [Substituted by the Companies (Meetings of Board and its Powers)
Fourth Amendment Rules, 2020, dated 30 Dec. 2020.]
(6) While giving Clarification/Guidance on applicability af Secretarial Stan-
dards on Meetings of the Board of Directors (SS-1) and General Meetings
(SS-2), ICSI has emphasised the "SCOPE" of SS-1 and SS-2 which read
as
under:
This Standard is in conformity with the provisions of the Act. How
Standard
ever, if, due to subsequent changes in the Act, a particular
or any part thereof becomes inconsistent with the Act, the provisions
of the Act shall prevail"
ection 173 of Companies Act, 2013, read with Rules 3 & 4of the Companies
(Meetings of Board and its Powers) Rules, 2014 lay down the legal pro
oOns with respect to holding Board meetings through video conferencing
ection 173, sub-section (2) of Companies Act, 2013 provides that par
icipation of directors in a meeting of the Board may be either in pers
through video conferencing or other audio visual means, as may be

202 1 (NEW SYLLABUS)
P.28 SOLVED PAPER- JUNE
recording and recognising the particina

prescribcd, which are capable of
and storing the proCeedings of such
ion of the directoS and of rccording
timc.
meetings along with the date and
Board and its Powers) Rules, 2014:
Rule 3 of the Companies (Meetings of the Board mectings
Deals withthe procedure,forconvening and conducting
vidco confercncing or other
audio visual m e a n s.
through
Board and its Powers) Rules, 2014:
Rule 4 of the Companies (Meetings of
Matters not to be dealt with in a meeting
through vidco conterencing or
the Companies (Meetings
other audio visual means has been omitted by
2021.
of Board and its Powers) Amendment Rules,
and maintained in the lorm of min-
(c) Proceeding of a meeting is prepared
in physical or electronic form,
utes. Minutes means a formal written record,
Book means a Book maintained
of the prOceedings of a Meeting. Minutes
of recording of Minutes.
in physical or in electronic form for the purpose
Secretarial Standards 1
Recording of Minutes as per
Minutes shall contain a fair and correct summaryot theproceed
ings of the Meeting.
Minutes shall be written in clear, concise and plain language.
Wherever the decision of the Board is based on any unsigned
documents including reports or notes or presentations tabled or
at the
presented which were not part of the Notes on
Meeting,
Agenda and are referred to in the Minutes, shall be identified by
of such documents by the Company Secretary or the
initialling
Chairman.
Where any earlier Resolution(s) or decision is superseded or
modified, Minutes shall contain a specitic reference to such
earlier Resolution(s) or decision or state that the Resolution is
in supersession of all earlier Resolutions passed in that regard.
Minutes ofthe preceding Meeting shall be noted at a Meeting of
the Board held immediately following the date of entry ot such
Minutes in the Minutes Book.
Finalisation of Minutes as per Secretarial Standards 1
Within fifteen days from the date of the conclusion of the Meeting
of the Board or the Committee, the draft Minutes thereof shall
be circulated by hand or by speed
post or by registered post o
by courier or by e-mail or by any other recognised electronic
means to all the members of the Board or the Committee, as
the date of the
O
Meeting, for their comments.
(d) The Ministry of Corporate Affairs has issued a General Circular
allowing
companies to hold Extraordinary General Meetings (EGMs) through vide
conferencing (VC) or other audio-visual means ted
(OAVM), complemen
SOLVED PAPER - JUNE 2021 (NEW SYLLABUS) P.29
h C-voting lacility or voting through registered emails. In furtherance

h e Government's objective of facilitating corporate compliances during
lockdown period and other restrictions on account of COVID-19, the
inistrythroughthiscircularhas allowed companics to hold Extraordinary
neral Mcctings. Unavoidable' extraordinary general mneetings (EGMs)
accd to be held through video-conferencing (VCs) and a transcript of the
aCcedings would need to be maintained by the company.
Attempt all parts of either 0. No. 2 o r 0. No. 2A

Oue. 2. (a) The 'Fit and Proper criteria for nomination of dircctors applies
with the statement ? Describe
only to private sector banks. Do you agree
the phrase Fit
and Proper.' (5 Marks)
of POR Ltd. (BSE Listed
(b) During the Meeting of Audit Committee
Company), the member of the Audit Committee so desired to detailed
information on material management control at depot. He also required
The project head
the financial control system o n material movement.
opined that Audit Committee has no such power. In light of the provisions
of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015, explain
whether such information can be called by Audit Committee. What panel
Audit Committee is not constituted
provisions are applicable in case of
as
persection 177 of the Act? (5 Marks)

Disclosures of
()What are the Materiality Guidelines ? Prepare a note on
events upon application of the Materiality Guidelines. (5 Marks)

Ans. 2.
(a) Refer to Chapter 2 Important questions for examination Answer No. 3
(b) Following are the powers of the Audit Committee under Companies
Act 2013 and SEBI (LÖDR) Regulations, 2015:
of
Section 177 (5), (6) and (7) ofthe Companies Act, 2013 Regulation 18(2)(c)
the SEBI Listing Regu-
lations,2015
(5) The Audit Committee may call for the comments of | The audit committee
the auditors about internal control systems, the scope shall have powers to
of audit,including the observations of the auditors and investigate any activity
review of financial statement before their submission within its terms of refer-
tothe Board and may also discuss any related issues ence, seek information
with the internal and statutory auditors and the man- from any employee,
agement of the company. obtain outside legal
other professional
6)The Audit Committee shall have authority to inves- o r
and secure at-|
einto any matter in relation to the items specified| advice
tendance of outsiders
(4) o r referred to it by the Board and for
th ction
s purpose shall have power to obtain professional with relevant expertise,
necessary.
e t r o m external s o u r c e s and have full access to ifit considerS
ntormation contained in the records of the company.
P.30 SOLVED PAPER JUNE 2021 (NEW SYLILABUS)
Section 177 (5), (6) and (7) of the Companles Act,

2013 Regulation 18(2)(c) o
the SEBI Listing Regu-
lations, 2015
the key managerial

()Theauditors ofacompany and the meetings
personnel shall have a right to be heard in
the auditor's
ofthe Audit Committee when it considers
report but shall not have the right to vote.
Therefore in light of the above provisions information about material man-
on material movement
agement control aswell as financial control system
can be called by Audit Committee.
that in case of any con-
Section 178(8) of Companies Act, 2013 provides
travention of the provisions of Section 177, the company shall be liable to
a penalty of five lakh rupees
and every officer ot the company who is in
default shall be liable to a penalty of one lakh rupees.
2015 the listed entity
(c) As per Regulation 4 of SEBI (LODR) Regulations,
shall frame a policy for determination of materiality of events/informa-
which shall be disclosed
tion, approved by the board of directors and
on
its website on the basis of following criteria:

a The omission of an event or information, which is likely to result in
discontinuity or alteration of event or information already available
publicly or
b. The omission of an event or information is likely to result in significant
market reaction if the said omission came to light at a later date or
c. An event/information may be treated as being material if in the opin
ion of the board of directors of listed entity, the event/information is
considered material.
Following events shall be disclosed upon application of the guidelines for

materiality:
1. Commencement or any postponement in the date of commencement
of commercial production or commercial operations of any unit/
division.
2. Change in the general character or nature of business brought abour
by arrangementsforstrategic, technical, manufacturing. or marketing
tie-up, adoption of new lines of business or closure of operations o
any unit/division (entirety or piecemeal).
3. Capacity addition or product launch.
Effect(s) arising out of change in the regulatory framework appiuca
icable
to the listed entity.
SOLVED PAPER JUNE 2021 (NEW SYLLABUS) P.31
5. Fraud/detaultscte. by directors(otherthan key managerial personnel)

or employees of listed cntity.
Note: This list is inclusive and not exhaustive)
OR (Alternate question to Q. No. 2)

Que. 2A. () Which Authority issued code on Stewardship for Insurer in
India ? What are the Principles of such Guidelines? (5 Marks)
( )The Finnish Corporate Governance Code 2020(2020 CG Code) came into
force and applicable to listed companies on Nasdaq Helsinki Ltd. (Helsinki
Stock Exchange). What is the key recommendation with respect to Related
Party Transaction in this Code?
(iin Define the role of Stakeholders in Corporate Governance under SEBI
(LODR) Regulations, 2015. (5 Marks)
Ans. 2A.
()Refer to Chapter No. 2 Important Questions for examination Answer
No. 4.
(i) Recommendation 27 of Finnish Corporate Governance Code 2020
deals with Related party transactions. It provides the following:
Related Party Transactions in General: The board of directors
must monitor and assess the company's related party transac
tions. The board of directors decides on related party transactions
that are not conducted in the ordinary course of business of the
company or are not implemented under arm's length terms.
Definition of Related Parties and Maintenance of List of Related

Parties: The company shall define the parties that are related
to the company. If the company's related parties have not been
identified appropriately and the information has not been kept
up to date, related party transactions can go unnoticed.
ldentifying Relaied Party Transactions: Related party transaction
means an agreement or other legal act between the company and
a related party. When identifying related party transactions, the
actual contents of the transaction, party, and the relationship
between them must be accounted for, not just the legal form
thereof.
Princlples for Monltoring and Evaluating Related Party Trans
actions: The board of directors shall monitor and evahuate trans-
actions between the company and its related parties
Decision Making and Conflict of Interest Reguhtions: It is vital to
identify related party transactions. Further the decision making
P.32 SOLVED PAPER JUNE 2021 (NEW SYLLABUS)
of the board of directors must also take provisionsor

interest into account, because board
members not
cannot icts oi
parts
in deciding a matter concerning themselves participate
Publication of the Principles: The principles for related
transactions are published in a manner decided by the, ted party
in
the compa
the company's annual corporate governance:statenmenty
providesshareholders and investors with the opportunity to as
the practices that the company complies with. assess
(iii) Regulation 4 of SEBI (Listing
Obligations
and Disclosure quire
ments) Regulations, 2015 provides for role of stakeholdersRequire
porate governance. The listed entity shall recognise the
in Cor
stakeholders and encourage co-operation between istedrights of its
the stakeholders, in the entity and
following manner:
i The listed
entity shall respect the rights of stakeholders that
established by law or through mutual are
agreements.
ii Stakeholders shall have the opportunity to obtain
for violation of their rights. effective redress
iii Stakeholders shall have access to relevant, sufficient and
information on a timely and regular basis to enable reliable
them to par-
ticipate in corporate governance process.
iv. The listed entity shall devise an
effective vigil mechanism
whistle blower policy
enabling stakeholders,
employees and their representative bodies, to including individual
freely communicate
their concerns about illegal or
unethical practices.
Que. 3. (a) Write the short notes on CSR Audit.
(b) ICSI Recommendations to
work suggests for constitution strengthen Corporate Governance trame
of Corporate
mandatory basis. If such recommendations are Compliance Committee on
authority, what will be the accepted by compele
that may be included in applicability?
Highlight any 3 major tunctiois
charter of the Committee.
()Prepare a brief note on Corporate Secretaries International Associat10n
Limited.
(d) Governance, Risk and
of
capabilities that enable
Compliance (GRC) is the integrated cole tion
address uncertainty and act organization to reliably achieve objec
an
with
(e) When will a transaction with a integrity." Explain.
related party be material?
(3 Marks each)
sOLVED PAPER - JUNE 2021 (NEW SYLILABUS) P.33
Ans. 3.
)Various provisions of the Companies (Corporate Social Responsibilitv

(a) and reporting mechanism for
ules, 2014 require the
monitori
Policy) CSR Com-
activities. It is the responsibility of the Company through
CSR to be utilized a s per
to monitor the funds of the Company which are
ittee of CSR Activities, has
Policy of the Company. Handbook o n Audit
she CSR the members in meeting
published by the ICAI in an etfort to guide
heen stakeholders in this respect.
expectations of the professionals and the
the
about the following:
It provides
CSR activities s e e m s not to be mandatory
as per
Requirement of audit of
various provisions of the Companies (Com
Companies Act, 2013. However, and
Social Responsibilities Policy) Rules, 2014 require the monitoring
pany These include:
mechanism for CSR activities.
reporting
S.
PROVISION REQUIREMENT
No.
of a decides to under
| Provided that if, the Board a company established under
company
1. Proviso to
Sub-Rule take its CSRactivities through
(2) | Section 8 of the Act or a registered trust or a registered
of Rule4
in this sub-rule, such
society, other than those specified
shall have a n established track
company o r trust o r society
similar programs or
record of three years in undertaking
the projects o r
projects; and the company has specified of
programs to be undertaken, the modalities of utilisation
funds of such projects and programs and the monitoring
and reporting mechanism.
Sub-Rule (2) | The CSR Committee shall institute a transparent monitor

2.
ing mechanism for implementation of the CSR projects
or
of Rule 5
programs or activities undertaken by the company.
3. Sub-Rule (1) | The CSR Policy of the company shall, inter alia, include
(b) of Rule 6 monitoring process of such projects or programs.
(b) Refer to Chapter No. 5 Answer No. 20.
() Corporate Secretaries International Association Limited (CSIA) is an
international federation of governance professional bodies for Corporate
Secretaries & governance professional and represents those who work as
frontline practitioners of governance throughout the world. It was estab
lished on February 10, 2017 as a Company limited by Guarantee in Hong
Kong. Following are the objectives of CSIA:
T o promote the professional status of suitably qualified Chartered
Secretaries, Corporate Secretaries, Company Secretaries, board sec-
retaries and other governance professionals.
P.34 SOLVED PAPER -JUNE 2021 (NEW SYLLABUS)
T o establish and maintain good relations and cxchanges betwe

ganisations dedicated to the promotion and practice of secretar
and/or the promotion of good governance.
T o develop and improve their services and profcssionalism of th
their
members.
T o assist in the creation of such organisations in countries or res
in which they do not currently exist.
regions
(d) Refer to Chapter No.10 Important questions for examination Answer
No. 5.
(e) The following provisions deal with the materiality of related rty
transaction:
Regulation 23 of SEBI (Listing Obligations and Disclosure Require

ments) Regulations, 2015 provides that a listed entity shall formulate
a policy on materiality of related part transactions and on dealing
with related party transactions including clear threshold limits duly
approved by the board of directors. Such policy shall be reviewed by
the board of directors at least once every three years and updated
accordingly.
Explanation: A transaction with a related party shall be considered
material if the transaction(s) to be entered into individually or taken
together with previous transactions during a financial year, exceeds
ten per cent of the annual consolidated turnover of the listed entity
as per the last audited financial statements of the listed entity.
Regulation 23(1A) of SEBI (Listing Obligations and Disclosure Require
ments) Regulations, 2015 further provides that notwithstanding the
above, with effect from July 1, 2019 a transaction involving payments
made to a related party with respect to brand usage or royalty shall be
considered material it the transaction(s) to be entered into individually
or taken together with previous transactions during a financial year,
exceed five per cent of the annual consolidated turnover of the listed
entity as per the last audited financial statements of the listed ent
PART II
Que. 4. () What type of risk is the Covid Pandemic?
at
(b) Is Risk Management Policy mandatory for private companies ?
are the advantages of Risk management?
()Write short notes on ISO 31000.
(d What is Reputation Risk ? How is it managed?
sOLVED PAPER JUNE 2021 (NEW SYLLABUS) P.35
Ans. 4.
i.e. Controllable risk
according to controllability,
a) Risk may be classilicd
and Uncontrollable risk. Controllable risks are catcgorized as Unsystematic
Risk whereas uncontrollablerisk is categorized as Systemic Risk. Following
are the characteristics of a Systemic Risk:
I t is not fully uncontrollable by an organisation.
I t is not entirely predictable.
I t is usually of a macro nature.
number of organisations operating undera
I t usually aftects a large
similar stream.
be assessed and anticipated in advance in terms of
I t cannot fully
timing and gravity.
Covid Pandemic is a systemic Risk. It is not fully uncontrollable by
It is not entirely predictable. It has affected various
an organisation.
organisations acrossthe globe. Covid cannot be fully assessed and anticipated
in advance in terms of timing and gravity.
(6) Section134(3)(n) of the Companies Act, 2013 provides; a statement

indicating development and implementation of a risk management policy
for the company including identification therein of
elements of risk, if
threaten the existence ot the
any, which in the opinion of the Board may
company. Therefore it is a prerequisite for a private company.
advan-
Properly implemented risk management policy has many potential
tages to an organization in the form of:
Better informed decision making - for example in assessing new op
portunities;
Less chances of major problems in new and ongoing activities.
Increased likelihood of achieving corporate objectives.

Risk management is the culmination of decision taken to improve corpo-
rate governance.
(c) Refer to Chapter 12 Answer No. 25.

(d) Refer to Chapter 12 Answer No. 22.
PART III
Attempt all parts of either Q. No. 5 or Q. No. 5A

of ABC
Que. 5. (a) You are newly appointed as the Company Secretary
Pvt. Ltd. Rama, who is the CEO of the Company, is not clear on concept
and applicability of internal audit to your company. She approaches you
JUNI 2021 (N:W SYILAUS)
SOLVED PAPER
P.36
briel Rama
a short note o briet Rama oc
on
to understand the same. Prepare concep
and applicability of internal audit as per the provisions of ConpanicsAc
2013 to your company.
(b) Why Non-Financial Reporting is important lor companies?

(c) Administrative Controls have an indircct rclationship with cial
this statement?
records. Doyou agree with
concept, what challene
(d) Sustainability Reporting being relatively
a new
?
do you foresee in mainstreaming sustainability reporting
(5 Marks each)
Ans. 5.
(a) Refer to Chapter 13 Important questions lor examination Answer
No. 4.
(b) Non-financial reporting is an opportunity to communicate in an open
and transparent way withstakeholders. In their non-financial reports,firms
volunteer an overvicw of their environmental and social impact during
the previous year. The information in non financial reports contributes to
building upa company'srisk-returnprofile. Non-financial reporting includes
a Board's Report
b. Corporate Social Responsibility Report
c Corporate Sustainability Reporting
Many opine that from the time of Industrial Revolution, economic devel.
opment has come at the cost of environment and has brought about large
scale destruction of nature. Due to the negative externalities of economic
development, the practice of non-financial reporting started largelyinre
sponse to pressure from non-governmental organisations (NGOs) and civic
society, which claimed that many firms lacked social and environmental
responsibility. It epitomises that a company's fFinancial health is dependent
on much more than the assets on its balance sheet and the movements on
its profit and loss account.
Therefore non-financial reporting
plays an important role as is a structured
way of presenting information about ones performance. It is the practice
of measuring,
disclosing
and being accountable to internal and
stakeholders for organisational performance towards the goal of external
sustain
able and inclusive development.
(c) Refer to Chapter 13 Answer No. 3
()Refer to Chapter 14 Answer No. 2(i)
SOLVED PAPER JUNE 2021 (NEWw SYLLABUS) P.37
OR (Alternate question to 0. No. 5)
Que. 5A.() Elucidate the purposes and limitations of Financial Reporting.

(i Explain the meaning of internal control and internal audit and also
mention how these two are different from each other.
(id What are the Guiding Principles for preparation of an integrated report?
(iv) Discuss the relation between integrated reporting and sustainability
reporting. (5 Marks each)
Ans. 5A.
(i) Financial reportingis the process of producing statements that disclose

an organisation's financial status to management, investors and the
government.
Purpose of Financial Reporting: Financial reporting serves two
primary purposes.
I t helps management to engage in effective decision-making
concerning the company's objectives and overall strategies.
The data disclosed in the reports can help management dis-
cern the strengths and weaknesses of the company, as well
as its overall financial health.
Financialreporting provides vitalinformation about the finan-

cial health and activities of the company to its stakeholders
including its shareholders, potential investors, consumers,
and government regulators. It's a means of ensuring that
the company is running appropriately.
Limitations of Financial Reporting
Financial Reporting involves the disclosure of financial informa-
tion to the various stakeholders about the financial performance
and financial position of the organisation over a specified period
of time. These stakeholders include - investors, creditors, public,
debt providers, governments & government agencies.

I n case of listed companies the frequency of financial reporting
is quarterly & annual. However, the current financial reporting
model was developed in the 1930's for an industrial world.
I n general, the model provides a backwards-looking review of
pertormance and does not provide enough relevant intormation
for decision- making today.

T h e financial reporting model is like "looking in the rear-view mir-
ror," when in fact the road ahead is very turbulent and there are
environmental.
huge impacts on the company, both societal and
SYILABUS)
(NEW
P.38 SOLVED PAPER - JUNE 2021
informalion,
but the lack af.
volume of
the in corporat.
I s not necessarily
where
improvements rate
which is
COmprehensive story,
reporting arc nceded. about Businese
intormation
I n today's world
Investors cxpcct a n d sustainability (ie
factors
intangible impacts and
model and strategy, commitments,
environmental,
social) and its ability
CConomic, v a l u c today
affect a company's
pertormance that
etc.
to create value in the future, the nature of the
315(SA 315)
to The Standard onAuditing
(11) According
internal control depicts the following implemented and main.
Internal control is a process designed, management and
with the governance,
tained by charged
those
other personnel. achievement of an
assurance
about the
It provides
reasonable
financial reporting, effec-
of
in the categories and
entity's objectives sateguarding of assets
of operations,
tiveness and efficiency
laws and regulations.
compliance with applicable a n audit on behalf
meant
traditional parlance,
Internal auditing'in its
e n s u r e only:
ofmanagement to
controls.
and effectiveness of internal
a. The adequacy
other records and r
and timeliness of financial and
b. Accuracy
ports.
the laid down policies and procedures
by each unit
Adherence to
c.
of the organization.
Internal Control and Internal
Following are the differences between
Audit:
INTERNAL CONTROL
INTERNAL AUDIT
S. BASIS
No.
means an
1. MEANING Internalcontrolis thesystem | Internal auditing
implemented by a company | audit on behalf of management
to ensure the integrity of to ensure the adequacy and
financial and accounting in- effectiveness of internal con
formation and that the com- | trols, accuracy and timeliness
records
pany is progressing towards of financial and other
fulfilingitsprofitability and and reports and adherenc
operational objectives in a to the laid down polces
successful manner. procedures by each unit ofthe
organization.
SOLVED PAPER JUNE 2021 (NEW SYLLABUS) P.39
BASIS INTERNAL CONTROL INTERNAL AUDIT
VERIFI I is a self-balancing mech- | Theentire work process/system

CATION anism implemented by the is checked and reviewed by the
management, so as to ensure internal auditor.
that the entirework process
is divisible in parts, so that
not a single person may have
the access to complete the
entire process.
3. WHAT IT It is a system introduced by |It is an activity done by the
IS? the management. internal auditor.
WHEN IT Internal Control is a policy Its periodicity may be yearly
IS DONE? decision by the management or half yearly or quarterly, as
and is a continuous process. decided by the management.
3. PURPOSE Formulation and circulation Detecting and reporting errors

of management principles and frauds and irregularities
and policies and effective regarding assets committed, if
and speedyexecutionthere- any detection and prevention
of with the help ofinternal activity.
checking and internal audit
activities.
SCOPE Wider in scope than internal Limited to a continuous internal
check. system of checking financial
and non-financial operations
and reporting to internal top
management.
iii) Refer to Chapter 14 Answer No.10
(iv) Refer to Chapter 14 Answer No.1
Que. 6. (a) Explain specific additional provisions for Board Members and
Management Committee Members in a Model Code of Business Conduct
and Ethics. (5 Marks)
(b) Define the following terms
() Standard and Poor's ESG India Index
(i) Sustainable Value Added (SVA)
(ii) Undue Advantage" as per Prevention of Corruption Act, 1988
(iv) "Bribery under ICSI Anti Bribery Code
(v) Central Vigilance Commission. (5 Marks)
Ans.6.
(a) Following are the additional provisions for Board members and Man-
4gement Committee Members in a Model Code of Business Conduct and

Ethics:
P.40 SOLVED PAPER - JUNE 2021 (NEW SYLLABUS)
As Board members
We undertake to inform the Chairman of the Board of any chang.
es in our other board positions, relationship with other business
and other events/circumstances/conditions that may interfere
with our ability to perform Board/Board Committee duties or
may impact the judgment of the Board as to whether we meet
the independence requirements of Listing Agreement with Stock
Exchanges.
We undertake that without prior approval of the disinterested
members of the Board, we will avoid apparent conflict of interest.
a. Related Party Transactions: Entering into any transactions
or relationship with the Comparny or its subsidiaries in which
we have a financial or other personal interest (either direct
ly or indirectly such as through a family member or other
person or other organisation with which we are associated).
b Outside Directorship: Accepting Directorship on the Board
of any other Company that competes with the business of
Company.
c
Consultancy/Business/Employment: Engaging in any ac
tivity which is likely to interfere or conflict with our duties/
responsibilities towards the Company.
d Use of Official position for our personal gains: We should
not use our official
position for our personal gains.
As Board/Management Committee Members
We undertake to actively participate in
meetings of the Board,
or the Committees thereof and the
meetings of Management
Committee on which we serve.
(b)(i) Refer to Chapter No.16 Answer No. 37
(b)(i1) Sustainable development is a normative concept laid out as the
combination of economic prosperity, environmental integrity and social
equity. Value is created whenever benefits exceed costs. Following are
the two approaches to measure
corporate contribution to sustainability:
a Absolute Measures: The absolute measure of
tributions to sustainability is to subtract the assessing corporate con-
costs from the benetits
created by a company. For this
purpose both internal and external
costs need to be considered. A
company must contribute to sustain-
ability, if the benefits exceed the sum of internal and external costs.
The result is 'GreenValue Added'. (GVA).
b. Relative Measures: The relative measures
express corporate contribu-
tions to sustainability as benefits per unit of
environmental or social
impact.
SOLVED PAPER JUNE2021 (NEW SYLLABUS) P.41
For exaple: Eco-cfficiency- There are two different uses of the term
eco-ctficieney.As a maxim eco-cfficiency refer to the reduction or even
minimization impacts. The second notion uses the term eco-efficiency
to describe the ratio of created value per environmental impact added.
Current approaches to measure corporate sustainable pertormance take
into account external costs caused by environmental and social damage
or focus on the ratio between value creation and resource consumption.
Sustainable Value Add measures whether a company creates extra val
ue while ensuring that every environmental and social impact is in total
constant. Therefore, it takes into account both, corporate eco and social
efficiency as well as the absolute level of environmental and social resource
consumption (eco and social etfectiveness).
As a result, Sustainable Value Added considers simultaneously economic,
environmental and social aspects. The overall result can be expressed in
y ot the three dimensions of sustainability. Sustainable Value Added
assesses the sustainable performance of enterprises.
(6)(ii) Section 2() of Prevention of Corruption Act, 1988 defines Undue
advantage as any gratification whatever, other than legal remuneration.
For the purposes of this clause
a "Gratification" is not limited to pecuniary gratifications or to gratifi- s
cations estimable in money.
b. "Legalremuneration' is not restricted to remuneration paid to a public
servant, but includes all remuneration which he is permitted by the
Government or the organisation, which he serves, to receive.
Explanation 1:Personsfalling under any of the above sub-clauses are public
servants, whether appointed by the Government or not.
Explanation 2: Wherever the words "public servant" occur, they shall be
understood of every person who is in actual possession of the situation of
a public servant, whatever legal defect there may be in his right to hold
that situation.
(b(iv) According to Bribery Code. Bribery' includes giving or
ICSI Anti
receiving bribe and third party gratification. The act of giving bribe is when
committed intentionally in the course of economic, financial or
commer-
Cial activities and when it is established that there is a promise, oftering

who
or giving, directly or indirectly, of an undue advantage to any person
directs or works, in any capacity, for a commercial entity, for the person
he in breach of his duties, act
mselt or
for another person, in order that
or refrain from acting.
(b() Refer to Chapter No.17, Important questions for examination
Answer No. 3.
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TAXMANN'S

ICS] S-PROFESSIONAL CRACKER

Chapter-wise Marks Distribution and Trend Analysis of Past Exams

Adv. Ritika Godhwani

December 2021 Exam

Governance and Compliance Risk 10.1

2019 2020 2021

Year Question Com Chapter Name Marks Category

2(c) Conceptual Framework of Corporate 5 Theory

2A(i) Legislative Framework of Corporate 5 Theory

2A(iin) Corporate Governance Forums 5 Theory

4(a) Risk Management 5 Theory

Year Question Com Chapter Name Marks Category

5A() Governance and Compliance Risk 5

2A() Board Processes through Secretarial| 5 Theory

Year Ouestlon Com Chapter Name Marks Category

6a)ii) Anti-Corruption and Anti-Bribery Theory

2(b) Board Committees 5 Theory

2c) Corporate Polícies and Disclosures Theory

Year Question Com Chapter Name Marks Category

3(c) Corporate Governance Forums 3 Theory

6b#1) Anti-Corruption and Anti-Bribery Theory

6(b)(iv) Anti-Corruption and Anti-Bribery 5 Theory

6(b() Anti-Corruption and Anti-Bribery Theory

S.No. Chapter Name Study Material

Legislative Framework of Corporate Governance 2

Policies and Disclosures 6

11 Corporate Governance Forums 11

| 16 CSR and Sustainability 16

17 Anti-Corruption and Anti-Bribery Laws in India 17

CHAPTER 4 BOARD PROCESSES THROUGH SECRETARIAL STAN

Q12. CSB Ltd. a Listed Company is holding a Meeting of Board of

encing or other audio visual

and its Powers) Rules, 2014

(1) The following be calt with

CHAPTER 6 CORPORATE POLICIES AND DISCLOSURES

The annual report shall contain the following:

regulation 33(3(d), if applicable.

Forthe top one thousand listed entities based on

[Clause (fA is substituted by the SEBI (Listing Obligations and Disclosure

( Disclosures with respect to demat suspense account/unclaimed sus.

b. A company established under section 8 of the Act or a registerea

d. A company established under section 8 of the Act, or a registered

website, if anv, for public access. However, earlier the Board of

activities shall be carried out i

CHAPTER 14: REPORTING

01. Role of Government in Sustainability Reporting?

SEBI in its (Listing Obligations and Disclosure Requirements) Regulations,

2015: "The anmual

() Forthe top onethousand listed entities based on market capitalizatioon,

MEANING AND DEFINITIONS OF CORPORATE GOVERNANCE

Q1. Justify the ICSI principles of Corporate Governance on 'sustainable

Ans. Good governance is the prime Board must posseo.

sound corporate governance.

growth. maintains investors'

4. It provides proper inducement to the owners as well as managers to

NEED FOR CORPORATE GOVERNANCE

Q5. Elucidate the following; Need for corporate governance.

2. Enhanced Investor Trust Investors consider corporate governance as

1. Role and powers of Board: Good governance is decisively the manifes