Corporate Governance Charter for Startups 

GS-3 Mains ; Economy 

Revision Notes 

Question : Critically analyze the challenges faced by startups in India in ensuring sound corporate governance.


  • Launched by the Confederation of Indian Industry (CII) to address concerns about governance in startups.


  • Provides tailored suggestions for startups to enhance their governance practices.
  • Offers guidelines for different stages of a startup’s lifecycle (inception, progression, growth, going public).

Key Features:

  • Self-Evaluative Governance Scorecard:
    • Online tool to assess current governance status and track progress over time.
    • Measures adherence to recommended governance practices.
  • Stage-Specific Guidelines:
    • Inception: Focus on board formation, leadership, compliance, finance, and conflict resolution.
    • Progression: Expand board oversight, monitor key metrics, define decision-making hierarchy, establish audit committee.
    • Growth: Build stakeholder awareness, form board committees, ensure diversity and inclusion, comply with legal requirements.
    • Going Public: Monitor committees, focus on fraud prevention, minimize information asymmetry, plan for succession, evaluate board performance.
  • Additional Considerations:
    • Long-term value creation over short-term valuations.
    • Separation of founders’ personal needs from business needs.
    • Alignment of founders’, promoters’, and investors’ goals with the company’s long-term vision.
    • Maintaining the startup as a separate legal entity with distinct assets from founders’.

Corporate Governance in India

What is Corporate Governance?

  • System of rules, practices, and processes for directing and controlling a company.
  • Balances the interests of various stakeholders: shareholders, customers, suppliers, government, community.
  • Involves:
    • Explicit and implicit contracts defining rights, responsibilities, and rewards.
    • Procedures for resolving conflicting stakeholder interests.
    • Proper supervision, control, and information flow (checks and balances).

Regulatory Framework:

  • The Companies Act, 2013: Defines board composition, independent directors, director training, audit and risk management committees, subsidiary management, etc.
  • Securities and Exchange Board of India (SEBI): Regulates financial markets, protects investors, and ensures healthy development.
  • Standard Listing Agreement of Stock Exchanges: Ensures listed companies follow good corporate governance practices.
  • Institute of Chartered Accountants of India (ICAI): Issues accounting standards for financial information disclosure.
  • Institute of Company Secretaries of India (ICSI): Issues secretarial standards as per the Companies Act, 2013.


  • Board Composition: Promoter dominance with friends and family on boards.
  • Performance Evaluation of Directors: Lack of transparency and public scrutiny.
  • Removal of Independent Directors: Vulnerability to removal by promoters for dissent.
  • Founder Control and Succession Planning: Overly strong founder control hindering governance.
  • Risk Management: Need for stronger board oversight and risk management policies.

Corporate Governance in India

Committees for Resolving Issues

  • Kumar Mangalam Birla Committee (1999):
    • Suggested recommendations for listing agreements.
    • Developed a Code of Governance adopted by SEBI.
    • Led to a new Clause 49 in listing agreements.
  • N R Narayana Murthy Committee (2003):
    • Recommendations led to a revised Clause 49 by SEBI.
    • Included amendments on independent directors, audit committee responsibilities, and formal codes of conduct.

Importance of Corporate Governance

  • Strengthens Investor Confidence: Strong governance builds trust, allowing companies to raise capital efficiently.
  • International Capital Flows: Enables companies to benefit from global markets, boosting economic growth.
  • Increased Productivity: Minimizes waste, corruption, risks, and mismanagement.
  • Brand Image: Enhances brand formation and development, attracting foreign investment.

Startups in India (as of 2023)

  • Definition: A startup ceases to be one after 10 years or exceeding ₹100 crore in annual turnover.
  • Number: Over 99,000 government-recognized startups.
  • Location: 49% based in Tier 2-3 cities, spread across 669 districts in India.
  • Unicorns: India has 108 unicorns (private startups valued over $1 billion) with a total valuation of $340.80 billion.

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