Written by Aritra Mal,
Lex Lumen Research Journal Winter Intern,
January 2026
Introduction:
Corporate Governance forms the backbone of trust in modern business. It determines how companies are directed, controlled, and held accountable – shaping everything from boardroom decisions to stakeholder protection. As capital markets grow more interconnected and investors become more discerning, robust governance frameworks have shifted from being regulatory checkboxes to genuine competitive advantages India’s corporate governance framework has rapidly evolved in recent years, reflecting both domestic imperatives and global convergence. What began as compliance-driven reforms matured into a more comprehensive ecosystem that emphasises transparency, accountability, and long-term value creation.
The Companies Act,2013, marked a watershed moment in India’s Corporate Governance. It introduced mandatory CSR provisions, increased director responsibilities and strengthened minority stakeholder protection. Recent amendments by the Ministry of Corporate Affairs (MCA) and SEBI’s evolution of the Business Responsibility and Sustainability Reporting (BRSR) framework demonstrate India’s ongoing commitment to raising governance standards while maintaining practical applicability.
This article examines key developments that shaped India’s corporate governance framework and their implications for companies, investors, and regulators. It explores how policymakers are balancing rigorous oversight with operational flexibility in an ever-changing business environment.
1. Evolution of Corporate Governance Framework in India:
A. Historical Context and Legislative Developments:
Corporate governance regulation in India has come a long way. It has evolved from a modest regulatory oversight to a more multilayered, comprehensive system. When the Companies Act, 1956, came into force, it was considered pathbreaking for its era, but at the same time, it lacked comprehensive provisions for directorial independence, audit rigour, or shareholder protection. The 2013 Act represented a watershed moment in India’s corporate governance sphere by codifying governance as a critical economic pillar and investor safeguard.
It introduced some major changes, like the appointment of independent directors for prescribed classes of companies, the establishment of audit committees to monitor financial integrity, and stringent disclosure obligations to enhance transparency. It was made mandatory for publicly listed companies and certain prescribed companies to appoint independent directors constituting at least one-third of the board. The goal was to dilute promoter dominance, bolster impartial oversight and promote professional governance culture.
B. Contemporary Regulatory Landscape: 2025 Developments:
In 2025, India’s corporate governance mechanism saw some important refinements, reflecting an intent to balance facilitation with accountability.
Digital Compliance Enhancement: The refinement of Companies (Management and Administration) Rules in 2025 elevated expectations for annual compliance. New reporting forms MGT-7, MGT-7A, and MGT-15 mandate expanded disclosure, including a comprehensive summary of indebtedness for debentures. It also includes category-wise classification of shareholders, photographic evidence of registered offices displaying company names, and enhanced traceability through financial year linkages in AGM reporting. These checks are crucial to enhance transparency for regulators and investors.
2. SEBI’s Business Responsibility and Sustainability Reporting (BRSR) Framework:
SEBI has put in place a comprehensive ESG reporting system through the BRSR framework, applicable to the top 1,000 listed entities by market capitalisation. The reporting regime has been strengthened through updated BRSR requirements and phased enhancements in disclosure quality and assurance. By aligning with globally recognised sustainability reporting approaches such as the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB), India has positioned itself among the frontrunners mandating structured ESG disclosures.
This framework brings the nine principles of the National Guidelines for Responsible Business Conduct (NGRBC) into practice. It focuses on ethical business conduct, meaningful engagement with stakeholders, respect for human rights, responsible use of environmental resources, and fair advocacy practices. Under BRSR, companies are required to provide clear qualitative and quantitative ESG disclosures – covering areas like energy consumption, water usage, waste management, workforce diversity, and governance standards.
The BRSR Core initiative is being rolled out in phases, with a focused set of key performance indicators to enhance the comparability and credibility of ESG disclosures. SEBI has also introduced a phased “reasonable assurance” requirement for BRSR Core disclosures, beginning with the top 150 listed entities from FY 2023-24, expanding to the top 250 in FY 2024-25, and then to the top 500 in FY 2025-26, before finally covering the top 1,000 listed entities by FY 2026-27.
This step-by-step rollout allows companies to build systems and enhance the quality of their reporting. SEBI has also introduced third-party assurance in stages to make these disclosures more accurate, reliable, and trustworthy.
3. Independent Directors and Board Governance:
Since independent directors (IDs) act as key watchdogs, regulators have made the rules around them stricter and clearer:
Proficiency Testing: IDs are required to undertake the online proficiency self-assessment test conducted through the Independent Directors’ Databank (administered by the Indian Institute of Corporate Affairs), within the prescribed timeline, unless exempted based on eligibility criteria under the applicable rules. This mechanism aims to ensure that directors remain adequately equipped for effective oversight and governance responsibilities.
Eligibility and Independence: The independence framework for independent directors has been strengthened through stricter eligibility expectations and enhanced disclosure obligations. IDs are required to disclose conflicts of interest and comply with statutory limits on directorships, which supports effective oversight and reduces the risk of divided attention.
Active participation: IDs are expected to play an active role in board discussions and decision-making, rather than staying silent or passive.
Board diversity and gender representation: To improve governance, the top 1,000 listed companies must have at least one independent woman director (effective from April 1, 2020). Also, directors above 75 years need shareholder approval, which encourages board renewal and more flexible leadership.
4. Corporate Social Responsibility (CSR) Evolution:
CSR in India has moved from being a voluntary goodwill activity to a legal requirement under Section 135 of the Companies Act, 2013. Companies that fall under the CSR rules must spend at least 2% of their average net profits from the last three years on activities that create real social impact.
Over time, the rules have become stricter, with clearer guidelines on how CSR funds can be used, mandatory registration of implementing agencies, detailed impact assessments, and strict rules for handling any unspent CSR money.
CSR is also now being linked more closely with ESG goals, helping companies take a more integrated approach to sustainability – combining social responsibility with stronger governance and environmental action.
5. Audit and Financial Reporting Developments:
The regulations continue to focus on keeping audits independent and improving audit quality:
Faster reporting of auditor fraud: Companies must e-file fraud-related auditor reports through e-form ADT-4, which improves transparency and helps regulators respond quickly.
Stronger auditor disclosures: Auditors must provide detailed information like PAN and registration information, which helps to reduce conflicts of interest and build trust.
Joint audits in certain cases: In some large or regulated contexts, joint audits may be adopted as a governance measure to strengthen audit coverage, enhance audit quality, and reduce over-reliance on a single audit firm.
Alongside this, digital compliance tools like e-filing, geolocation tracking, photo uploads, and real-time monitoring have made compliance smoother and more efficient, while also improving enforcement.
6. Enforcement Mechanisms and Penalty Framework:
The National Company Law Tribunal (NCLT) and the Appellate Tribunal (NCLAT) play a key role in handling corporate governance disputes, shareholder complaints, and the enforcement of compliance. Their expanding jurisdiction and procedural framework are intended to improve the timeliness of dispute resolution and strengthen confidence in corporate enforcement mechanisms.
The penalty system is also designed to be balanced – minor procedural mistakes usually attract civil penalties, while serious misconduct can lead to criminal action. This ensures punishments are proportionate and act as a strong deterrent.
7. Challenges in Implementation and Compliance:
Complex regulatory requirements pose significant resource constraints for smaller companies and regulatory bodies, complicating compliance, especially in ESG reporting and board governance. Overlapping regulatory jurisdictions amplify administrative burdens, necessitating enhanced inter-regulatory coordination.
Compliance costs, though justified, particularly strain smaller enterprises. Regulatory strategies must pragmatically balance rigorous governance with sustainable business operation.
8. Strategic Recommendations and Future Outlook:
Going forward, corporate governance in India must become more tech-enabled, stakeholder-focused, and climate-aware, instead of staying a box-ticking compliance exercise. Companies should speed up governance digitisation by using AI tools for compliance tracking, fraud detection, stronger internal controls, and early risk alerts. This will help boards shift from delayed reporting to real-time monitoring and smarter decision-making.
At the same time, governance quality will improve only if people are equipped for it. Directors and compliance officers need regular training on evolving ESG standards, board responsibilities, and new regulatory expectations – because today’s governance requires more than legal knowledge. It also demands an understanding of sustainability risks, stakeholder concerns, and long-term strategy.
Finally, since overlapping regulators often increase paperwork and confusion, there is a strong need to harmonise regulations and reduce duplication. While compliance costs are justified, they can strain smaller companies – so the system must remain strict enough for accountability, but practical enough to support sustainable business growth.
Conclusion:
In 2025, India’s corporate governance framework continued to strengthen through sharper disclosure norms, stronger board accountability, digital compliance upgrades, and more effective enforcement. These reforms are pushing companies towards greater transparency and a more stakeholder-focused approach. However, their real impact will depend on smooth implementation and the ability to adapt to changing business realities. For Indian companies, embracing strong governance remains crucial for sustainable growth, credibility, and global competitiveness.
