5. Decoding Corporate Governance and Insolvency Related Issues in India

Corporate governance principles were incorporated after the financial impropriety of the owners/managers increased at a rampant stage whereby innocent stakeholders were left without a remedy. The governance structure and distribution of rights of different participants in the corporation and their equally accountable duties were necessary in the modern corporation to prevent siphoning of funds or oppression and mismanagement. Post Ketan Parekh and Satyam Scams, India has come to more intricate questions of Cyrus Mistry where the law is unable to demystify the complex board structures and lack of transparency and accountability in such corporate structures. The exploitation comes to the forefront when the company is in financial distress and is being led towards insolvency. The Promoters/Board members generally try to maximize profits and bonus payments even in the eventualities of distress. At the time of scrutiny before adjudicatory authority in process of declaration of insolvency the problems come to the forefront and increase manifold. Group structures, shareholder responsibilities, payment of dividends and director duties are some of the key problems that have taken the shape of big corporate issues. This leads to corporate governance issues, which the business world is tackling for long. OECD in 2014 has laid down G20 principles to promote best practices in the world. The authors in this paper will analyze these key principles and issues in corporate governance as enunciated by OECD and IOSCO. The authors also propose to scrutinize various cases of insolvency passed in the Indian jurisdiction which entrench on corporate governance practice. The paper will also argue the role of directors and promoters bidding during resolution process and its impact on insolvency proceedings. It is proposed to suggest various measures to improve the status quo to make corporate governance and insolvency as stable as possible to increase the investor sentiment and economic development of the country.