Leading trade association Confederation of Indian Industry (CII) has developed a Corporate Government Charter for startups that can act as a self-governing guide for them as they navigate regulatory requirements.
The purpose of the Charter, which startups can adhere to on a best-endeavour basis, is to assist them in becoming conscientious corporate citizens and to empower them to disseminate it to their stakeholders in order to demonstrate their sound governance.
According to CII, entrepreneurs should utilize the Charter as a “ready reckoner” as they proceed down the path of good governance.
The four stages of a startup’s life cycle—inception, development, growth, and becoming public—are represented in the Charter, which has been carefully crafted to offer guidance to them.
There are defined governance tenets that may receive more attention at each step.
Early adoption of good governance practices, according to R Dinesh, President, CII & Chairman, TVS Supply Chain Solution, helps startups gain both concrete and intangible benefits, such as long-term value creation, stakeholders’ trust, improved access to bank and investor financing, less reliance on promoters, efficient organizational structures, and increased odds of the company’s long-term survival.
It is his goal that the Charter will assist startups become Leaders of Tomorrow by allowing them to implement strong governance practices early on.
According to the CII Charter, at the “Inception” stage, startup governance may be concentrated on the creation of a board, establishing a tone at the top, compliance monitoring, accounting, finance, external audit, related party transaction policies, and a conflict resolution process.
During the “progression” stage, a startup may also concentrate on broadening the scope of board oversight, keeping an eye on important business metrics, upholding internal controls, defining the decision-making hierarchy, providing a focused overview of finance, accounts, and external audit, establishing an audit committee, and managing risk and crises.
When a business enters the “growth” stage, it may also concentrate on forming a board committee, guaranteeing Diversity, Equity, and Inclusion (DE&I) on Board, and raising stakeholder understanding of the company’s vision, mission, code of conduct, culture, and ethics.
In accordance with the Companies Act of 2013 and all other relevant laws and regulations, they should fulfill their legal obligations, pay attention to the use of funds, monitor and review their development, adhere to CSR and ESG standards, and keep an eye on matters pertaining to human resources and strategy.
Upon “going public,” startups have the option to enhance their governance by monitoring the operations of multiple committees, emphasizing fraud prevention and detection, implementing grievance redressal mechanisms, reducing information asymmetry, managing stakeholders effectively, succession planning, and evaluating board performance.
In order to guarantee compliance with the Companies Act of 2013, SEBI LODR, stock market laws, and governance policies, internal controls, social media policy, compliance program, and timely statutory filings and disclosures, they should also assess these areas, according to the CII Charter.