Corporate Governance Charter

Context:

The Confederation of Indian Industry (CII) has recently introduced a corporate governance charter designed specifically for startups. This charter includes a self-evaluation scorecard to monitor governance progress.

What is Corporate Governance?

Corporate governance encompasses a set of principles and practices that steer an organization’s development. It focuses on values such as transparency, fairness, and accountability. The introduction of the charter aims to address the loss of shareholder value in Indian startups, which has been driven by governance issues in high-profile companies like BharatPe and GoMechanic.

Key Features of the Charter:

• Purpose: The charter serves as a self-regulatory framework for startups, aligned with the Companies Act of 2013.
• Advantages: It supports startups in boosting value, stability, growth, resilience, competitiveness, and long-term sustainability.
• Guidelines: The charter is designed to cater to various stages of a startup’s lifecycle—Inception, Progression, Growth, and Going Public—offering clear roles and responsibilities.
• Online Scorecard: The charter includes an online tool that allows startups to evaluate their governance practices and monitor improvements over time.

Definition of Startups:

As per the Income Tax Act, a startup in India is a private limited company, partnership firm, or limited liability partnership (LLP) that meets the following conditions:

• Incorporation: The entity must have been established or registered within the last 10 years.
• Turnover: The startup’s annual turnover should be less than INR 100 crore in any financial year since its incorporation.
• Innovation: It must focus on developing or improving a product, service, or process, or possess a scalable business model with the potential to generate wealth and employment.
• Originality: The business must not result from the splitting or restructuring of an existing company.

Previously, the Department of Industrial Policy and Promotion (DIPP) defined a startup as an entity incorporated as a private limited company, partnership, or LLP in India, with annual revenue up to Rs 25 crores.

About CII:

The Confederation of Indian Industry (CII) is a prominent non-governmental trade association and advocacy group based in New Delhi, established in 1895. CII works with leaders from business, politics, academia, and society to influence global, regional, and industry-related agendas. Operating on a membership basis, CII was designated as the B20 India Secretariat during India’s G20 Presidency in 2023, tasked with leading the B20 India process.