CASES ON

CORPORATE GOVERNANCE

Varghese JohnMBA, Christ University.

INTORDUCTION TO CORPORATE GOVERNANCE

• System by which companies are directed and controlled.

• Boards of directors are responsible for the governance companies.

• Shareholders‘ role is to appoint the directors and the auditors to satisfy themselves that an appropriate governance structure is in place

LEGAL FRAMEWORK

• Covered Under Indian Companies’ Act 1956• Regulations/ directives issued by SEBI• RBI and IRDA regulate for Banks and Financial

and Insurance institutions

CG Under Companies Act

• Shareholder Rights • Disclosure and Transparency Requirements• Responsibilities of the Board • Clause 49 of listing agreement:– Board of Directors and Independent Directors– Audit Committees– Subsidiary Companies– Disclosures– Report on Corporate Governance, Compliance

Major Incidences in Indian Corporate-Legal Sector

1. Reebok India Case2. Vodafone wins $2.2 Billion Tax Bill Battle3. Kingfisher Airlines Loses License to fly4. INR 1,800 crore wiped off Adani Enterprise

Ltd stocks after rumour fuelled by blogger5. Hero Motors finally drops Honda6. Sahara told to repay small investors

REEBOK INDIA SUFFERS A MAJOR SCAM

• Reebok India, owned by Adidas AG, alleged a Rs.870 crore fraud by its former managing director (MDand former Chief Operating Officer (COO) .

• The two were accused of criminal conspiracy and fraudulent practices including stealing products by setting up “secret warehouses”.

• The Income Tax department has alleged tax evasion of Rs 140 crore in the case

VODAFONE WINS $2.2-BILLION TAX BILL BATTLE

• The tax demand was over Vodafone’s $11 billion deal to buy Hutchison’s Indian mobile business in 2007. The UK-based company had appealed to the Supreme Court after losing the case in the Bombay High Court in 2010.

• The court ordered the tax office to refund to Vodafone with 4 percent interest the 25 billion rupees it had been asked to deposit pending a ruling.

KINGFISHER AIRLINES LOSES LICENSE TO FLY

• The financially troubled Kingfisher Airlines lost its flying permit after a deadline to renew its suspended license expired.

• Kingfisher owes various public sector banks $1.4bn (£870m) in debts and has been frantically trying to raise funds after lenders refused to give fresh loans.

1,800 CRORE WIPED OFF ADANI ENTERPRISE LTD STOCKS AFTER ONLINE RUMOUR

• Stock prices of many companies under the Adani Group took a tumble after a blogger posted incorrect rumors about Gautam Adani’s arrest in connection with an arrest of a political leader.

• blogger mentioned “Believe it or not: Our Ahmedabad Bookie says: Mr. GAUTAM ADANI is been arrested? What will happen to ADANI STOCKS? Something related to Kidnapping of Congress Leader…We are Hearing (Rumours or Facts??) Let’s see…” The stock dipped 8.4% and closed at Rs. 195.

HERO MOTORS FINALLY DROPS HONDA

• Hero MotoCorp dropped Honda’s badge from all its models at the end of September 2012

• Hero MotoCorp continues to pay royalty to Honda for its technology despite the separation.

• The 26 year old joint venture was ended in 2010 through a separation agreement under which Hero Group bought out Honda’s stake in the JV.

SAHARA TOLD TO REPAY $3 BILLION TO SMALL INVESTORS

• One of India’s biggest business groups was ordered by the Supreme Court of India after a prolonged legal battle with capital markets regulator SEBI to refund 174 billion rupees raised by “dubious” means from 22 million small investors.

• The judgment closed a much exploited loophole of the corporate fundraising laws in India and underscored an increasing assertiveness by India’s judiciary