Sound corporate governance practices by startups will lay strong foundation for continued success, says CII document

New Delhi [India], April 2 : India has emerged as the third largest ecosystem for start-ups globally with 1,17,254 DPIIT (Department for Promotion of Industry and Internal Trade) recognized startups across the country until December 2023
The startups are spread across over 80 per cent of districts of the country and there is at least one recognised startup in every state and union territory.
India has more than 100 unicorn companies. According to Corporate Governance Charter for Startups released by CII (Confederation of Indian Industry) this month, adopting sound governance practices by these businesses will lay a strong foundation for the continued success of these entities and help them become stable, sustainable and globally competitive in the long run and grow to become global corporations.
Startups have emerged as important contributors to the Indian economy in terms of employment generation, share in GDP, raising capital, foreign direct investment, innovation and social integration.
The document says that the Corporate Governance Charter for Startups can serve as a strategic blueprint for fostering integrity, transparency, and accountability within emerging enterprises.
The Charter underscores the pivotal role of conflict management, compliance, secretarial and legal aspects, stakeholder engagement, and whistle-blower mechanisms in fortifying the governance framework of start-ups. By adhering to these principles, start-ups can instil trust among investors, employees, and other stakeholders, paving the way for sustainable growth.
A much-discussed topic in the start-up space is corporate governance based on the basic principles of accountability, transparency, fairness and responsibility.
R Dinesh, President of CII says that startups have undoubtedly emerged as important contributors to the Indian economy.
"Adopting sound governance practices will help these entities in laying a strong foundation for their continued success. It will enable early adoption of good governance practices amongst Start-ups and help them evolve into Leaders of Tomorrow," he said.
With a focus on compliance with laws and regulations, the Charter emphasizes the need for startups to establish clear roles and responsibilities, ensuring alignment with global governance standards. According to the document, by embracing these practices, start-ups can navigate complexities, mitigate risks, and enhance operational efficiency.
"The Startups have become an integral part of the Indian economy and have propelled the Indian industry in terms of innovation, technology, markets and business strategy. We feel this is the right time for CII to curate a Charter on Corporate Governance. The Charter comprises of good governance practices; principles of corporate governance; focus areas for startups in terms of governance and forward-looking concepts" says Chandrajit Banerjee Director General, CII (Confederation of Indian Industry).
The report also stresses the necessity of external audits, ensuring shareholder rights, and reviewing related party transactions. Functional policies for various organizational functions like HR, legal, and vendor management are deemed essential for robust governance.
This Charter attempts to list voluntary recommendations on corporate governance of a startup keeping in view unique nuances to govern startups, irrespective of its stage and the balance required to be maintained in their short term and long-term goals.
It also prescribes guidelines appropriate for startups keeping in view the life cycle and which are segregated based on the specific stages at which corporate governance is crucial for them - inception stage, progression stage, growth stage and going public stage.
"These guidelines can be used by startups as a ready reckoner as they glide along the path of good governance. The charter may serve as a self-governing code for startups in their compliance journey which they may follow on best endeavour basis. The purpose of this charter is to help startups become responsible corporate citizens and also enable them to share it with their stakeholders to establish themselves as being well-governed," the CII document said.