Recent Papers on Corporate Governance

The following papers on corporate governance in India are
available on SSRN. Details, including abstracts, are set out below:
1.         Corporate Governance and the Indian
Private Equity Model
by Afra Asharipour.
Private Equity (PE)
firms have long invested in Western firms using a leveraged buyout (LBO) model,
whereby they acquire a company that they can grow with the ultimate goal of
either selling it to a strategic buyer or taking it public. Unable to undertake
the traditional LBO model in India, PE investors in Indian firms have developed
a new model. Under this Indian PE Model, PE firms typically acquire minority
interests in controlled companies using a structure that is both hybridized
from other Western investment models and customized for India’s complex legal
environment. As minority shareholders in controlled firms, PE investors in
India have developed several strategies to address their governance concerns.
In particular, PE investors in India have focused on solutions to address local
problems through the use of agreements that govern (i) the structuring of
minority investments, (ii) investor control rights, and (iii) exit strategies.
Nevertheless, recent governance and regulatory difficulties highlight the
continuing uncertainty surrounding the Indian PE model.
2.         Board Independence in India: From Form
to Function?
by Vikramaditya Khanna and myself.

In this paper we explore
the application and evolution of board independence in India, where
concentration of shareholdings in public companies is the norm, what effects it
has had, and how one might make the best use of the board independence concept
in the Indian environment. Following India’s liberalization in the early 1990s,
the first foray into board independence came in the form of a voluntary code
recommended by the Confederation of Indian Industry, which was later on adopted
in a revised form by the Securities and Exchange Board of India (SEBI) as a
mandatory requirement. This formal phase was influenced by developments around
the world, thereby displaying signs of a legal transplant. However, we argue
that the formal independence requirements gave rise to considerable doubts as
to the functional impact of independent directors.

We also discuss the most recent set of reforms to corporate law in India which
are moving away from the earlier conception of board independence imported into
India and towards greater functionality by adapting the concept to the
environment in India. A new legislation, the Companies Act, 2013, provides
extensive powers and responsibilities and imposes significant liabilities on
independent directors that transform their role to one that emphasizes
monitoring. Interestingly, this transformation in India is not the result of
international developments, such as the global financial crisis, that called
into question the role of independent directors, but the result of internal
systemic shocks due to local corporate governance scandals. Although these
steps are positive, much is still required before board independence becomes
more effective in India. We conclude with some suggested reforms that may
further push the board independence concept towards greater effectiveness in
India.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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