CII Unveils Corporate Governance Charter For Startups

The Confederation of Indian Industry (CII) has launched a corporate governance charter for startups to offer tailored guidance and suggestions, aimed at enhancing governance practices for firms at different stages of growth.

The charter is designed to help startups navigate governance needs across various stages, from inception to going public. It highlights essential governance norms applicable to startups regardless of their stage, offering timeless principles and practices for adherence.

Hence, the startup guidance will be organised into four distinct stages: inception, progression, growth, and going public. Each stage will highlight specific governance principles requiring extra attention at that particular phase of the startup journey.

“Corporate governance enables startups to have clear and rule-bound decision-making processes based on ethical and legal considerations. It helps improve the quality of decisions, reduce conflicts of interest, and promote long-term strategic thinking. Good governance practices help maintain transparency and enhance disclosures relating to predictability in revenue, growth, and business planning important parameters for startups and investors to work together with mutual trust,” said Kunal Bahl, chairman of CII National Startup Council (2023-24).

The charter incorporates an online self-assessment governance scorecard for startups. This tool enables startups to evaluate their current governance status and track improvements over time. By periodically assessing against the scorecard, startups can gauge their progress in governance practices, with score changes indicating enhancements in their governance frameworks.

Corporate governance issues at Indian startups garnered significant attention in 2022 and 2023. Notable cases included legal battles involving figures like Grover and Broker Network’s Rahul Yadav, as well as law enforcement raids targeting edtech giant BYJU’S.

Allegations of financial mismanagement and misconduct also surfaced, such as those against GoMechanic’s cofounders and Skill-Lync, further undermining trust in the startup ecosystem.

A survey conducted by Inc42, including 400 founders, revealed that approximately 44% experienced heightened investor scrutiny in the last year. Conversely, according to Inc42’s Indian Startup Founder Sentiment Survey for 2023, the remaining 56% of Indian founders reported either a low or moderate increase in investor oversight and accountability.

The survey also revealed that 54% of Indian founders believe that the wary stance adopted by investors to counter flawed corporate governance practices among Indian startups was moderately or barely effective.