Select Your Location
Every organization should have a framework for governance in an organization. Governance can be understood as the relationship between the internal components and the external components of the business. Governance plays a crucial role, as it directly affects the goodwill of the organization. Therefore every company must make sure to have a good governance system in place. However, it is not enough to have a governance system in an organization. The governance system of an organization should also be accompanied by internal controls and a proper policy of monitoring. Monitoring can be done internally and externally. Apart from internal monitoring, there is a requirement to compulsory adopt the policy regarding external monitoring and reporting.
Table of Contents
In 2011 there was a discussion headed by the
Ministry of Corporate Affairs (MCA) on certain requirements such as the
National Voluntary Guidelines on the Social, Economic, and Environmental
aspects which corporate has to take into consideration. With this
consultation, the Government of India considered that certain responsibilities
have to be adopted by companies voluntarily. In the consultation, some of the
main considerations of companies were related to the social responsibility of
This was considered by the monitoring agency, SEBI, to come up with certain guidelines regarding the reporting standards of the business. SEBI took a view of the continuous failures of the governance mechanism of Indian corporate in spite of having stringent regulations. Because of this, the SEBI brought out the system of Business Responsibility Reporting (BRR). Companies have to submit a business responsibility report as per the requirement of the SEBI. However, this was only limited to the companies that were listed in a recognized stock exchange. Apart from this, the overall picture of the Business Responsibility Report is for effective compliance for corporate governance norms of listed entities.
Responsibility Report, which was required to be submitted by companies, had to
be approved and implemented in a phased manner. In order to avoid confusions
regarding the division, the SEBI had divided the requirement into two stages.
These stages, also called phases are as follows:
Also, Read: Corporate Social Responsibility under Companies Act 2013.
Stage I- In this phase, the SEBI had considered the requirement of mandatory submitting a Business Responsibility Report. The requirement of submitting the business responsibility report was only for the top 100 listed Entities. This was included in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the SEBI LODR Regulations. In the above Act, under Regulation 34(2) f – the top 100 entities must include the Business Responsibility Report in their Annual Report as per the prescribed format.
Stage- II- In this
phase, the extension of the Business responsibility reporting was on the basis
of the Market Capitalisation of the top
500 listed entities. This phase was brought out in the year 2016.
Apart from the
above two phases as mandated by SEBI, there were many such notifications and
regulations brought about to improve the requirement of a company when
submitting the business responsibility report.
These notifications were introduced and have an effect now.
A Business Responsibility Report must portray the following core elements:
above principles, a business can effectively contribute to society. The values
and principles of business responsibility reports have been incorporated in the
SEBI format of the business responsibility report.
From the above amendments,
it is clear that there are provisions related to the framework regarding the
management and governance of an organization. Therefore corporate governance reporting
is one of the central and mandatory provisions of the Business Responsibility
Report. For effective implementation of the above provisions, companies are
given 90 days.
Since the SEBI
has brought out various amendments regarding listing regulations and reporting
standards of listed entities, there would be effective harmonization of the
previous and present regulations related to listed companies. The features of
the SEBI LODR regulations are as follows:
regulations show that entities must not only be compliant with domestic
principles regarding listing and governance but also in line with international
principles of listing.
In 2019, SEBI had increased the limit from 500
companies to 1000 companies. Due to this
notification, the top 1000 companies that are listed in recognized stock
exchanges have to mandatory publish in their annual report, the Business
Responsibility Report (BRR). This was brought for transparency in an
organization. The objectives of the organization must be in line with that of
the stakeholders of the business. Companies have to be more socially
responsible to their stakeholders. The
main requirement for carrying out the business responsibility report is for
companies to balance their priorities. By submitting the business
responsibility report in the annual report, monitoring institutions such as the
SEBI would have information on companies that have complied with the LODR
The BRR has
company submits its annual report, it must fill in the information regarding
the compliance with the Business Responsibility Report. In case there is
non-compliance with the provisions of the Business Responsibility Report, then
there are separate penalties under specific regulations.
requires corporate governance. Having a proper governance framework would
provide transparency and clarity in the dealings of the organization. It would
improve the relationship between the shareholders, stakeholders, and the
employees of an organization. However, without proper monitoring and reporting
standards, such governance frameworks cannot be maintained. The MCA has brought out listing regulations
that have been regulated by SEBI. SEBI has made certain amendments regarding
these regulations, including the change regarding increasing the number of
listed entities from 500 to 1000. These entities are required to submit a
business responsibility report with the annual return. Through the BRR, the monitoring body will
know if the business is compliant with the necessary provisions by listed
entities. By submitting such a report, a listed entity will be not only
compliant with reporting, but also compliant with the rules related to
More on SEBI: SEBI’s Latest Format for Compliance Report on Corporate Governance.
Varun Hariharan has completed the Legal Practice Course from BPP Law School, Manchester. He has a Masters in Commercial and Corporate Law from the Queen Mary University of London and LLB Honours from Bangor University, UK. He specialises in law related to corporate, artificial intelligence and technology law.
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
The Securities and Exchange Board of India (SEBI), the capital markets regulator, has recommend...
The objective of the enactment of the Prevention of Money-laundering Act, 2002, i.e. PMLA (the...
Tax planning is a continuing effort and a management strategy for ensuring the minimization of...
On 18th May 2023, the Securities Exchange Board of India (SEBI) released a Consultation Paper o...
Infrastructure and real estate have been regarded as India's "sunshine sector" since the turn o...
On 22nd May 2023, the Central Board of Direct Taxes (CBDT) issued a new circular under secti...
Anyone can have different sources of income. With globalization and the opening up of economies...
The Reserve Bank of India (RBI) is crucial in regulating NBFC, including branch openings and cl...
In India, Non-Banking Financial Companies are subject to certain restrictions from taking publi...
Are you human?: 5 + 3 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
This article speaks about the notification released by the Reserve Bank of India, about the FEMA Guidelines for Exp...
30 Jan, 2021
India is one of fastest-growing economies in the world. India's attractiveness has resulted in an inflow of foreign...
11 Apr, 2023
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!