Governance Framework in India (Basics): Board Structure, Independent Directors and Key Provisions (Companies Act/SEBI LODR Overview) Questions

Question 1

SEBI LODR is applicable mainly to listed companies. (True/False)

Accepted Answer

True. SEBI LODR deals with **listing obligations** and **disclosure requirements** for listed entities (concept).

Question 2

Define independent director (one line).

Accepted Answer

An **independent director** is a non-executive director who is independent from management and can provide objective oversight (concept).

Question 3

Write any one role of independent directors.

Accepted Answer

Independent directors provide **objective oversight** and help reduce conflicts of interest (any one role) (concept).

Question 4

Non-executive directors are generally not involved in day-to-day management. (True/False)

Accepted Answer

True. **Non-executive directors** focus on oversight and guidance rather than daily operations (concept).

Question 5

State any one governance mechanism that supports fraud prevention.

Accepted Answer

**Internal controls and audit** help prevent/detect fraud and improve reliability of reporting (concept).

Question 6

Companies Act and SEBI LODR both aim at better disclosures and accountability. (True/False)

Accepted Answer

True. Both frameworks support **accountability** and **transparency**, with LODR placing strong emphasis on disclosures for listed entities (concept).

Question 7

Differentiate Companies Act (broad) and SEBI LODR (broad) in a table (any three points).

Accepted Answer

Basic differences (concept):

| Basis | Companies Act (broad) | **SEBI LODR** (broad) |
|---|---|---|
| Applicability | companies in general | **listed entities** |
| Focus | board duties, audits, compliance | **listing obligations** + **disclosures** |
| Purpose | accountability + legal compliance | investor protection + transparency |

Any three differences are sufficient.

Question 8

Explain board structure: executive vs non-executive vs independent directors (use a table).

Accepted Answer

Board structure (concept):

| Type | Meaning | Role |
|---|---|---|
| **Executive** | involved in management | operational decisions |
| **Non-executive** | not in day-to-day operations | oversight and guidance |
| **Independent** | non-executive, independent from management | objective monitoring; reduces conflicts |

Write any three points with examples if needed.

Question 9

State any three key governance provisions/checklist points for Indian companies (use bullet points).

Accepted Answer

Any three key governance provisions (overview):

- board meetings and documented decisions (minutes)
- **audit** and **internal controls** oversight
- committees (audit/NRC/CSR as applicable)
- timely **disclosures** of material information
- related party transaction (RPT) approvals (concept)

Write any three points.

Question 10

Explain related party transactions (RPT) and why RPT controls are important (any three points).

Accepted Answer

A **related party transaction (RPT)** is a transaction between a company and a related party (promoters, directors, group entities), which may create conflicts of interest (concept).

Importance of RPT controls (any three):
- prevents **misuse of company resources** and self-dealing
- protects minority shareholders by ensuring **fairness**
- improves **transparency** through approvals and disclosures (concept)

Write any three points.

Question 11

Explain the role of independent directors in corporate governance (any three points).

Accepted Answer

Role of independent directors (any three) (concept):

- provide **objective oversight** and challenge management
- protect minority shareholders and support fairness
- strengthen audit/risk oversight via committees
- improve transparency and ethical culture (overview)

Write any three points.

Question 12

List any three key governance mechanisms used in India (use a small table).

Accepted Answer

Any three governance mechanisms (concept):

| Mechanism | Purpose |
|---|---|
| **Board & committees** | oversight and monitoring |
| **Internal controls & audit** | prevent/detect fraud; reliable reporting |
| **Disclosures** (listed entities) | transparency and investor protection |
| RPT approvals | manage conflicts of interest |

Write any three with one-line purpose.

Question 13

Explain governance framework in India: key components, board structure and independent directors (exam-style) with a table.

Accepted Answer

### Key components (overview)
India’s governance framework includes broad company law provisions (board duties, audits, compliance) and securities market rules for listed entities emphasizing **disclosures** (concept).

### Board structure and independence (table)

| Element | What it means | Why it matters (concept) |
|---|---|---|
| **Executive** directors | manage operations | operational insight |
| Non-executive directors | oversight role | monitoring and guidance |
| **Independent** directors | objective non-executives | reduces conflicts; protects minority shareholders |

Conclusion: Strong board independence improves transparency and accountability (concept).

Question 14

How governance improves reporting quality and investor protection (exam-style) with a table.

Accepted Answer

### How governance improves reporting (concept)
Governance improves reporting through independent oversight, strong internal controls, and audit mechanisms.

| Mechanism | Impact on reporting/investor protection (concept) |
|---|---|
| **Audit committee / board oversight** | monitors reporting; improves accountability |
| **Internal controls & audit** | reduces misstatements and fraud |
| **Disclosures** (LODR) | reduces information asymmetry |
| RPT oversight | reduces conflicts of interest |

Conclusion: Better governance increases trust and protects investors by improving transparency (concept).

Question 15

Write a short note on SEBI LODR and list key disclosure expectations (exam-style) with a flowchart.

Accepted Answer

### SEBI LODR (brief)
SEBI LODR sets **listing obligations** and **disclosure requirements** for listed entities to ensure transparency and investor protection (concept).

### Key disclosure expectations (any four) (overview)
- timely disclosure of material events/information
- periodic financial results and governance reporting
- disclosures related to RPTs and compliance
- accurate, consistent communication to stock exchanges

Flowchart:

```text
Event/Results -> Review/Approval -> Disclosure to Exchange -> Public transparency -> Investor protection
```

Basis	Companies Act (broad)	SEBI LODR (broad)
Applicability	companies in general	listed entities
Focus	board duties, audits, compliance	listing obligations + disclosures
Purpose	accountability + legal compliance	investor protection + transparency

Governance Framework in India (Basics): Board Structure, Independent Directors and Key Provisions (Companies Act/SEBI LODR Overview)

8 more questions to unlock