NEW DELHI: Confederation of Indian Industry (CII), in its voluntary advisory on corporate governance released on Sunday, said start-ups should keep valuations “realistic” and that the needs of the entity and the founder’s personal He said there is a need to separate needs.
The industry group points out in its “Corporate Governance Charter for Startups” that “the perception that good corporate governance comes with excessive costs and reduces startup agility may be misplaced.” are doing. He added that it is important not to view corporate governance measures as cost-centric for companies, as the costs of non-compliance and bad governance can be fatal for companies.
Start-ups may strive for long-term value creation rather than short-term valuations. “…the goals and needs of the founders/promoters/early investors may be aligned with the long-term goals of the business,” CII added.
The CII Charter calls for voluntary recommendations on corporate governance for startups, taking into account the unique nuances of governing startups, and sets out guidelines suitable for startups based on specific stages of their lifecycle. .
“Early adoption of good governance practices helps startups achieve long-term value creation, stakeholder trust, improved funding from investors and banks, reduced dependence on promoters, and effective organizational structures.” , tangible and intangible benefits such as improved chances of long-term survival,” said CII President R Dinesh.
Dinesh, who is also chairman of TVS Supply Chain Solutions, added that the ‘Governance Charter’ will enable early adoption of good governance practices among startups.
According to CII, the charter could serve as a voluntary code of compliance efforts for startups to adhere to on a best efforts basis. “The purpose of this Charter is to help start-ups become responsible corporate citizens and to help start-ups share this Charter with their stakeholders to ensure that they are well-governed. ,” CII said in a statement.
CII Director General Chandrajit Banerjee said the charter comprises focus areas for startups in terms of governance and forward-looking concepts.
The Charter provides guidance in the startup lifecycle, which is divided into four stages: creation, development, growth, and public listing.
During the “launch” stage, startup governance is likely to focus on board composition, setting the tone at the top, compliance oversight, accounting, finance, external auditing, related party transaction policies, and dispute resolution mechanisms. In the ‘Advanced’ stage, startups will further expand board oversight, monitor key business metrics, maintain internal controls, define decision-making hierarchies, provide an intensive overview of finance, accounting and external audit, may focus on risk and audit establishment. crisis management.
Once a startup reaches the ‘growth’ stage, it will need to develop stakeholder awareness of its vision, mission, code of conduct, culture, organizational ethics, functional policies, form board committees, ensure diversity, equity and inclusion, and CSR. compliance with, and environmental norms.
During the ‘listing’ stage, startups should monitor the functioning of various committees, prevent and detect fraud, focus on grievance redressal mechanisms, minimize information asymmetry, effectively manage stakeholders, succession plan, board directors. Governance may be expanded from the perspective of performance evaluation and reviews of the organization. Comply with governance policies, internal controls, SEBI and stock exchange regulations and ensure timely statutory declarations and disclosures.
(issued April 29, 2024, 00:59 IST)