CORPORATE LAW

CIA 1.1

RASHI JAIN

3BBA ‘C’ - 1820374

 2018 Thomson Reuters and Contributors (Feb 2018) 61-69

INSOLVENCY AND BANKRUPTCY CODE OF INDIA: THE PAST, THE PRESENT AND
THE FUTURE

Krati Rajoria

Introduction

The Indian insolvency resolution regime underwent a complete overhaul consolidating several
pre-existing laws and providing a single law for insolvency and bankruptcy related matters. In
May 2016, the Indian Parliament enacted the Insolvency and Bankruptcy Code 2016 that
became effective in December 2016.
History of Evolution of Insolvency and Bankruptcy Reforms in India

Meaning: Insolvency can be defined as ‘‘a state that prompts one to file for bankruptcy’’. This
occurs when the entity’s cash flow in falls beneath its cash flow out. For individual debtors, this
implies that their incomes are too low for them to pay off their debts. Bankruptcy is not
precisely the same as insolvency. Bankruptcy occurs when a court has determined
insolvency, and given orders for its resolution. Insolvency describes circumstances where the
debtor is unable to meet their commitments of repaying debts. The fundamental explanations
behind insolvency are principally poor management and financial constraints.

• The situation of the market changes and the company did not perceive the need for
change as per market requirements.
• Bad debts.
• The failure on the part of the management to acquire adequate skills, imprudent
accounting practices and absence of data frameworks.
• Loss of long-term finance or lack of cash flow.

Insolvency Laws in India

The Insolvency laws in India have their origin in English law. The provisions that dealt with
insolvency law were initially found under section 23 and 24. Statute was passed marking the
beginning of insolvency specific legislation in India. This statute applied to Presidency towns
namely Bombay, Madras and Calcutta. Then the Indian Insolvency Act 1848 was enacted that
made distinction between traders and non-traders.
The jurisdiction relating to insolvency was transferred to High Courts, limiting its jurisdiction to
presidency towns. Till 1907, there was no legislation dealing with insolvency in non-presidency
areas, therefore, in 1907, the Provincial Insolvency Act was passed which was later replaced by
the Provincial Insolvency Act 1920. These two legislations continued in force until recently and
were repealed by the IB Code.
As ‘‘Bankruptcy & Insolvency’’ is in the Concurrent List in the Indian Constitution,7 both Center
and State Governments have power to legislate on this subject.

THE INSOLVENCY AND BANKRUPTCY CODE 2016: Features and Challenges

There were multiple overlapping laws and adjudicating bodies dealing with corporate and
individual insolvency in India.
On the lines of Bankruptcy Code of US, India also aimed to introduce an integrated legislation
on insolvency. As has already been covered above, the insolvency and bankruptcy laws in India
went through series of amendments/ attempts to address the immediate problems with no
element of foreseeability. The Code is a comprehensive insolvency legislation encompassing all
companies, partnerships and individuals .
Until now, in India the process of winding up of companies was regulated by the Companies Act
After the enactment of the Companies Act 2013 and the enforcement of the IB Code 2016 the
winding up procedure is now under the supervision of National Company Law Tribunal .

Conclusion and Suggestion

In case of such failures, the most sensible and practical approach would be to have a speedy
mechanism that would help financiers to negotiate and work out a new arrangement. If this is
not a viable option, then the best outcome for the financiers, as well as the society, is
liquidation. When such arrangements are made functional, the debt recovery process will work
smoothly. The IB Code no doubt has a lot of significance and relevance in the present scenario
since it has overhauled the obsolete regime relating to insolvency and bankruptcy in India.
EUROPEAN RESEARCH ON MANAGEMENT AND BUSINESS ECONOMICS 24(2018)
121-129

Gender Diversity, Corporate Governance and Firm Behavior: The Challenge of

Emotional Management

Almudena Barrientos Báez, Alberto Javier Báez-García, Francisco Flores-Mu ̃noz, Josué
Gutiérrez-Barroso

Introduction

This work aims to explore the status of gender diversity in corporate governance and its
implications to corporate performance and emotional intelligence. With this purpose, the role
of women in leading modern corporations and the pending gaps in equality were analyzed.

Gender diversity, corporate performance and emotional intelligence: conceptual triangle

The behavior of large firms has concerned more diverse people and organizations, not only
their shareholders, but also employees, customers and suppliers, competitors, public bodies.
Business management has been gradually becoming more transparent and diverse, and this has
had an effect on the structure and composition of the boards of directors and their corporate
management styles. Several studies have identified how women perform better in emotional
intelligence measurements and the study identifies a link between emotion management and
better performance. Recently, other authors have suggested the superiority of women over
men in these emotional abilities. This aspect of corporate governance have been studied in
depth, since there are legal developments in this regard.

Methodology

Financial and corporate governance data provided by Reuters.com, were used for the period
ending 2017. Additional data on corporate governance of each entity were gathered from
official corporate website of each firm. They designed ad-hoc indicators for gender diversity,
along with differences in salary and seniority.
Results

The results suggested very relevant gap in the three analyzed dimensions: presence, salary and
seniority. Women tend to be focused only on several corporate tasks like those related to
marketing and human resources management. This research contributes in two different ways:
(1) it demonstrate the enormous gap still existing between men and women at the top of
tourist organizations worldwide and (2) it suggests several research pathways given the type of
gender gap detected.

Conclusion

The presence of women in corporate governance has been growing over time. But this fact is
seen by some authors not only as the recovery of a place unjustly unemployed, but as a factor
that can positively influence business management.

Scope for research

In order to empirically complete the proposed conceptual triangle and to further investigate
the mediating role of emotional intelligence in the connection between gender diversity and
corporate transparency and behavior, subsequent research will be required. This study shows
that it still exist a very relevant gap in the three analyzed dimensions of gender gap: presence,
salary and seniority.
 PROCEDIA-SOCIAL AND BEHAVIOURAL SCIENCES 219(2016) 455-464

Rethinking of Corporate Governance

Rohmawati Kusumaningtias, Unti Ludigdo, Gugus Irianto, Aji Dedi Mulawaraman

Introduction

Corporate Governance is regarded as an acceptable mechanism to prevent fraud in companies.

However, scandals continue to occur in corporates. The article describes corporate governance
from the emergence, the implementation and underlying theories.

Simple corporate governance is a system to direct and control a corporation whereas good
corporate governance include rights of shareholders, transparency and board accountability.

Corporate governance practices

In USA

The company’s management structure uses one board system consisting executive director-
company leader and non-executive director- company supervisor. According to Daniri, in one
board system, the duties of non-executive director were often mixed with managerial tasks of
the executive director due to which they could not work independently and objectively in
overseeing the company. The CEO has the duty to lead executive and non-executive director
which means CEO has tremendous influence and authority. The use of one board system is to
achieve rapid economic growth but this system gives full powers to the CEO which leads to
corporate scandals such as the WorldCom and Enron.

In UK

In UK’s perspective, the use of one board system is expected to provide the board with
responsible freedom in running the company effectively and accountably. Three models of
corporate governance in UK are private company- limited by shares, private company- limited
by guarantee and public limited company. There is no legal law for employees to have any
representation at board level just like USA.
In Europe

Europe gives the freedom to choose either one board system or two board system. The
functions of manager and the functions of supervisor are separated where supervisor only
oversee the company and gives advice to the directors but do not have the authority to manage
the company. Employee representative have seat in the board but only shareholder
representative have the deciding vote.

Conclusion

Jackson and Carter describe corporate governance is concerned with organizing things within
the concept of economy. All internal and external factors that affect the interest of the
stakeholders including shareholders, customers, suppliers, government regulators and
employees must be taken into consideration.
 The Essential Elements of Corporate Law. Oxford Legal Studies Research Paper
No. 20/2009

The Essential Elements of Corporate Law

John Armour, Henry Hansmann, Reinier Kraakman

Summary

This article describes the functions and boundaries of corporate law. The economic importance
of the corporate form's hallmark features: legal personality, limited liability, transferable
shares, delegated management, and investor ownership. The major agency problems that
attend the corporate form, and that, therefore, corporate law must address are: conflicts
between managers and shareholders, between controlling and minority shareholders, and
between shareholders as a class and non-shareholder constituencies of the firm such as
creditors and employees. Corporate law serves in part to accommodate contract and property
law to the corporate form and, in substantial part, to address the agency problems that are
associated with this form. The role of law in structuring corporate affairs so as to achieve these
goals: whether, and to what extent standard forms - as opposed, on the one hand, to private
contract, and on the other, to mandatory rules - are needed, and the role of regulatory
competition. Whilst the ‘core’ features of corporate law are present in all - or almost all - legal
systems, different systems have made different choices regarding the form and content of
many other aspects of their corporate laws. These forces operate differently across countries,
implying that in some cases, complementary differences in corporate laws are functional.
 ECONOMICA, Vol. 10, no. 2, pp. 51-60

The Effect of Corporate Governance on Capital Structure Decisions – A Case of

Saudi Arabian Banking Sector

Nasir Ali, Najeeb Muhammad Nasir, Saqlain Latif Satti

Introduction

This study analyzes the impact of Corporate Governance on Capital Structure Decisions in Saudi
Arabian commercial banking sector. The components of corporate governance whose impact
has been analyzed on the capital structure are board size, independence of directors,
ownership structure, ownership of management, board meetings. The research study evaluates
the effects of corporate governance components on capital structure decisions of Saudi
commercial banks.

Corporate Governance

Corporate governance describes the rights and responsibilities of all the stake holders in an
organization. Structure of corporate governance consists of a wide range of practices, policies
and foundations which include accounting standards related to fair financial disclosure,
executive compensation, size and composition of corporate boards audit committees.
Corporate governance of banks seems to be more important than other industries because the
banking sector plays a crucial financial intermediary role in any economy, particularly in
developing countries.

Methodology

Multiple regression analysis, Correlation matrix and Descriptive Statistics is used to assess the
relationship among corporate governance components and capital structure of Saudi
commercial banks for the years 2010 and 2011.
Results

The results show that ownership structure and board size are positively correlated which is
coherent with most of the previous studies. Managerial ownership and board independence
are negatively correlated and board meeting held in a year is also negatively correlated but is
statistically insignificant. Moreover, the study found that on average the Saudi banks uses 68 %
debt capital. The research study is supposed to facilitate regulatory authorities like CMA for
improving the implementation of rules and regulations in order to make corporate governance
tools work more efficiently in the Kingdom of Saudi Arabia.

Conclusion

The findings suggest that more studies should be conducted to investigate the weak
relationship between corporate governance and capital structure in Saudi banks and more
variables for corporate governance such as role of Committees, auditor independence, foreign
ownership and minority ownership should be added. The study has limitations especially
regarding data availability which covers two years and the small size of total population in the
banking sector of the country.

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