Companies seek expert help to ensure corporate governance compliance

Amrita Nair Ghaswalla Mumbai | Updated on August 27, 2014 Published on August 27, 2014

With increasing reach of the Foreign Corrupt Practices Act US and the UK Bribery Act, emphasis is on transparency

Even as companies are exposed to multi-jurisdictional laws and regulations, compliance and its monitoring have become a complex task. Taking preventive measures against compliance violations, corporate misconduct and disputes with authorities has become an existential issue for most companies, leading to the rise of teams and even entire divisions to tackle such issues.

“Given the challenges and risks of doing business in today’s environment, several legal organisations are assisting corporations in dealing with diverse issues,” says Berjis Desai, Senior Partner at J Sagar Associates (JSA), a law firm.

With the increasing extra territorial reach of the Foreign Corrupt Practices Act of the US and the UK Bribery Act, there is an emphasis on corporate governance, transparency, responsibility and accountability, he adds.

The Government has also taken steps to improve corporate governance and make doing business more transparent, but analysts say more has to be done. “Though Government policies and new legislation such as the Companies Act, 2013 had spurred a positive sentiment in India Inc, there is still much headway to be made in changing ground realities,” says Arpinder Singh, Partner, Fraud Investigation and Dispute Services at audit and research firm EY (formerly Ernst & Young).

Many examples

There are several examples in India for issues of corporate governance and disputes. The corporate fraud in Enron, AgustaWestland’s helicopter kickback case, Vodafone’s tax dispute, and more recently Reliance Industries’ arbitration against the Government are some of them.

In May this year, Mukesh Ambani-led RIL and its partners BP and Niko Resources, the contractor group of the D6 block in the Krishna Godavari basin off the Andhra coast, issued a notice of arbitration to the Government.

Officials said the continuing delay on the part of the Government to notify the price in accordance with the approved formula for the gas to be sold had left the parties with no other option but to pursue arbitration.

Arbitration case

Law firm JSA is representing British oil giant BP in the arbitration case. JSA’s Desai says the matter could even be something as innocuous as the product recall of automobiles. “The resultant erosion in investments and damage to credibility have led corporations calling out to the experts.”

High stakes

These disputes have had their impact on the financials of several companies as well as the economy. “Continued instances of fraud and misconduct have been threatening the economic landscape for some time now. It has expanded exponentially over the past few years, and has also propelled the Government to take additional steps to enhance corporate governance,” says Desai. Against this background, there is a growing demand from both domestic and international clients to tackle corporate compliance and fraud investigations, he adds.

However, EY’s Arpinder Singh says, “Though regulatory measures are paving the way for sound governance practices, companies need to pay more attention to the intricacies of the framework through efficient monitoring, and establish a robust fraud response plan.”

Published on August 27, 2014
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