The Bankruptcy Code — which awaits Parliament nod — will have a big impact on the nature of corporate governance and capitalism in India, Jayant Sinha, Minister of State for Finance, has said.

The code will go a long way in strengthening creditors rights in India, Sinha said here at an international conference on corporate governance, organised jointly by Indian Institute of Corporate Affairs (IICA) and FICCI.

“Today, creditor rights as one set of stakeholders in conduct of corporations are weak in India. With the bankruptcy code, we will strengthen creditor rights dramatically. In strengthening creditors’ rights and giving an ability to invoke a default for creditors, we are also changing the balance of powers between equity holders and debt holders in a corporation. This will have a big impact on corporate governance,” Sinha said.

Indications are that the Modi-led Government would, in the upcoming Budget session, take steps to get the Bankruptcy Code passed by Parliament.

Sinha highlighted that the present Government was explicitly following pro-poor as well as pro-market set of policies.

“As we follow a pro-market set of policies, the role of corporations in this market economy becomes extremely important and the manner in which corporations are governed becomes vital in the functioning of this market economy,” he said.

“If we are not able to sustain as well as follow the best governance standards, it will be very difficult for the corporate sector to be able to attract the investments, attract the talent and attract resources to build businesses and compete on the global scale”.

Speaking on the occasion, Prashant Saran, Whole-time member, SEBI, said that corporate governance does not lie only on following the law, but should be seen as a way of survival and doing business.

Jun Zhang, Country Manager, India, International Finance Corporation, said that “good governance” has now become a business imperative.

He highlighted that India has been constantly raising the bar for implementation of best corporate governance practices. The introduction of new Companies Act 2013 and SEBI regulations are important milestones in that direction, he said.

“While the Government plays a central role in shaping the legal, institutional and regulatory framework within which the individual corporate governance systems are developed, a huge responsibility also lies on the private sector,” he added.

India is IFC’s largest single country exposure both in terms of investments and advisory services.

Srivats.kr@thehindu.co.in

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