The Ministry of Corporate Affairs (MCA) is considering referring the need for stricter regulations for larger unlisted companies to the Company Law Committee (CLC), which recently had its tenure extended by a year. This move aims to gather diverse expert opinions for enhanced corporate governance in bigger unlisted companies including mature Startups.

The CLC may explore requirements like quarterly financial reporting for these companies, similar to listed entities, and potentially define the criteria for “larger” unlisted companies. 

“This is an issue that would certainly be referred to this panel and deliberated upon. It is always beneficial for the Ministry to get viewpoints of an organised committee with members from different background and expertise,” official sources said.

Byju’s case

The debate on the need for a higher level of regulation for large unlisted companies has gained momentum after the recent episode of Byju’s (India’s most valued start-up) failing to meet certain compliance requirements and its statutory auditor having resigned.

In June this year, Deloitte Haskins and Sells resigned as Byju’s auditor citing a delay on part of the company in submitting financial statements and the audit firm’s inability to commence audit for FY22. Three directors – GV Ravishankar, Russell Dreisenstock and Vivian Wu — had also resigned from Byju’s board.

MCA’s latest thinking on this issue is significant as former SEBI Chairman Ajay Tyagi had in June this year suggested that the Ministry should step into the scene to put in place an institutionalised review mechanism on corporate governance compliances of certain mature start-ups.

The MCA should come up with a policy to analyse and review the corporate governance practices of mature start-ups in which the valuation has grown high or the turnover has increased beyond a level or there are plans to launch an IPO, Tyagi had then said.

Interestingly, there is also a thinking in certain quarters that rather than regulation, India must adopt a robust system of self-governance if it wants to have an energetic start-up ecosystem. The panel may, therefore, be forced to do a tough balancing act on this critical issue.


While the MCA does not look at ‘start-ups’ as a separate category for regulation purposes, official sources on Monday explained that regulations are framed for smaller or larger unlisted companies as a category, sources explained. 

SEBI already has a rigorous regulatory regime for listed companies. 

The CLC, whose tenure was recently extended till mid September next year, will now be asked to examine whether more rigorous regulatory regime —not as rigorous as for listed ones—would be needed for large unlisted companies or not, sources added.

“The Panel would be tasked to look at what kind of more rigorous compliance requirements are needed for large unlisted companies”, sources said.

Amarjit Chopra, a member of CLC and former CA Institute President, welcomed the potential improvements in unlisted company governance. He emphasised the need for good governance practices, given the substantial size of some of these unlisted entities, which rivals or exceeds that of listed companies.

“I am indeed glad to note that government may bring in the agenda for improving the governance in unlisted companies. All good governance practices of listed companies need to be replicated in these entities, he said when contacted.