1. Strengthening Board Governance:
LODR mandates the composition of the Board of Directors, including a minimum number of independent directors, women directors, and separation of roles between Chairperson and CEO/MD for top listed entities. This ensures board independence and checks executive dominance, promoting balanced decision-making.
2. Transparency through Disclosures:
The regulations require timely and accurate disclosures relating to financial results, related party transactions, shareholding patterns, and material events. This empowers investors with relevant information, aiding informed decision-making and reducing the scope for insider trading or fraud.
3. Audit and Risk Oversight:
LODR mandates the constitution of audit committees, nomination and remuneration committees, and risk management committees. These committees improve oversight over financial reporting, executive pay, and internal controls, thereby enhancing risk governance and accountability.
4. Protection of Minority Shareholders:
Through provisions related to voting rights, related party transactions, and public shareholding requirements, LODR ensures that minority shareholders are not unfairly prejudiced by decisions favoring promoters or insiders.
5. Enforcement and Penalties:
SEBI has the authority to impose penalties, suspend trading, or even delist companies for non-compliance with LODR norms. This acts as a deterrent and encourages companies to adopt strong compliance cultures.
Challenges and Limitations:
Despite robust provisions, implementation gaps remain due to box-ticking compliance or lack of proactive enforcement.
Smaller firms may struggle with the costs and complexities of compliance.
The effectiveness of LODR also depends on the quality and independence of board members and auditors, not just formal structures.
Conclusion:
The SEBI (LODR) Regulations are a significant step toward aligning Indian corporate governance with global best practices. While enforcement and awareness can be further strengthened, the framework has largely been effective in improving governance standards, fostering investor confidence, and enhancing corporate accountability.