Importance of Strong Corporate Governance in Start-Up Companies

 

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Amitabh Kant, India's G20 Sherpa, and Partners Unveil Start-Up Governance Playbook by Indian Venture and Alternate Capital Association, in collaboration with Deloitte India

Why Corporate Governance is Essential for Start-up Companies? 

1. Unconventional Nature: Start-ups prioritize innovative strategies for cost-effective solutions to problems, going beyond traditional approaches.

2. Young Founders with Limited Business Exposure: Due to their founders' youthful age and limited business experience, start-ups may have short-term interests like funding rather than focusing on long-term sustainability.

3. Sectoral Omnipresence: Start-ups are present in a wide range of industries, covering almost every conceivable space.

4. Large and Growing Numbers: With a staggering 98,000 registered start-ups and 108 unicorns, the start-up ecosystem is witnessing significant growth.

Recommendations for Implementing Good Corporate Governance in Start-ups:

1. Establish Clear Norms of Self-Regulation: Define comprehensive guidelines for start-ups, covering all stages from inception to early, evolving, growing, and mature stages.

2. Adopt a Code of Ethics and Conduct: Implement a code of ethics and conduct that outline expected behaviours and values within the organization.

3. Expand the Board with Independent Directors: Enhance the board's composition by adding independent directors who bring diverse expertise and impartiality to decision-making processes.

4. Define Organizational Purpose and Values: Clearly articulate the purpose and values of the organization, enabling employees and stakeholders to connect with and align themselves to its mission.

5. Conduct External and Internal Audits: Regularly perform financial audits, both externally and internally, to identify and address any potential financial irregularities or lapses.

 

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