India to introduce new corporate governance legislation

India is set to approve new legislation to replace its long-serving corporate governance regulations, with the aim of raising best practice standards in the nation.

The country's cabinet is widely expected to pass the 2011 Companies Bill before the end of the month following several years of development, thus replacing the Companies Act that has been in place since 1956.

When it comes into effect, the bill will compel firms to be more transparent about their board operations, appoint independent directors and create committees on issues such as auditing and remuneration.

It will also provide the Indian serious fraud investigation office with powers to investigate and prosecute corporate entities suspected of illicit business activities.

Although the older legislation has been amended numerous times in the last half-decade, it is now felt that replacing it entirely would be a more forward-thinking solution.

Last month, India's minister of corporate affairs Dr M Veerappa Moily said changes to corporate governance laws will need to balance regulatory power with flexibility.