Securities and Exchange Board of India (SEBI) in 1999 set up a committee under Shri Kumar Mangalam Birla, member SEBI Board, to promote and raise the standards of good corporate governance. The primary objective of the committee was to view corporate governance from the perspective of the investors and shareholders and to prepare a ‘Code’ to suit the Indian corporate environment.

The mandatory recommendations apply to the listed companies with paid-up share capital of Rs. 3 crore and above. The composition of the board of directors should be a combination of executive and non-executive directors. The audit committee should contain three independent directors with one having financial and accounting knowledge. The board should hold at least four meetings in a year with a maximum gap of four months between two meetings to review operational plans, capital budgets, quarterly results, and minutes of the committee’s meeting. The director shall not be a member of more than ten committees and shall not act as chairman of more than five committees across all companies.

The non-mandatory recommendations were to apply to all the listed private and public sector companies, their directors, management, employees, and professionals associated with such companies. The committee recognizes that compliance with the recommendations would involve restructuring the existing boards of companies. It also recognizes that smaller ones will have difficulty in immediately complying with these conditions.