Technology and Corporate Governance in India

Overview:

This article examines the shift towards digital corporate governance in India, focusing on the role of technology in reshaping compliance, decision-making, and shareholder engagement. It also analyses emerging regulatory gaps and the need for a coherent legal framework to support this transition.

Background:

The landscape of corporate governance in India is undergoing a significant transformation driven by rapid digitalisation and technological integration. Traditionally anchored in the framework of the Companies Act, 2013 (“Act”), corporate governance has focused on board oversight, compliance, and shareholder accountability through largely physical and periodic processes. However, the COVID-19 pandemic accelerated the adoption of digital corporate governance tools, including virtual shareholder meetings and electronic board processes, marking a shift towards more continuous and technology-enabled governance. This transition reflects a broader movement from compliance-based models to data-driven and real-time corporate governance systems, has exposed significant gaps in the existing legal and regulatory framework.

Key Digital Enablers & Indian Regulatory Landscape:

The emergence of digital corporate governance is closely tied to a range of statutory and regulatory enablers embedded within the Act and allied regulations. A foundational element is the legal recognition of electronic records and digital authentication, including the use of Digital Signature Certificates (“DSCs”) for filings, incorporation documents (such as e-MoA and e-AoA), and statutory submissions through the MCA21 system, thereby institutionalising paperless compliance. Further, the Act expressly enables electronic voting mechanisms under Section 108 read with Rule 20 of the Companies (Management and Administration) Rules, 2014, mandating listed companies (having 1,000 or more members) to provide remote e-voting facilities to shareholders. This is complemented by Regulation 44 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which reinforces the requirement of e-voting for listed entities, ensuring wider shareholder participation through digital means.

The Ministry of Corporate Affairs (“MCA”) has progressively enabled virtual corporate governance practices through a series of circulars, beginning with General Circular No. 14/2020 (April 8, 2020) and 20/2020 (May 5, 2020), permitting EGMs and AGMs through video conferencing (“VC”) or other audio-visual means (“OAVM”). These measures have been repeatedly extended through subsequent circulars, allowing fully virtual AGMs up to September 30, 2025. These circulars mandate integrated e-voting, real-time participation, digital quorum recognition, and recording of proceedings, thereby embedding technology into core governance processes.

These provisions reflect a clear regulatory shift towards technology-enabled corporate governance, though largely through subordinate legislation and circular-based relaxations rather than a consolidated statutory framework.

Legal and Practical Challenges:

The transition towards digital corporate governance has exposed several concrete legal and operational challenges, many of which are already visible in practice. One major issue arises in the context of virtual AGMs and e-voting - to save costs and go green, the MCA now allows listed companies to send financial reports via email instead of physical mail, provided they also publish notices in both English and local newspapers. While this shift makes it much easier for shareholders to participate through e-voting, the biggest hurdle remains "missing" shareholders, those who still hold old paper certificates and haven't updated their contact details. Even with companies and registry agents working hard to digitize records, many investors remain untraceable, meaning they miss out on vital company updates, the ability to vote, and potentially their own dividends. Questions around authentication, identity verification, quorum, and voting validity in e-AGMs further complicate governance processes, exposing risks of procedural invalidity and disputes.

From a legal standpoint, a key structural challenge lies in the lack of statutory backing for virtual governance mechanisms. The continued reliance on MCA circulars permitting virtual meetings has been criticised as potentially inconsistent with Sections 96 and 100 of the Act, which mandate physical meetings - raising concerns about the constitutional and legal validity of such circular-based governance. This creates uncertainty for companies undertaking critical decisions (e.g., capital raising, board changes) through digital modes. Despite SEBI mandating e-voting, there have been documented instances where companies failed to provide e-voting facilities, undermining shareholder participation and regulatory intent.

Cybersecurity risks, digital illiteracy, and unequal access to technology continue to hinder effective adoption, particularly for smaller shareholders and enterprises. These examples collectively demonstrate that digital governance is not merely a theoretical shift but one that raises real compliance, inclusivity, and legitimacy concerns. Accordingly, there is a strong case for reform in corporate governance, including statutory recognition of virtual meetings, clear legal standards for e-voting and digital participation, and robust safeguards for cybersecurity and shareholder rights - moving from a fragmented, circular-driven approach to a coherent legislative framework for digital corporate governance.

Way Forward:

The transition towards digital corporate governance is both inevitable and desirable. But as current practice demonstrates, a piecemeal approach built on temporary circulars has created legal uncertainty and left genuine gaps in shareholder protection. The most pressing reform is statutory: Parliament must amend the Companies Act to expressly recognise virtual and hybrid meetings, ending the awkward reliance on executive circulars that may conflict with Sections 96 and 100. That legislative anchor would then enable a coherent second tier of regulation - clear standards for AI use in board processes, strengthened cybersecurity obligations, and inclusive digital infrastructure for smaller shareholders. In parallel, the Ministry of Corporate Affairs (“MCA”) has enabled virtual corporate governance practices through a series of circulars beginning in April and May 2020, permitting general meetings through video conferencing (VC) or other audio-visual means (OAVM). These relaxations have been periodically extended.

These measures reflect a clear regulatory shift towards technology-enabled governance. However, the framework remains fragmented, relying significantly on subordinate legislation and executive circulars rather than a consolidated statutory foundation.