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CMA Final Paper 15 study materials
CMA Final Paper 15 study resources

CMA Final Paper 15: Corporate Governance

CMA Final Paper 15 · Work through your exam, one topic at a time.

All guide sections

Corporate Governance

This domain tests the legal architecture of board accountability in India - Companies Act 2013, SEBI LODR and the codes on board composition, committees, related party transactions and whistleblowing.

Core rules

  • Section 149(4): listed companies must have at least one-third independent directors. Section 149(6) sets eligibility - no KMP or employee role in the company or its holding/subsidiary/associate in the preceding three financial years, no material pecuniary relationship, not a promoter, no audit-firm association within three years.
  • Section 152(6): two-thirds of directors are liable to retire by rotation, and at least one-third of those retire each year.
  • Section 177 Audit Committee: minimum three directors, majority independent, independent chairperson, majority independent members. Section 178 Nomination and Remuneration Committee: minimum three directors, independent chairperson.
  • Section 135 CSR applies where net worth ≥ ₹500 crore, turnover ≥ ₹1,000 crore or net profit ≥ ₹5 crore; spend 2% of average net profit of the preceding three financial years.
  • SEBI LODR Regulation 17 requires a woman director and, for the top 500 listed entities by market capitalisation, a non-executive chairperson not related to the MD/CEO. Regulation 23 requires audit committee and shareholder approval for material RPTs (₹1,000 crore or 10% of consolidated turnover, whichever is lower).

Worked example

A company proposes appointing its former CFO, who resigned 20 months ago, as an independent director. Under Section 149(6)(a) she was a KMP within the preceding three financial years, so she is ineligible; the resolution would be invalid and the board's composition would breach Section 149(4). The correct route is either appointment as a non-independent director or deferral until three financial years have elapsed, re-checking the pecuniary-relationship and promoter tests at that date.

Traps

Counting a nominee director as independent; forgetting that the three-year cooling period applies to holding and associate companies too; and missing that material RPT thresholds use consolidated turnover.