Corporate Governance and ESG

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Guide 2 of 5 · The rules that apply regardless of size

Corporate governance and ESG

Board composition, independent directors and CSR are Companies Act obligations that apply from a company's first board meeting, not something that phases in as the company grows. This guide covers the baseline every company carries; the additional layer that applies once a company lists sits in Guide 4.

5 years
maximum single term for an independent director, for up to two consecutive terms
3 years
mandatory cooling-off before an independent director can be reappointed in any capacity
2%
minimum CSR spend of average net profit, where CSR applies
₹5cr
net profit that alone triggers CSR applicability, independent of the net-worth and turnover tests
Figures current as of August 2026, drawn from this guide’s claims register (Companies Act rules and MCA notifications). Confirm current thresholds before relying on them for a specific filing.

Board composition

A private company needs a minimum of two directors, a public company three, up to a cap of fifteen (extendable by special resolution). Independent directors are a listed-company and larger-public-company requirement, covered in Guide 4 alongside the rest of the SEBI layer, but where they do apply, an independent director's term is capped at five consecutive years, for a maximum of two consecutive terms, followed by a mandatory three-year cooling-off period before reappointment in any capacity. A casual vacancy in an independent director's seat must be filled within three months.

At least one woman director is mandatory for every listed company, and for any public company with paid-up capital of ₹100 crore or more, or turnover of ₹300 crore or more.

CSR: who it applies to, and what it requires

CSR currently applies where a company's net worth reaches ₹500 crore, turnover reaches ₹1,000 crore, or net profit reaches ₹5 crore in the preceding financial year: any one of the three triggers it. Where it applies, the company needs a CSR committee and a minimum 2% spend of average net profit.

Proposed, not yet law: the pending Corporate Laws (Amendment) Bill, 2026 would raise the CSR net-profit trigger from ₹5 crore to ₹10 crore, among other changes. Introduced in Lok Sabha on 23 March 2026 and currently with a Joint Parliamentary Committee, it has not passed both houses of Parliament or received presidential assent: the ₹5 crore trigger above is the current, applicable figure.

ESG reporting: a listed-company obligation, worth knowing either way

Business Responsibility and Sustainability Reporting (BRSR) is a SEBI requirement for listed companies, not a private-company obligation. It's included here because governance and ESG naturally sit together, but the actual filing duty belongs to Guide 4. If your company is privately held today with a listing on the horizon, this is one of the obligations that activates on listing, not before.

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    This page is general information, not professional advice. Indian corporate law positions and MCA rules change frequently, and how any of this applies depends on your company's specific facts. Take professional advice before acting on anything on this page. We are happy to be that adviser, but we do not act on a web page, ours or anyone else's, without one.