Skip to content

NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance

A research analyst reviewing the governance of a listed company finds that the promoter family holds 62% of the equity, the chairman is the promoter's father, and the CEO is the promoter's son. Which concern is MOST directly raised by this structure?

The main concern is weak board independence and the risk that minority shareholders' interests are overridden, because family members hold both chairman and CEO posts and the promoter has 62% stake. Public holding of 38% still exceeds the 25% minimum, so no norm is breached.

  1. AWeak board independence and a risk that minority shareholder interests may be overriddenCorrect
  2. BAutomatic violation of the minimum public shareholding norm
  3. CInability of the company to raise funds through debt
  4. DCompulsory delisting of the company

Explanation

Combining the chairman and CEO roles within one family concentrates control and can weaken the board's independent oversight, raising minority shareholder risk. Promoter holding of 62% leaves 38% public, which is above the 25% minimum public shareholding requirement, so option two is wrong. Debt raising and delisting are not triggered by this structure.

Did you get it right without looking?

One question tells you little. A timed set on Company Analysis - Business and Governance shows your real accuracy, how long you take and where you lose marks.

Practise Company Analysis - Business and GovernanceFree diagnostic mock

More Company Analysis - Business and Governance questions