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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Concept of Governance in Professional Managed Company and Promoters Driven Company

Kaveri Textiles Ltd is listed, and its founder family holds 62% of the shares and nominates the Chairman, the Managing Director and two other directors. Which feature best identifies it as a promoter-driven company rather than a professionally managed company?

A company is promoter-driven when the founding family controls ownership and nominates the key board members through its large shareholding. Listing, annual reporting and independent directors are common to both types of company, so they do not show promoter-driven control.

  1. AIts shares are traded on a recognised stock exchange
  2. BControl over key board appointments rests with the founding family through its shareholdingCorrect
  3. CIt has appointed an independent woman director
  4. DIt publishes an annual report for its shareholders

Explanation

A promoter-driven company is marked by the promoter group's control over ownership and the board, usually exercised through a large shareholding. Listing, annual reports and an independent woman director are features common to professionally managed companies as well, so they do not distinguish the two types.

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