India needs to strengthen corporate governance laws urgently or risk the integrity of its capital markets and a slump in foreign investor participation, according to a study to be published tomorrow.

Reforms are needed in investor voting processes, related-party transactions, corporate disclosure and the auditing profession, says the Asian Corporate Governance Association, an advocacy group in Hong Kong.

Deficiencies in India's corporate governance regime attracted international scrutiny last year when the head of Satyam Computer Services admitted to defrauding the company over a number of years.

The report, which will be presented to India's securities regulator and stock exchange and government officials, is based on feedback from association members, which include global institutional investors and local market participants.

“There needs to be genuine long-term improvements to corporate governance if India is to achieve its goal to make Mumbai an international financial centre,” Jamie Allen, ACGA secretary-general, told the Financial Times.

According to the report, “critical areas” of corporate governance were sidestepped in spite of the reforms enacted in recent years.

The five key recommendations include a call to overhaul the “weak” regime governing related-party transactions, including giving independent shareholders the power to approve large transactions.

In addition, ACGA says that “the scope for the misuse and abuse of warrants in India is considerable”.

Investors also remain frustrated with the audit profession, which is “highly fragmented and hamstrung by regulations that protect the small firm at the expense of the market”.

ACGA also calls for changes to shareholder meetings. Investors want earlier notification of meetings and to be able to instruct their proxies to speak at the gatherings.