It said cases filed by investors with courts are frequently heard by judges who lack experience and knowledge on corporate and securities law, resulting in delay in the proceedings of the cases.

"Litigation is extremely protracted and in general takes years before a decision is rendered. Under the system, trials are not scheduled for a specific time; rather, hearings are conducted for part of a day during a given month and then carried over to succeeding months under the same procedure," said final draft report of the ADB, which was prepared under an ongoing ADB technical assistance project.

These delays make it virtually impossible to obtain timely relief to set aside improper corporate actions or direct compliance by the company with provisions of the Companies Act, the report said.

It said the ministry of commerce administers the Companies Act through the Registrar of Companies who is charged with overseeing not only public companies, but also thousands of private limited companies.

"With this extensive workload the registrar does not possess the resources to deal with the intensive and often-complex matters of corporate governance associated with publicly traded companies," the report said.

Due to such limitations on the part of the registrar the enforcement of Companies Act cannot be ensured.

There are many types of conducts by public companies and their insiders, which are criminal offenses under the act. "These provisions under the Companies Act do not operate as a meaningful deterrent since the registrar lacks the staff and expertise to enforce the act," according to the report.

It also said lack of understanding of securities laws by police officials and the corruption in the prosecution process make it difficult to prosecute such offenders.

The report, however, said the most serious constraint in establishing good corporate governance is the absence of effective external enforcement of corporate and securities laws by government and self-regulatory organisations.

Another hurdle to corporate governance is the absence of a meaningful channel for shareholders and others to check the insider fiduciary breaches and non-compliance with legal requirements relating to company's operation, the report added.