RATIONALE BEHIND

strengthening governance and supporting the board in achieving strategic objectives.
maximising input value put forth by each director
supporting board in fulfilling its role
improving effectiveness/efficiency
brings specialisation as a skill set
insulation from undue influence
better time mgmt. and in-depth scrutiny

TYPES OF COMMITTEES

selection/nomination
board development/governance
investment
risk mgmt.
safety,health and environment
inquiry
finance/budget
marketing/PR

BASIC COMMITTEE MGMT.

a/c to terms of reference established by board
standing/ad-hoc
recommending policy for board approval
full use of members' expertise,time & commitment along with ensuring diversity of opinions.
don't supplant responsibility
individual minutes recorded

TABLE F OF SCHEDULE I OF CO. ACT,2013 provides AoA of a co. to govern committee procedures.

COMMITTEE members' selection

specific members appointed by board/committee chair.the things considered vary from knowledge area,expertise domain to time commitments.also taken in consideration are the tasks required,skills needed and keeping in mind committee goals and objectives.

COMMITTEE chair selection

appointed by members/board.he is the one who sets the tone,pace and strategies so should possess motivational/leadership/behavioural skills and time commitment.this role requires extra work,time for communication and proper info about developments along with willingness to resolve conflicts.

coordinating work and making an environment of thoughtful deliberation along with helping the group use all abilities/experiences in synergy.

chairs are responsible for setting agendas,assigning responsibilities and following-up.

AUDIT COMMITTEE

Corporate governance comprises factors such as audit committee as it is charged with principal oversight of financial reporting and disclosure to enhance integrity in internal control processes/procedures and risk mgmt. systems.

constitution mandated under S.177 of co. act,2013;S.292A of the erstwhile act & Regulation 18 under SEBI(LODR),2015.

AUDIT COMMITTEE under co. act,2013

S.177 read with Rule 6 of co. rules,2014 provides that board of every listed and co. covered under Rule 4 of co.(director appointment/qualifications) rules,2014 provides for the following class:

public co. with PUC of 10cr./<
public co. with turnover 100 cr./<
public co. having aggregate,o/s loans/borrowings/debentures/deposits > 50cr.

above figures taken as per last audited financial statements

AUDIT COMMITTEE under SEBI(LODR) Regulations,2015

every listed to constitute a qualified/independent committee per reference terms,subject to specified conditions.

Case Law : In the case of Shruti Power Projects (P) Ltd., In re, the National Company Law Tribunal, Ahmedabad Bench, CP No. 5/441/NCLT/AHM/2017, dated April 13, 2017.

AUDIT COMMITTEE composition

under REG.18, the chair should be independent and shall be present at AGMs.

The audit committee at its discretion shall invite the finance director or head of the finance function, head of internal audit and a representative of the statutory auditor and any other such executives to be present at the meetings of the committee. Provided that occasionally the audit committee may meet without the presence of any executives of the listed entity.

AUDIT COMMITTEE functions/role

under S.177

recommend appointments,remuneration and terms of auditors.

in a govt. co, only remuneration is recommended,Notification No. GSR 463(E) dated 05-06-2015.

review/monitor auditor's independence and performance along with the effectiveness of the audit process.
examining financial statements and auditor reports
approval/modification of transactions with related parties or otherwise

above unapplicable transactions b/w a holding and its wholly owned subsidiary.

scrutiny of inter-corporate loans/investments
valuations
evaluating internal financial controls
monitoring end use of funds raised through POs and related matters

under Reg.18(3),Part C of Schedule II

ROLE

functions as per co. act,2013
Review:

directors responsibility statement
changes in accounting policies/procedures
major accounting entries
adjustment in audit findings
compliances
disclosure/approval/modification of RPTs
modified opinions in draft audit report

review with mgmt.,quarterly financial statements before submission to board for approval.
uses/application of funds/purposes/reports by monitoring agency
monitoring auditor independence/performance and effectiveness of the audit process.
reviewing internal control processes
discussion with internal auditors of significant findings and follow up on internal investigations
discussing scope/nature of audit as well as post-audit discussions
reviewing whistle blower mechanism
approving appointment of CFO
functions as in terms of reference
reviewing loan utilization/advances from/investment by holding 100 crore/</10% of asset size of subsidiary,whichever is LOWER.

MANDATORY REVIEW

mgmt. discussion/analysis of financial condition and operation results
statement of significant RPTs
mgmt./internal control weaknesses letters
internal audit reports
chief internal auditor and their terms subject to review
quarterly/annual deviation statements per Reg.32(1,7)

AUDIT COMMITTEE Powers

AUDIT COMMITTEE Meetings/Quorum

LODR provides for min. meeting and quorum such as:

meet at least 4x per year and not more than 120 days to elapse b/w 2 meetings.[Reg.18(2)(a)]

Quorum=2 or 1/3rd members,whichever GREATER with at least 2 independent directors.[Reg.18(2)(b)]

disclosures in board report

S.177(8) provides that the board's report under S.134(3) shall disclose-committee composition,reasons for not accepting recommendations by board.

under SEBI(LODR),following disclosures are made in "corporate governance" section-terms of reference,composition,members,chair,meetings and attendance per year.

further per Reg. 46,website to disclose all compositions

NOMINATION & REMUNERATION COMMITTEE (NRC)

co. act,1956 had not mandated it except for a public co. having no/inadequate profits.

NRC constitution

under co. act,2013;S.178(1) read with Rule 6 of co.(board meetings/powers)rules,2014 and Rule 4 of co.(directors appointment/qualifications)rules,2014 provides that board of following class to constitute an NRC:

every listed
public co. with PUC of 10cr./<
public co. with a turnover of 100 cr./<
public co. having aggregate,outstanding loans/borrowings/debentures/deposits >50 cr.

not applicable to S.8 co. and specified IFSC public co.

under SEBI(LODR),Reg.19 provides for an NRC

NRC composition

quorum as in Reg.18 and shall meet at least annually;role specified in Part D of Schedule II.

NRC Functions

under Co. act,2013

identify qualified directors for senior mgmt. and recommend appointment,removal,evaluation of board,committees and directors.[178(2)]
formulate criteria for qualifications,+ve attributes,independence and remuneration policy.(3)
formulating above,consider-

remuneration level/composition is reasonable/sufficient to attract,retain and motivate.
relationship of remuneration to performance
balance among fixed/incentive pay (4)

placed on website
web address and salient features in board's report

(2,3,4) not applicable to govt. co. except for senior mgmt.notification 463(E), dated 5-6-2015.
if such disclosed in financial statements,referred instead of being repeated in the board's report.

under Reg.19(4)

ROLE-Part D of Schedule II

criteria for qualifications,+ve attributes,independence and recommending a remuneration policy.
criteria for performance evaluation of IDs/board
diversity policy
identifying persons qualified to be directors and recommending appointments/removal.
ID terms per evaluation
remuneration to senior mgmt.

disclosure in board's report/website

under "corporate governance"

brief description of reference terms
members/chair details
yearly meetings/attendance
IDs performance evaluation criteria

per Reg.46,website discloses various compositions

STAKEHOLDERS' RELATIONSHIP COMMITTEE (SRC)

SRC constitution/composition

SRC role

to consider/resolve grievances relating to transfer,non-receipt of annual reports/declared dividends. also-

reviewing measures for exercise of voting rights
reviewing adherence to service standards rendered by registrar/share transfer agents.
measures and initiatives for reducing unclaimed dividends along with timely receipts.

disclosure in "corporate governance" in board's report:

non-executive directors heading
compliance officers
shareholders complaints received so far

not solved to holders satisfaction
pending complaints

Reg. 46 like above committees

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE (CSR)

under S.135 in co. act,2013 read with Rule 3 of co.(CSR Policy)rules,2014 mandates for every co. that fulfills the following criteria during immediately preceding FY to constitute a CSR Committee of 3/< directors of which, at least 1=independent.

net profit=5 cr./<
net worth=500 cr./<
turnover=1000 cr./<

CSR composition

if no ID is required under S.149(4),committee to have 2/< directors.

Rule 5(1) provides:

pvt. co. to constitute a committee with both directors
foreign co; 1 person of committee shall be Indian Resident per S.380 and other nominated by foreign co.

S.134(3) attached to a statement laid in AGM,a board report including policy details which has been developed/implemented by the committee during the year.
S.135(9)amt. to be spent by co. under (5) <50 lakhs,CSR constitution inapplicable and functions discharged by board.

CSR functions

CSR expenditure

S.135(5) in every FY,at least 2% of avg. net profits (S.198) made during 3 immediately preceding FY or part thereof.

first proviso states preference to be given to local areas for spending
failure to spend,board's report to specify reasons for not spending unless unspent amt. relates to an ongoing project, transfer to fund in Schedule II within 6 months of FY expiry.
spending in excess,set-off in succeeding FYs as prescribed

S.135(6)amt. remaining unspent pursuant to ongoing project transferred within 30 days of FY end to special a/c "unspent CSR a/c" and such spent within 3 FYs from transfer,failing which,transferred to fund in Schedule VII within 30 days of 3rd FY end.
S.135(7)default in complying above-

case law:Technicolor India (P.) Ltd. v/s Registrar of Companies, CP NO. 124 (BB) OF 2019, JANUARY 31, 2020.

check out Schedule VII in co. act,2013 for the table of activities.

RISK MGMT. COMMITTEE (RMC)

Co. act describes such a policy in S.134(3)(n) but no specific section dedicated to it.

Reg. 21 of SEBI(LODR) deals with it as below:

majority in case of listed entity with o/s SR equity shares,at least 2/3rds=IDs
chair=board member/senior executive
meet at least annually
board defines role/responsibility and delegates monitoring/reviewing risk mgmt. plan.
applicable to top 500 listed entities @ end of Previous FY

VIGIL MECHANISM

it should provide safeguards from victimization and to provide access to the chair of the audit committee and details disclosed in the board's report.

OTHER/NON-MANDATORY COMMITTEES

to oversee specific objects/projects and nomenclature/role will depend accordingly such as-

Corporate Governance for policies/procedures
Regulatory,Compliance and govt. Affairs for non-financial compliance
Science,Tech & Sustainability for R&D
Customer Service/Grievance
Fraud Monitoring
IT
Performance Appraisal Review
Credit
Ethics

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November 20, 2023

CS Professional:GRMCE [Ch-5 Board Committees]