COMMITTEES
– Committees are generally formed to perform some expertise work.
-Members of the committee are expected to have expertise in the specified field.
-Committees are usually formed as a means of improving board effectiveness and efficiency, in areas where more focused, specialized and technical discussions are required.
Board Committees
-A board committee is a small working group identified by the board, consisting of board members, for the purpose of supporting the board’s work.
However, the Board of Directors is ultimately responsible for the acts of the committee. Board is responsible for defining the committee role and structure.
Mandatory Committees
| Under Companies Act, 2013 | Under SEBI (LODR) Regulations, 2015 |
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| Committees | Audit Committee (AC) | Nomination and Remuneration Committee (NRC) |
| Applicability(as per Companies Act, 2013) | Sec 177 (AC) / Sec 178 (NRC)•
a) Paid up Capital: 10Cr or more b) Turnover: 100cr or more c) Aggregate outstanding loans or borrowings or debenture or deposits: exceeding 50cr |
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| Applicability(as per SEBI LODR) | Regulation 18 – Every Listed companies | Regulation 19 – Every Listed companies |
| Composition | Companies Act, 2013•
SEBI (LODR)•
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Companies Act, 2013
Out of which not less than one half shall be Independent Directors. SEBI (LODR)•
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| Meetings | Companies Act, 2013 : Silent SEBI (LODR)•
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Companies Act, 2013 : Silent SEBI (LODR)•
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| Quorum for meetings of the Committee | Companies Act, 2013 : Silent
SEBI (LODR)•
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Companies Act, 2013 : Silent
SEBI (LODR)•
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| Chairperson | Independent Directors (he shall not be Chairperson of the Company) | Independent Directors (he shall not be Chairperson of the Company) |
| Attendance of Chaiperson in Annual General Meeting (AGM) | Shall be present in the AGM
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May be present in the AGM
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| Functions / Role |
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Note: The above functions, shall not apply to Government company except with regard to appointment of senior management and other employees |
| Penalty for contravening the Provisions. | Company-•Liable to pay fine of Rs. 1 Lakh to Rs 5lakh and
Officers– who are in default liable to pay
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| Committees | Stakeholder Relationship Committee (SRC) | Risk Management Committee (RMC) | Corporate Social Responsibility (CSR) |
| Applicability(as per Companies Act, 2013) | Sec 178
Companies consisting of more than 1000 Shareholders, debenture holders, deposit holders, security holders |
Not specified | Sec 135
Companies with:•
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| Applicability(as per SEBI LODR) | Regulation 20 – Every Listed companies | Regulation 21 –Top 500 Listed companies | Not specified |
| Composition | Companies Act, 2013•
SEBI (LODR)•
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Companies Act, 2013: Not Applicable
SEBI (LODR)•
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| Chairperson | Non-Executive Director | Shall be a member of Board of Directors | Not specified |
| Meetings | Companies Act, 2013 : Silent
SEBI (LODR) At least 1 in a year |
Companies Act, 2013 : Silent
SEBI (LODR) At least 1 meeting |
Not specified |
| Quorum for meetings of the Committee | Not specified | Not specified | Not specified |
| Attendance of Chairperson in Annual General Meeting (AGM) | Shall be present in the AGM | Not specified | Not specified |
| Functions / Role |
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| Penalty for contravening the Provisions. | Company-•
Liable to pay fine of Rs. 1 Lakh to Rs 5 Lakh and Officers– who are in default liable to pay•
Imprisonment up to 1 year or both. |
Company-•
Liable to pay fine of Rs. 50,000 to Rs 25 Lakh and Officers– who are in default liable to pay•
Imprisonment up to 3 year or both |
Company-•
Liable to pay fine of Rs. 50,000 to Rs 25 Lakh and Officers– who are in default liable to pay•
Imprisonment up to 3 year or both |
OTHER COMMITTEES
Corporate Governance Committee:
- Responsible for considering and making recommendations to the Board concerning the appropriate size, functions and needs of the Board.
- This Committee may be constituted:
i. To develop and recommend the board a set of corporate governance guidelines applicable to the company,
ii. Implement and periodically review policies and processes relating to corporate governance,
- Typically, the committee may be responsible for considering matters relating to corporate governance including
i. The composition of board
ii. Appointment of new directors
iii. Review of strategic human resource decisions
iv. Succession planning for the chairman and other key board and executive positions
v. Performance evaluation of the board and its committees and individual directors.
Regulatory, Compliance & Government Affairs Committee:
The primary objective of the Compliance Committee is to review, oversee, and monitor:
- Company’s compliance with applicable legal and regulatory
- Company’s policies, programmes, and procedures to ensure compliance with the Company’s Code of Conduct and other relevant standards
- Company’s efforts to implement legal obligations arising from settlement agreements and other similar documents; and
- The committee oversees the Company’s non-financial compliance programmes and systems with respect to legal and regulatory requirements
Section 134 (5) of the Act dealing with Directors Responsibility Statement states that the directors need to ensure that they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Science, Technology & Sustainability Committee may be constituted to
- Monitor and review the overall strategy, direction and effectiveness of the Company’s research and development.
- Review the Company’s policies, programmes and practices on environment, health, safety and sustainability.
- Assist the Board in
i. Identifying and comprehending significant emerging science and technology policy and public health issues and trends that may impact the Company’s overall business strategy.
ii. Oversight of the Company’s major acquisitions and business development activities as they relate to the acquisition or development of new science or technology.
Customer Service Committee/ Customer Grievance Committee:
- Service oriented companies may have separate Board Committee on customer service matters.
- Grievance committee may look after the complaints (if any) received from the customer and the steps taken to resolve it.
Fraud Monitoring Committee:
- in some companies which are in field of financial services, there may be need of the separate fraud monitoring committee.
- They may take care of the checks and balances and preventive measures in order to discourage the employees in their modus operandi.
Information Technology Committee:
- Information Technology is need of hour.
- This committee may look after the present and future need of the induction of Information Technology.
- Also takes care of need of providing the training to the existing as well new incumbents.
Performance Appraisal Committee
- This committee periodically (say annually) reviews the performance to Top Executives/ Key Managerial Person of the company as well as the Directors of the company.
- It is just like the performance review of the each and every employee, which happens in most of the organizations.
- By this annual exercise, the persons sitting at helm of the affairs of the company comes under the scanner of this committee.
Author: Rupesh Jain is an Associate at M&K Associates and can be reached at mail@mnklaws.com
Disclaimer: The views, information or opinions expressed herein are compiled by the Legal team of M&K Associates, Company Secretaries, Hyderabad. The above information is solely for disseminating knowledge and private circulation. We are hereby not liable for any loss, damage or inconvenience caused as a result of reliance on such information and we accept no legal liability or other responsibility by or on behalf of any errors, omissions, or statements on this content.
Author Bio
please make a correction in CSR comm the limit is Net profit 5 crore