This article delves into the essential aspects of the Board and Committee Composition under the Companies Act 2013 and SEBI (LODR) Regulations 2015. It provides an overview of the requirements and roles for various committees mandated for listed companies and those meeting certain capital or turnover thresholds. The primary focus is on the composition of the Board of Directors, Audit Committee, Nomination and Remuneration Committee, Stakeholder Relationship Committee, and Risk Management Committee.
BOARD & COMMITTEE COMPOSITION
Composition of Board of Directors has been mentioned in Section 149 of the Companies Act, 2013
In case of listed Company we need to check SEBI (LODR) Regulation, 2015.
In this article we will find about the overview of the Board Composition and Composition of Various Committees under the Companies Act, 2013 & SEBI (LODR) Regulation, 2015.
As Per Companies Act, 2013
COMPOSTION OF BOARD (Section 149)
Every Listed Company shall have at least 1/3rd of the total number of Directors as independent Directors.
The following class or classes of companies shall have at least 2 directors as independent directors –
(i) The Public Companies having paid up share capital of 10 crore rupees or more; or
(ii) The Public Companies having turnover of 100 crore rupees or more; or
(iii) The Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding 50 crore rupees:
As Per SEBI (LODR) Regulation, 2015
COMPOSTION OF BOARD (Regulation 17)
The composition of board of directors of the listed entity shall be as follows:
- Board of directors shall have an optimum combination of executive and non-executive directors with at least one Woman Director and not less than 50% of the Board of Directors shall comprise of Non-Executive Directors;
- Where the Chairperson of the Board of Directors is a Non-Executive Director, at least 1/3rd of the Board of Directors shall comprise of Independent Directors and where the Chairperson of the Board of Director is an Executive Director, at least 50% of the Board of Directors shall comprise of Independent Directors.
- Provided that where the regular Non-Executive Chairperson is a Promoter of the listed entity or is related to any promoter or person occupying management positions at the level of board of director or at one level below the board of directors, at least 50% of the Board of Directors of the listed entity shall consist of Independent Directors.
- Where the listed company has Outstanding SR Equity Shares, at least 50% of the Board of Directors shall comprise of Independent Directors.
The listed entity shall ensure that approval of shareholders for appointment of a person on the Board of Directors is taken at the next general meeting or within three months from appointment, whichever is earlier.
With effect from April 1, 2024, the continuation of a director serving on the board of directors of a listed entity shall be subject to the approval by the shareholders in a general meeting at least once in every five years from the date of their appointment or reappointment.
Any vacancy in the office of a director shall be filled by the listed entity at the within 3 months from the date such vacancy.
AUDIT COMMITTEE COMPOSITION
As Per Companies Act, 2013:
Section 177
The Board of Director of:
1. Every Listed Company
2. Public Companies having paid up share capital of 10 crore rupees or more; or
3. Public Companies having turnover of 100 crore rupees or more; or
4. Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding 50 crore rupees:
Shall constitute an Audit Committee.
The Audit Committee shall consist of a minimum of 3 Directors with majority Independent Director.
Majority of members of Audit Committee including its Chairperson shall be persons with ability to read and understand, the financial statement.
As Per SEBI (LODR) Regulation, 2015
Regulation 18
Every Listed Company shall constitute an Independent Audit Committee.
1. The audit committee shall have minimum three directors as members.
2. 2/3rd members of audit committee shall be Independent Directors.
3 In case of a listed entity having outstanding SR equity shares, the audit committee shall comprise of only Independent Directors.
4. All Members of audit committee shall be Financially Literate and at least 1 member shall have accounting or related Financial Management Expertise.
5. Chairperson of the audit committee shall be an Independent Director.
NOMINATION AND REMUNERATION COMMITTEE COMPOSITION
As Per Companies Act, 2013:
Section 178
The Board of Director of:
1. Every Listed Company
2. Public Companies having paid up share capital of 10 crore rupees or more; or
3. Public Companies having turnover of 100 crore rupees or more; or
4. Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding 50 crore rupees:
Shall constitute a Nomination and Remuneration Committee.
The Nomination and Remuneration Committee shall consist of at least 3 Non-Executive Directors out of which not less than 50% shall be Independent Directors.
Chairperson of the company (whether executive or non-executive) may be appointed as a member of the Nomination and Remuneration Committee but shall not chair such Committee.
As Per SEBI (LODR) Regulation, 2015
Regulation 19
Every Listed Company shall constitute a Nomination and Remuneration Committee.
The committee shall comprise of at least three Directors.
(b) All Directors of the committee shall be Non-Executive Directors.
(c) At least 2/3rd of the directors shall be Independent Directors.
The Chairperson of the nomination and remuneration committee shall be An Independent Director.
Chairperson of the Listed Company (whether executive or non-executive) may be appointed as a member of the Nomination and Remuneration Committee but shall not chair such Committee.
STAKEHOLDER RELATIONSHIP COMMITTEE COMPOSITION
As Per Companies Act, 2013:
Section 178
The Board of Directors of a company which consists of more than 1000 shareholders, debenture-holders, deposit-holders and any other security holders at any time during a financial year shall constitute a Stakeholders Relationship Committee.
Chairperson who shall be Non-Executive Director and such other members as may be decided by the Board.
As Per SEBI (LODR) Regulation, 2015
Regulation 20
Every Listed Company shall constitute a Stakeholder Relationship Committee.
The Chairperson of the Stakeholder Relationship Committee shall be Non-Executive Director.
The Committee shall consist of at least 3 Director with at least 1 Independent Director.
In case of a Listed Entity having outstanding SR Equity Shares, at least 2/3rd of the Stakeholders Relationship Committee shall comprise of Independent Directors.
RISK MANAGEMENT COMMITTEE COMPOSITION
As Per SEBI (LODR) Regulation, 2015
Regulation 21
The board of directors shall constitute a Risk Management Committee.
The Risk Management Committee shall have minimum 3 members with majority of them being members of the Board of Directors, including at least 1 Independent Director.
In case of a listed entity having outstanding SR equity shares, at least 2/3rd of the Risk Management Committee shall comprise Independent Directors.
The Chairperson of the Risk management committee shall be a member of the Board of Directors and Senior Executives of the listed entity may be members of the committee.
Conclusion: Maintaining the right composition of the Board and Committees is crucial for ensuring effective corporate governance. Listed companies and those meeting specified financial criteria must adhere to the guidelines outlined in the Companies Act 2013 and SEBI (LODR) Regulations 2015. By complying with these regulations, companies can foster a transparent and efficient decision-making process that aligns with the best interests of shareholders and stakeholders.
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