“Elevate corporate governance with insights into Committees under the Companies Act, 2013. Explore the significance, importance, and applicability of key committees like Audit Committee, Nomination & Remuneration Committee, Stakeholder Relationship Committee, Corporate Social Responsibility Committee, and Vigil Mechanism. Stay informed to strengthen your company’s governance framework.”
Corporate governance encompasses a wide array of processes, customs, policies, laws, and institutions that guide organizations and corporations in their actions, administration, and operational control. Its primary objective is to steer organizations towards their goals while effectively managing relationships with stakeholders, including the board of directors and shareholders.
The Institute of Company Secretaries of India defines corporate governance as the application of best management practices, strict compliance with laws, and adherence to ethical standards to ensure effective wealth management, discharge of social responsibility, and sustainable development for all stakeholders.
Interestingly, corporate governance is not a novel concept in India. Ancient scriptures like the Ramayana, authored by Valmiki, showcase its significance. The epic not only narrates the life of Rama but also imparts valuable insights into ethics, statecraft, politics, and even human resources management.
A crucial element of good governance is the establishment of “Board Committees.” A committee comprises individuals assembled to execute specific designated tasks. It may dissolve after the completion of its assignments or proceed to undertake new projects.
In terms of a Company, incorporated under the Companies Act, 2013, a board committee is a small working group identified by the board itself, consisting primarily of board members, for the purpose of supporting the board’s work. Committees are generally formed to perform some specified work. Members of the committee are expected to have expertise in the specified field.
We can say, that Board Committee is a group of members of Board, identified by the Board , to perform the duties of the Board and to aid te burdedn of the Board.
IMPORTACE OF BOARD COMMITTEES
1. They strengthen the governance arrangements of the company and support the Board in the achievement of the strategic objectives of the company.
2. They strengthen the role of the Board in strategic decision making and supports the role of non-executive directors in challenging executive management actions.
3. They maximise the value of the input from non-executive directors, given their limited time commitment.
4. They support the Board in fulfilling its role, given the nature and magnitude of the agenda.
APPLICABILITY UNDER THE COMPANIES ACT, 2013
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Sl. No. |
Section under The Companies Act, 2013 | Name of the Committee | Applicability |
| 1. | Sec 177 & Rule 6 of the Companies (Meetings of the Board and is Powers) Rules, 2014 | Audit Committee | a) every listed public company;
b) All public companies with a paid-up capital of 10 crore rupees or more; c) All public companies having turnover of 100 crore rupees or more; d) All public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding 50 crore rupees or more. **The paid-up share capital or turnover or outstanding loans or borrowings or debentures or deposits, as the case may be, as existing on the date of last audited financial statements shall be considered. *** The independent director’s (if applicable) SHALL form majority in the composition. |
| 2. | Section 178 & Rule 6 Of the Companies (Meetings of The Board and Its Powers) Rules, 2014 | Nomination & Remuneration Committee | a) every listed public company;
b) All public companies with a paid-up capital of 10 crore rupees or more; c) All public companies having turnover of 100 crore rupees or more; d) All public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding 50 crore rupees or more. ** Section 178 shall not apply to Section 8 companies and specified IFSC public companies |
| 3. | Section 178(5) | Stakeholder Relationship Committee | The Board of Directors of a company which consists of more than one thousand shareholders, debenture holders, deposit-holders and any other security holders at any time during a financial year |
| 4. | Sec 135 (1) & Rule 3 Of Companies (Corporate Social Responsibility Policy) Rules, 2014 | Corporate Social Responsibility Committee | every company which fulfils any of the following criteria during the immediately preceding financial year:
a) Companies having net worth of rupees five hundred crore or more, or b) Companies having turnover of rupees one thousand crore or more or c) Companies having a net profit of rupees five crore or more |
| 5. | Section 177(9) | Vigil Mechanism | a) Every listed company
b) The Companies which accept deposits from the public; c) The Companies which have borrowed money from banks and public financial institutions in excess of fifty crore rupees. |
| 6. | No section under The Companies Act, 2013 | Risk Management Committee | Section 134(3)(n) only describes about the Risk Management Policy. |
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