|Audit Committee||Minimum 3 Directors as members||2/3rd should be Independent Directors or Majority of the members should be Independent Director||Chairperson of the Audit Committee will be Independent Director||The Chairperson and other members must have ability to read and understand Financial Statements|
|Nomination and Remuneration Committee||Minimum 3 Directors all are Non-Executive||Half of the members should be Independent Directors||Chairperson of the NRC will be Independent Director||Chairperson of the Company(Executive or Non-executive) can be appointed as member of the Committee but cannot chair the committee|
|Stakeholder Relationship Committee||As decided by the Board of Directors||–||Chairperson of the SRC will be Non-Executive Director|
|Corporate Social Responsibility Committee||Minimum 3 Directors as members||At least 1 should be Independent Director||Any member of the committee can become the chairman of the CSR Committee|
|Risk Management Committee||Members of the Board and Senior executives of the listed entity can be members||–||Chairperson shall be a member of the Board||Majority of the members must be from the Board|
Let us assume a practical scenario wherein XYZ Limited, a public listed Company incorporated under Companies Act, 2013 has below composition of committees:
|Name||Category||Nature||Manag-ement||Audit Committee||Nomination and Remun-eration Committee||Stakeholder Relationship Committee|
|1.||Mr. A||Promoter Director||Executive||Chairman||Member||—||Chairperson|
|3.||Mr. C||Independent Director||Non -Executive||—||Member||Chairperson||—|
|4.||Mrs. D||Independent Director||Non -Executive||Member||Chairperson||Member||—|
Therefore, XYZ Limited has complied with the composition of Audit Committee, as per Section – 177 of Companies Act, 2013 and Regulation 18 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
NOMINATION AND REMUNERATION COMMITTEE:
Therefore, XYZ Limited has not complied with Section – 178 of Companies Act, 2013 and Regulation 19 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Solution: Mr. A, Chairperson of the Company, can be appointed as a member of the Nomination and Remuneration Committee
STAKEHOLDER RELATIONSHIP COMMITTEE:
Therefore, XYZ Limited has not complied with the provisions of section – 178(5) of Companies Act, 2013 and Regulation 20 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Solution: Since Mr. A is an Executive Director, he cannot act as chairman of this Committee. A Non-Executive Director should be appointed as the Chairman.
RISK MANAGEMENT COMMITTEE:
Therefore, XYZ Limited has complied with the Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The Company has to constitute a CSR committee.
Solution: The Company can take the same Composition as that of Risk Management Committee since all the above are complied with in the composition of Risk Management Committee.
Author: Bhagath Chandra Reddy is Associate at M&K Associates and can be reached at [email protected]
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