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
  • Audit Committee
  • Audit Committee
  • Nomination and Remuneration Committee
  • Nomination and Remuneration Committee
  • Stakeholders Relationship Committee
  • Stakeholders Relationship Committee
  • Corporate Social Responsibility Committee
  • Risk Management Committee

Committees Audit Committee (AC) Nomination and Remuneration Committee (NRC)
Applicability(as per Companies Act, 2013) Sec 177 (AC) / Sec 178 (NRC)•

  • Every Listed Companies•
  • Every Public Co. having:

a) Paid up Capital: 10Cr or more

b) Turnover: 100cr or more

c) Aggregate outstanding loans or borrowings or debenture or deposits: exceeding 50cr

Applicability(as per SEBI LODR) Regulation 18 – Every Listed companies Regulation 19 – Every Listed companies
Composition Companies Act, 2013

  • Min: 3 Directors•
  • Majority : Independent Directors•
  • Majority + Chairperson : ability to read Financial Statements

SEBI (LODR)

  • Min: 3 Directors•
  • 2/3rd: Independent Directors•
  • All members – Financial Literate•
  • Atleast 1 –Financial Accounting or Financial Management expertise.•
  • CS : Secretary of Committee
Companies Act, 2013

  • 3 or more Non-Executive Directors

Out of which not less than one half shall be Independent Directors.

SEBI (LODR)

  • Atleast 3 Non-Executive directors•
  • Atleast 50% shall be Independent Directors
Meetings Companies Act, 2013 : Silent SEBI (LODR)

  • At least 4 in a year and Max. gap of 120 days
Companies Act, 2013 : Silent SEBI (LODR)

  • At least 1 in a year
Quorum for meetings of the Committee Companies Act, 2013 : Silent

SEBI (LODR)

  • 2 or 1/3rd whichever is higher•
  • But 2 Independent Directors shall be present
Companies Act, 2013 : Silent

SEBI (LODR)

  • 2 or 1/3rd whichever is higher•
  • But 1 Independent Directors shall be present
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

 

May be present in the AGM

 

Functions / Role
  • Recommendation for appointment, remuneration and terms of appointment of auditors of the company
  • Review and monitor the auditor’s independence and performance, and effectiveness of audit process.•
  • Examination of the financial statement and the auditors’ report.
  • Approval or any subsequent modification of transactions of the company with related parties.
  • Evaluation of internal financial controls and risk management systems
  • Identify persons who are qualified to become directors and who may be appointed in senior management.•
  • Formulate the criteria for determining qualifications, positive attributes and independence of a director.•
  • Recommend to the Board a policy, relating to the remuneration for the directors, key managerial personnel and other employees.

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

  • Fine Rs. 25,000 to Rs. 1,00,000 or
  • Imprisonment up to 1 year or both.

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:•

  • Net worth: ≥ 500 Cr or•
  • Turnover:≥ 1000Cr or•
  • Net Profit: ≥ 50Cr
Applicability(as per SEBI LODR) Regulation 20 – Every Listed companies Regulation 21 –Top 500 Listed companies Not specified
Composition Companies Act, 2013

  • Non-Executive Chairperson and such other members as Board decides.

SEBI (LODR)

  • At least 3 Directors
  • At least 1 Independent Director
Companies Act, 2013: Not Applicable

SEBI (LODR)

  • Board of Directors •
  • Senior Executives.(Majority Shall be Board of Directors)
  • 3 or more directors•
  • At least 1 Independent Director, (If any)
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
  • The main function of the committee is to consider and resolve the grievances of security holders of the company.
  • Framing, overseeing and monitoring implementation of Risk Management Policy.
  • Validating the process and procedure of Risk Management and Risk Mitigation
  • Periodically reviewing and evaluating the Risk Management Policy
  • Formulating and recommending to the Board, a CSR Policy.
  • Recommending the amount of expenditure to be incurred on CSR activities.
  • Monitoring CSR Policy
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•

  • Fine Rs. 25,000 to Rs. 1,00,000 or

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•

  • Fine Rs. 50,000 to Rs. 5,00,000 or

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•

  • Fine Rs. 50,000 to Rs. 5,00,000 or

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.

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Company: M&K Associates
Location: Hyderabad, Telangana, IN
Member Since: 12 Jan 2018 | Total Posts: 19
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