CS Deepak BangaCS Deepak Banga

The Companies incorporated under the Indian Company Law are required to frame different Policies/ maintain systems/ plans and devise Codes of/ for the Company/ Board of Directors and Senior Management Personnel/ Directors and Employees etc. pursuant to the provisions of the Companies Act, 2013 and other corporate laws. However, companies whose shares are listed on Stock Exchanges in India are additionally required to frame some other policies/ code as well, in compliance of the Listing Agreement and SEBI Rules and Regulations.

The Policies and Codes that are required to be framed by companies, needs also to be disclosed in the Board’s Report forming part of the Annual Report and uploaded on Company’s website, wherever applicable.

The table below lists the various Policies/ Codes to be framed, applicability, manner of framing and disclosure requirements etc.

S. No.
Name of
Policy/
Code
Requirement
Applica-bility
To be framed by
Disclosure
Committee
Board of Directors
Board
Report
Website
of
Company
1.
Corporate Social Responsibility (CSR)Policy
Sec.135 of CA, 2013*
Every company having net worth of Rs.500 crore or more OR turnover of Rs.1,000 crore or more OR a net profit of Rs. 5 crore or more during any financial year
(i) Board shall constitute CSR Committee of the Board which shall formulate & recommend to the Board, CSR Policy which shall indicate the activities to be undertaken by the company as per Schedule VII of the CA, 2013,, (ii) recommend the amount of expenditure to be incurred on the activities to be undertaken by the company and (iii) monitor CSR Policy of the company from time to time
Board of Directors shall: (i) Approve the Policy (ii) ensure that the activities as are included in CSR Policy are undertaken by the company
Disclose the contents of the CSR Policy as per the particulars specified in the Annexure to Companies (CSR Policy) Rules, 2014
The contents to be given in the Board Report shall be displayed on the website of the Company.
2.
Whistle Blower Policy – A Vigil mechanism for directors and employees to report genuine concerns or grievances about unethical behavior, actual or suspected fraud or violation of the company’s code of conduct or ethics policy
Sec.177(9)/177 (10) of CA, 2013 & Cl. 49.II.F./ Cl.49.III.D(18) of LA**
Every listed company and all companies which:
(i)accept deposits from the public;
(ii)have borrowed money from banks and public financial institutions in excess of Rs.50 Crores.
As the Audit Committee shall review the functioning of the Whistle Blower mechanism, the Policy can be routed through the Audit Committee.
Yes
Details of establishment of such mechanism to be disclosed
Details of establishment of such mechanism to be disclosed, if any.
3.#
(i) Policy for formal annual evaluation by the Board of its own performance, that of its committees and individual directors.
Sec.134(3)(p) of CA, 2013
• Nomination and Remuneration Committee (NRC) shall lay down criteria for performance evaluation of very director and shall carry out their evaluation [178(2) of CA, 2013] Further, as per Cl. 49.II.B.5/ Cl.49.IV.B.2/4 of LA, NRC shall lay down evaluation criteria for performance evaluation of Independent Directors and the Board.
• The performance evaluation of IDs shall be done by the entire Board (excluding the director being evaluated)[Schedule IV (VIII)(1) of CA, 2013]
• Independent Directors shall evaluate the performance of the Board and management
[Schedule IV(II) (2) of CA, 2013]
Listed companies & every other public company having such paid up capital as may be specified #
(#Not yet specified)
Listed companies and all Public companies having –
(i) paid up share capital of Rs.10 crores or more; OR (ii) turnover of Rs.100 crores or more OR (iii) which have, in aggregate, outstanding loans, debentures and deposits exceeding Rs.50 crores.
Board
The evaluation criteria as laid down by the Nomination and Remuneration Committee shall be disclosedin Annual Report only by listed companies.
4.
Risk Management Policy
of the company
Section 134(3)(n) of CA, 2013/ Cl.49.VI. of LA
All companies
Board of Directors of listed companies shall constitute a Risk Management Committee of the Board which shall frame and update risk management plan and policy and recommend to the Board. In other cases, Board shall formulate the policy.
Board
5.
Policy for determining ‘material’ subsidiaries of the Company
CL.49.V.D/E. of LA
Listed companies
Board
Provide a weblink in the Annual Report of the policy disclosed on the website of the company
Yes
6.
(i) Policy on materiality of related party transactions and
(ii) Policy on dealing with related party transactions
Cl.49.VII.C./ Cl.49.VIII.A.2. of LA
Listed companies
Board
Provide a weblink in the Annual Report of the policy on dealing with related Party Transactions disclosed on the website of the company
Disclose the policy on dealing with related party transactions on the website of the company.
7.
Code of Conduct for Directors and Senior Management.
Cl.49.II.E/ Cl.49.VIII.D.3.of LA
Listed companies
Board
Board members & senior management personnel shall confirm compliance with the code on an annual basis. The Annual Report shall contain a declaration to this effect signed by CEO.
Yes
8.
Code of Conduct for Prevention of Insider Trading for ‘designated employees’ which shall include:
(i) officers comprising the top three tiers of the company management;
(ii) the employees designated by the company to whom the trading restrictions shall
be applicable, keeping in mind the objectives of this code of conduct.
SEBI (Prohibition of Insider Trading) Regulations, 1992 [upto 14.05.2015]
Listed companies
Board
9.
Code of Practices and Procedures for fair disclosure of unpublished price sensitive information
SEBI (Prohibition of Insider Trading) Regulations, 2015[shall become effective w.e.f. 15.05.2015]
Listed companies
Board
Yes
10.
Code of Conduct to Regulate, Monitor and Report trading by Insiders
 SEBI (Prohibition of Insider Trading) Regulations, 2015 [shall become effective w.e.f. 15.05.2015]
Listed companies
Board
11.
Policy for Prevention of Sexual
Harassment at Workplace
Sexual Harassment of Women at Workplace
(Prevention, Prohibition
and Redressal) Act, 2013 read with Rules framed thereunder
All companies
Companies having more than 10 employees at any of their offices/ branches are required to constitute an Internal Complaint Committee
12.
Policy on Board diversity
Cl. 49.IV.B.3. of LA
Listed companies
Nomination & Remuneration Committee shall devise a Policy on Board diversity.
Board
13.
Policy on directors’ appointment and remuneration of the directors, key managerial personnel and other employees including criteria for determining
qualifications, positive attributes, independence of a director and other matters.
Section 134(3)(e)/178 (3) of CA, 2013 & Cl.49.IV.B.1 of LA
Every listed company and all Public companies having –
(i) paid up capital of Rs.10 crores or more; OR (ii) turnover of Rs.100 crores or more OR (iii) which have, in aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs.50 crores or more.
Board shall constitute the Nomination & Remuneration Committee, if applicable, which shall formulate a policy and recommend to the Board
Board
Disclose the remuneration policy
14.
Plans for orderly succession for appointments to the Board and to senior Management
Cl.49.II.D.6. of LA
Listed companies
15.
Device proper systems to ensure compliance with the provisions of all applicable laws to the company
Sec.134(5)(f) of CA,2013 & Cl. 49.II.D.3. of LA
All companies
However, Board shall periodically review compliance reports of all laws applicable to the company as well as steps taken by the company to rectify instances of non-compliances.
* CA, 2013 stands for Companies Act, 2013

** LA stands for Listing Agreement

# The two different sections of the Companies Act, 2013, pursuant to which Policy for evaluation by the Board of its own performance and individual directors is to be framed are not completely aligned with each other. For eg. in terms of Section 178(2) of the Companies Act, 2013, Nomination and Remuneration Committee (NRC) is required to lay down criteria for performance evaluation of very director and it shall carry out their evaluation, whereas as per Section 149(8) read with Schedule IV(VIII)(1) of Companies Act, 2013, the performance evaluation of Independent Directors shall be done by the entire Board (excluding the director being evaluated). Further, as per the applicable provision of the Listing Agreement, the NRC is required to frame evaluation criteria for the Independent Directors only. This type of discrepancy in the provisions,on the same subject, within the same Act and between different statutes needs to be addressed by the Minsitry/ SEBI by bringing out suitable amendment in the Act/Listing Agreement.

(Author – CS Deepak Banga is a Company Secretary working with Jaypee Group and can be contacted at csdeepakbanga@gmail.com)

Read Other Articles from CS Deepak Banga –Disclosure in Board’s report-Companies Act & Listing Agreement

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Category : Company Law (4053)
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Tags : Companies Act (2517) Companies Act 2013 (2289)

4 responses to “Policies and Codes to be framed by Companies”

  1. Kishore Chavan says:

    Thank you so much, Mr Banga. for the detailed information on policies to be put in place by companies registered under CA.

  2. samarth says:

    Very Useful.

  3. Giftson says:

    Thanks Mr. Deepak … appreciate your efforts. This is very useful.

  4. R Balasubramanian, Chennai-59 says:

    A GOOD AND CRISP PRESENTATION!

    R Balasubramanian , Chennai-59.

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