Vigil Mechanism/Whistle Blower – Statutory requirements and Company’s Policy
a) Companies Act, 2013 (hereinafter referred to as CA)- Section 177 (9) read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014
b) Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as LR)
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.
Shall establish a vigil mechanism for directors and employees to report genuine concerns in such manner as may be prescribed.
Other statutory requirements:
a) The vigil mechanism shall provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the Chairperson of the Audit Committee or the director nominated to play the role of Audit Committee, as the case may be, in exceptional cases
b) The companies which are required to constitute an audit committee shall oversee the vigil mechanism through the committee and if any of the members of the committee have a conflict of interest in a given case, they should recuse themselves and the others on the committee would deal with the matter on hand.
c) In case of other companies, the Board of directors shall nominate a director to play the role of audit committee for the purpose of vigil mechanism to whom other directors and employees may report their concerns.
d) In case of repeated frivolous complaints being filed by a director or an employee, the audit committee or the director nominated to play the role of audit committee may take suitable action against the concerned director or employee including reprimand.
e) The listed company shall have a whistle-blower policy and make employees aware of such policy to enable employees to report instances of leak of unpublished price sensitive information.
a) Website of the Company: As per section 177(10) of CA and Regulation 46(2) (e) LR details of establishment of vigil mechanism/ Whistle Blower policy;
b) Board’s Report: As per section 177(10) of CA and Schedule V of LR the Corporate Governance report should give details of establishment of vigil mechanism/whistle blower policy, and affirmation that no personnel has been denied access to the audit committee.
Every Company to establish a Vigil Mechanism/Whistle Blower Policy:
Important points to be covered under the Policy: There is no specific format for the policy as far as the above regulatory requirements are taken care of, however its better to have the following points covered.
a) Mention the kind of complaints covered under the policy and the ones that are not covered. E.g.: Violation or non-compliance of the Code of Conduct, policies, fraud, wrongdoing, involving leak or suspected leak of unpublished price sensitive information or unethical use of UPSI in accordance with SEBI (Prohibition of Insider Trading) Regulations etc. Issues related to compensation, bonus payouts, performance appraisal, tax deducted at source, inappropriate facility management or administrative services, information technology related issues etc. shall not be covered under the Vigil Mechanism Policy.
2) Ethics Committee:
a) For effective implementation of the Policy an Ethics Committee can be formed comprising of three or more members of senior management. An email id/address to be assigned to the Committee and the same to be communicated to all so that the complainant can reach the ethics committee without any hassles.
b) The initial investigation of the Compliant can be done by the ethics committee on its own or with the help of an external investigator
c) If the compliant is found to be frivolous and with malafide intentions, disciplinary actions can be taken against the complainant
d) In all other cases thorough investigation to be done and the report to be submitted to the Audit Committee of the Company.
3) Direct access to the Audit Committee Chairperson:
a) If the Whistle Blower has to submit a protected disclosure against any member of Ethics Committee or any other appropriate and exceptional cases which he/she believes cannot be resolved by the Ethics Committee, he/she may address directly to the Chairman of the Audit Committee. An email id/address of the Audit Committee Chairperson to be provided.
4) Procedure and Protection:
a) The Policy should clearly mention the steps and modes of lodging a compliant under this policy
b) The policy should mention how the investigations would be carried out, time limits for completion of investigation, steps after investigation etc. to give a clear idea to the whistle blower and also the person against whom the complaint is filed.
c) Rights and duties of both the Whistle-blower and the subject against whom the compliant is made has to be specified.
d) A very important requirement for this policy to be successful is that the Company should ensure that the whistle blower and his/her rights have to be protected. The identity of the Whistle Blower and the subject shall be kept confidential to the extent possible given the legitimate needs of the law and investigation.
5) Confidentiality and Transparency:
a) The Company will treat all Disclosures made under this Policy as confidential and privileged to the fullest extent permitted by law.
b) All documents relating to the reporting, investigation and action there upon under this policy, as a result of a report of questionable action defined above shall be kept in accordance with the Company’s policy on Preservation of Documents subject to applicable laws.
c) A quarterly report with number of complaints received, nature of the complaints received under the Policy and their outcome shall be placed before the Audit Committee.