Committees Under Companies Act, 2013 And Securities Exchange Board of India (Listing Obligations and Disclosure Requirement) Regulations, 2015 (SEBI (LODR) Regulations, 2015)
Introduction:
Committees are usually formed as a means of improving board effectiveness and efficiency, in areas where more focused, specialized and technical discussions are required. These committees prepare the groundwork for decision making and report at the subsequent board meeting. Committees enable better management of full board’s time and allow in-depth scrutiny and focused attention. Members of the committee are expected to have expertise in the specified field.
Need for Committees:
(i). To strengthen the governance of the company and support the Board to achieve their strategic objective.
(ii).To improve Board effectiveness and efficiency.
(iii).To maximise the value of inputs received from Non-Executive directors, given that they have limited time.
The Companies Act, 2013 (“Act”) and Securities Exchange Board of India (Listing Obligations and Disclosure Requirement) Regulations, 2015 (“SEBI (LODR) Regulations”) has mandated certain committees to be formed for certain companies. The applicability, Constitution and details of meeting, are discussed in this article.
Mandatory Committees of the Board
Companies Act, 2013 | SEBI (LODR) Regulations, 2015 |
Audit Committee | Audit Committee |
Nomination and Remuneration Committee | Nomination and Remuneration Committee |
Stakeholders Relationship | Stakeholders Relationship |
Corporate Social Responsibility Committee | – |
– | Risk Management Committee |
Mandatory Committees under Companies Act, 2013
COMMITTEES |
SECTION |
APPLICABILITY |
COMPOSITION |
MEETING AND QUORUM |
|
Audit Committee |
177 |
(Refer Rule 4 of The Companies(Appointment and Qualifications of Directors) Rules, 2014 |
|
– |
– |
Nomination and Remuneration Committee |
178(1) to 178(4) |
(Refer Rule 4 of The Companies(Appointment and Qualifications of Directors) Rules, 2014 |
|
– |
– |
The Stakeholders Relationship Committee |
178(5) to 178(6) |
|
|
– |
– |
Corporate Social Responsibility Committee: |
135 |
Every Company:
Provided that : Where the CSR Expenditure does not exceed Rs 50 lakhs the company need not form CSR Committee |
|
Law is silent w.r.t. number of CSR Committee meetings in a year. But as per Secretarial Standard 1 “Committees shall meet as often as necessary subject to the minimum number and frequency stipulated by the Board or as prescribed by any law or authority.” |
Law is also silent W.r.t. quorum for the committee meeting. But as per Secretarial Standard 1 “The presence of all the members of any Committee (applicable to CSR Committee also) constituted by the Board is necessary to form the Quorum for Meetings of such Committee unless otherwise stipulated in the Act or any other law or the Articles or by the Board. |
Mandatory Committees under SEBI LODR
COMMITTEES |
REGULATION |
APPLICABILITY |
COMPOSITION |
MEETING |
QUORUM |
Audit Committee |
18 |
All listed Companies |
|
Minimum 4 times a year gap shall not exceed 120 days between the two meetings. |
|
Nomination and Remuneration committee |
19 |
All listed Companies |
|
Atleast 1 meeting in a year |
|
Stakeholders Relationship Committee. |
20 |
All listed Companies |
|
Atleast 1 meeting in a year |
Not mentioned in LODR |
Risk Management Committee. |
21 |
Top 1000 listed entities based on the Market Cap as at immediate preceding financial year andHigh debt value listed entity |
|
Atleast 2 meeting in a year and gap shall not exceed 180 days between the two meetings. |
Either two members or one third of the members of the committee, whichever is higher, including at least one member of the board of directors in attendance. |
DISCLAIMER: The content has been prepared according to relevant provisions and information that exist at the time of preparation of this document. The Readers are requested to refer the relevant existing provisions of applicable Laws.