Committees under Companies Act, 2013 & SEBI (LODR) Regulations, 2015

Lakshmi Sekhar 24 Nov 2022 20,019 Views 0 comment Print SEBI | Articles

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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	All listed Companies Public Companies having a Paid-up share capital of 10 crore rupees or more, and a turnover of Rs. 100 Crore or more. All Public Companies which have in aggregate outstanding loans, debentures and deposits exceeding 50 crore rupees are required to constitute an Audit Committee. (Refer Rule 4 of The Companies (Appointment and Qualifications of Directors) Rules, 2014	Minimum 3 Director Majority director shall be independent	–	–
Nomination and Remuneration Committee	178(1) to 178(4)	All listed Companies Public Companies having a Paid-up share capital of 10 crore rupees or more, and a turnover of Rs. 100 Crore or more. All Public Companies which have in aggregate outstanding loans, debentures and deposits exceeding 50 crore rupees are required to constitute an Audit Committee. (Refer Rule 4 of The Companies (Appointment and Qualifications of Directors) Rules, 2014	three or more non-executive directors more than one half shall be independent	–	–
The Stakeholders Relationship Committee	178(5) to 178(6)	Those Companies which is having more than 1000 shareholders, debenture-holders, deposit-holders and any other security holders at any time during a financial year	Chairperson – Non executive director	–	–
Corporate Social Responsibility Committee:	135	Every Company: net worth of not less than Rs.500 crores or more or Turnover of not less than Rs 1000 crores or more or Net Profit of Rs 5 crores or more Provided that : Where the CSR Expenditure does not exceed Rs 50 lakhs the company need not form CSR Committee	three or more directors atleast one independent director Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more director a private company having only two directors on its Board shall constitute its CSR Committee with two such directors.	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 3 Director atleast 2/3^rd of Director shall be independent in case of a listed entity having outstanding SR equity shares, the audit committee shall only comprise of independent directors Chairperson – Shall be Independent Director Chairperson shall be present in Annual general meetings to answer queries of the shareholders. Company Secretary – Secretary of Audit Committee	Minimum 4 times a year gap shall not exceed 120 days between the two meetings.	Minimum 2 members or 1/3^rd of the members of Audit Committee whichever is greater at least 2 Independent Directors .
Nomination and Remuneration committee	19	All listed Companies	Minimum 3 Directors All Directors shall be Non-Executive Atleast 50 % director shall be Independent in case of a listed entity having outstanding SR equity shares, 2/3^rd of the nomination and remuneration committee shall comprise of Independent directors] Chairperson – Shall be Independent Director	Atleast 1 meeting in a year	Minimum 2 members or 1/3^rd of the members whichever is greater, at least 1 Independent Director
Stakeholders Relationship Committee.	20	All listed Companies	Minimum 3 Directors Atleast 1 Director shall be Independent in case of a listed entity having outstanding SR equity shares, at least two thirds of the Stakeholders Relationship Committee shall comprise of Independent directors Chairperson – Shall be Non – Executive Director Chairperson shall be present in Annual general meetings to answer queries of the security holders.	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 and High debt value listed entity	The board of directors shall constitute a Risk Management Committee. Minimum 3 Directors with majority of them being members of the board of directors Atleast 1 Director shall be Independent in case of a listed entity having outstanding SR equity shares, at least two thirds of the Risk Management Committee shall comprise independent directors Chairperson – member of the BOD	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.

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COMMITTEES

SECTION

APPLICABILITY

COMPOSITION

MEETING AND QUORUM

Audit Committee

177

All listed Companies

Public Companies having a Paid-up share capital of 10 crore rupees or more, and a turnover of Rs. 100 Crore or more.

All Public Companies which have in aggregate outstanding loans, debentures and deposits exceeding 50 crore rupees are required to constitute an Audit Committee.

(Refer Rule 4 of The Companies

(Appointment and Qualifications of Directors) Rules, 2014

Minimum 3 Director

Majority director shall be independent

–

–

Nomination and Remuneration Committee

178(1) to 178(4)

All listed Companies

Public Companies having a Paid-up share capital of 10 crore rupees or more, and a turnover of Rs. 100 Crore or more.

All Public Companies which have in aggregate outstanding loans, debentures and deposits exceeding 50 crore rupees are required to constitute an Audit Committee.

(Refer Rule 4 of The Companies

(Appointment and Qualifications of Directors) Rules, 2014

three or more non-executive directors

more than one half shall be independent

–

–

The Stakeholders Relationship Committee

178(5) to 178(6)

Those Companies which is having more than 1000 shareholders, debenture-holders, deposit-holders and any other security holders at any time during a financial year

Chairperson – Non executive director

–

–

Corporate Social Responsibility Committee:

135

Every Company:

net worth of not less than Rs.500 crores or more or

Turnover of not less than Rs 1000 crores or more or

Net Profit of Rs 5 crores or more

Provided that : Where the CSR Expenditure does not exceed Rs 50 lakhs the company need not form CSR Committee

three or more directors

atleast one independent director

Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more director

a private company having only two directors on its Board shall constitute its CSR Committee with two such directors.

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.”

COMMITTEES

REGULATION

APPLICABILITY

COMPOSITION

MEETING

QUORUM

Audit Committee

18

All listed Companies

Minimum 3 Director

atleast 2/3rd of Director shall be independent

in case of a listed entity having outstanding SR equity shares, the audit committee shall only comprise of independent directors

Chairperson – Shall be Independent Director

Chairperson shall be present in Annual general meetings to answer queries of the shareholders.

Company Secretary – Secretary of Audit Committee

Minimum 4 times a year gap shall not exceed 120 days between the two meetings.

Minimum 2 members or 1/3rd of the members of Audit Committee whichever is greater

at least 2 Independent Directors .

Nomination and Remuneration committee

19

All listed Companies

Minimum 3 Directors

All Directors shall be Non-Executive

Atleast 50 % director shall be Independent

in case of a listed entity having outstanding SR equity shares, 2/3rd of the nomination and remuneration committee shall comprise of Independent directors]

Chairperson – Shall be Independent Director

Atleast 1 meeting in a year

Minimum 2 members or 1/3rd of the members whichever is greater,

at least 1 Independent Director

Stakeholders Relationship Committee.

20

All listed Companies

Minimum 3 Directors

Atleast 1 Director shall be Independent

in case of a listed entity having outstanding SR equity shares, at least two thirds of the Stakeholders Relationship Committee shall comprise of Independent directors

atleast 2/3^rd of Director shall be independent

Minimum 2 members or 1/3^rd of the members of Audit Committee whichever is greater

in case of a listed entity having outstanding SR equity shares, 2/3^rd of the nomination and remuneration committee shall comprise of Independent directors]

Minimum 2 members or 1/3^rd of the members whichever is greater,