Corporate Board Committees
The Board has overall responsibility for the
management and oversight of the Group and its activities, providing
entrepreneurial leadership within a control framework. It is responsible for
approving the Group’s strategic objectives and ensuring that the necessary
financial and human resources are made available to meet those objectives.
Through the Audit Committee, the Board also reviews the Company’s risk
management and internal control systems on an ongoing basis.
Mandatory Committees
|
Under Companies Act,
2013 |
|
|
·
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 |
The following
are discussions on some of the important committees of the Board:-
- Audit Committee
- Nomination and Remuneration Committee
- Stakeholders Relationship committee
- Corporate Social Responsibility Committee
- Risk Management Committee
The four Committees Viz.., Audit, Nomination and Remuneration,
Stakeholder Relationship and Corporate Social Responsibility were specified by
the Companies Act 2013, there by bringing consonance with Listing Agreement.
1. Audit
Committee:
Applicability:
As per Section 177 of the Act read with
rule 6 of the Companies (Meetings of the
Board and its Powers) Rules, 2014, every
Listed Public Companies and Public Companies having a Paid-up share capital of
10 crore rupees or more, and a turnover of Rs. 100 Crore or more.
Additionally
All Public Companies which have in aggregate outstanding loans, debentures and
deposits exceeding 50 crore rupees are required to constitute an Audit
Committee.
Composition
of Audit Committee as per Companies Act, 2013:
Minimum
3 directors with majority of Independent Director.
Members
including the Chairman of Audit Committee should be able to read and understand
financial statement.
Composition
of Audit Committee as per clause 49 of Listing Agreement:
Minimum
of 3 Director of which 2/3rd are independent Directors.
All
members should be financially literate and at least 1 member shall have
accounting or related financial management expertise.
Vigil Mechanism:
Vigil Mechanism provides adequate
safeguard against victimisation of persons. It is established for directors and
employees to report their grievances and concerns.
Rule 7 of Companies (Meetings of
Board and its Powers) Rules, 2014 describes about establishment of Vigil
Mechanism for every Listed Company and companies prescribed below:
Companies
which accepts deposits from public.
Companies
which have borrowed money from bank and public financial institutions in excess
of Rs.50 Crores.
The
Board of Directors shall nominate a director to play role of Audit Committee
for the purpose of Vigil Mechanism for reporting purpose. The aggrieved person
will have direct access with the Chairperson/Nominated Director of the Audit
Committee.
The
details of establishment of such mechanism shall be disclosed on the company’s
website, and in the Board ‘report.
Penalty
for the Violation of Audit Committee Provisions:
The Company shall be punishable with
a fine of Rs. 1 lakh to Rs. 5lakh and every officer of the company who is in
default shall be punishable with imprisonment upto 1 year or with Rs. 25,000 to
Rs. 1 lakh or with both.
The
majority of members of Audit Committee including its Chairperson shall be
persons with ability to read and understand, the financial statements
All
members of audit committee shall be financially literate and at least one
member shall have accounting or related financial management expertise.
Function of Audit Committee:
To
recommend appointment, remuneration and terms of appointment of the Auditor of
the Company.
To
establish a Vigil Mechanism Policy.
To
call for remarks of the auditors about the internal control system.
At
the Annual General Meeting, the chairman of the Committee should be present to
answer the shareholder’s inquiry.
To
discuss any issues related to internal and statutory auditors and the
management of the Company.
Meetings
of the committee:
As per the revised listing obligations the Audit Committee should meet at least
four times in a year and not more than four months shall elapse between two
meetings. — The quorum
shall be either two members or one third of the members of the audit committee
whichever is greater, but there should be a minimum of two independent members
present.
Role
of audit committee:
Oversight of the company’s financial
reporting process and the disclosure of its financial information to ensure
that the financial statement is correct, sufficient and credible;
Recommendation for appointment,
remuneration and terms of appointment of auditors of the company;
Approval of payment to statutory
auditors for any other services rendered by the statutory auditors;
Rreviewing, with the management, the
quarterly financial statements before submission to the board for approval
Review and monitor the auditor’s
independence and performance, and effectiveness of audit process;
Review the functioning of the Whistle
Blower mechanism
Discussion with statutory auditors
before the audit commences, about the nature and scope of audit as well as
post-audit discussion to ascertain any area of concern;
Powers
of audit committee:
Investigate any activity within its
terms of reference;
Seek information from any employee;
Obtain outside legal or other
professional advice;
Secure attendance of outsiders with
relevant expertise, if it considers necessary.
To call for the comments of the auditors
about internal control systems, the scope of audit, including the observations
of the auditors and review of financial statement before their submission to
the Board and also may discuss any related issues with the internal and
statutory auditors and the management of the company.
The auditors of a company and the key
managerial personnel have a right to be heard in the meetings of the Audit
Committee when it considers the auditor’s report but shall not have the right
to vote.
2.
Nomination and Remuneration Committee:
Applicability:
Sections 178(2), (3)
and (4) of the 2013 Act specify the responsibilities of the NRC whereby it
shall make recommendations on the appointment and removal of directors,
evaluate their performance, recommend levels of remuneration, etc. A provision
for penalty for non-compliance with such requirements has also been
incorporated. Whereas the Listing Agreement
specifies that the Remuneration Committee has to recommend the remuneration for
executive directors only, the Companies act 2013 extends this to all key managerial personnel
as well. In addition, the Listing Agreement mandates that all the members of
the Remuneration Committee must attend all its meetings and that its
Chairperson must attend the Annual General Meeting of the company.
As per section 178 of the Act read with
rule 6 of the Companies (Meetings of the Board and its Powers) Rules, 2014, every Listed Public Companies and Public Companies having a
Paid-up share capital of 10 crore rupees or more, and a turnover of Rs. 100
Crore or more.
Additionally
All Public Companies which have in aggregate outstanding loans, debentures and
deposits exceeding 50 crore rupees are required to constitute a Nomination and
Remuneration Committee.
Composition of Nomination and
Remuneration Committee as per Companies Act,2013:
Minimum
of 3 Non-Executive Directors out of which two shall be Independent Directors.
Chairperson
shall be an Independent director.
Functions of Nomination and
Remuneration Committee:
Recommendation
of succession plans for the directors.
To
review the elements of the remuneration package, structure of remuneration
package.
To
review the changes to remuneration package, terms of appointment, severance
fee, requirement and termination policies and procedures.
To
recommend the shortlisted candidates who are qualified to be director and who
can be appointment in senior management.
The
committee is authorised to seek information about any employee and the
management is directed to co-operate.
The
Committee can be present at the General Meeting to answer the shareholder’s
queries.
Role of the
committee
Formulation of the criteria for
determining qualifications, positive attributes and independence of a director
and recommend to the Board a policy, relating to the remuneration of the
directors, key managerial personnel and other employees
Formulation of criteria for evaluation
of Independent Directors and the Board
Devising a policy on Board diversity
Identifying persons who are qualified to
become directors and who may be appointed in senior management in accordance
with the criteria laid down, and recommend to the Board their appointment and
removal.
3. Stakeholders Relationship Committee:
Under Section 178 of the Companies Act 2013, every company
which has more than 1000 shareholders, deposit holders or other security
holders, shall constitute a Stakeholders Relationship Committee (‘SRC’), with
a non-executive director as Chairperson with the objective of grievance
redressal of various stakeholders. The Chairperson of the SRC is also mandated
to attend the general meetings of the company. A penalty for non-compliance has
been stipulated.
Composition
of Stakeholders Relationship Committee:
As
per the SEBI Listing regulations the Committee should consist of least three
directors, with at least one being an Independent director, shall be members of
the committee and in case of a listed entity having outstanding SR equity
shares, at least two-thirds of the committee shall comprise of independent
directors.
The
chairperson of the Committee shall be a non-executive director and such other
members as may be decided by the Board.
As per regulation the Committee
shall meet at least once in a year. The chairperson or, in his absence any
other member of the committee authorized by him in this behalf shall attend the
general meetings of the Company.
Functions
of Corporate Stakeholders Relationship Committee:
The
Committee shall resolve complaints related to transfer/transmission of shares,
non-receipt of annual report and non-receipt of declared dividends, general
meetings, approve issue of new/ duplicate certificates and new certificate on
split/consolidation/ renewal etc. approve transfer/transmission,
dematerialization.
Role of the
committee
To
consider and resolve the grievances of security holders of the company
To
specifically look into the redressal of grievances of shareholders, debenture
holders and other security holders.
The
grievances of the security holders of the company may include complaints
related to transfer of shares, non-receipt of balance sheet, non-receipt of
declared dividends, which shall be handled by this committee.
The
main function of this committee is to expedite the process of share transfers.
4. Corporate Social Responsibility Committee:
Sec 135 (1) read with rule 3 of
Companies (Corporate Social Responsibility Policy) Rules, 2014, mandates that
every company having :
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.5crore or more shall constitute a Corporate Social
Responsibility Committee.
Networth,
Turnover or Net Profit are according to Financial year and has been clarified
as to imply any of the three(3) preceding financial years
Such
companies has to earmark 2% of it’s net profits and should be spent on CSR activities
Composition
of CSR Committee as per Companies Act, 2013 :
In case of Listed Company at least 3
Directors out of which 1 should be an Independent Director.
Relaxations:
An unlisted public company or a private company covered under sub-section (1 )
of section 135 which is not required to appoint an independent director, shall
have its CSR Committee without such director
A
private company having only two directors on its Board shall constitute its CSR
Committee with two such directors
In
case of a foreign company, the CSR Committee shall comprise of at least two
persons of which one person should be resident of India and authorized to
accept on behalf of the company, service of process and any notices or other
documents and another person shall be nominated by the foreign company.
Functions
of Corporate Social Responsibility Committee:
To
suggest and devise a CSR Policy according to the Schedule VII of Companies Act,
2013 to the board.
To
recommend the amount of expenditure of the devised policy above.
To
monitor the CSR Policy of company from time to time and prepare a transparent
monitoring mechanism.
Institution
of a transparent monitoring mechanism for implementation of the CSR projects or
programs or activities undertaken by the company.
Role of CSR
committee
Recommending
the amount of expenditure to be incurred on the CSR activities
Monitoring
the Corporate Social Responsibility Policy of the company from time to time
A
transparent monitoring mechanism for implementation of the CSR projects or
programs or activities undertaken by the company
Shall
indicate the activities to be undertaken by the company as specified in
Schedule VII;
5. Risk Management Committee
Risk Management Committee is the
committee formed by board of directors to oversee the risk management policy
and global risk management framework of the business.
Risk Management Committee will
assist the Board of Directors in fulfilling its oversight responsibilities with
regard to the risk appetite of the Corporation, the Corporation’s risk
management and compliance framework, and the governance structure that supports
it. SEBI LODR Regulation 2015 Regulation 21
|
1 |
Applicability |
Top 500 listed
entities determined on
the basis of market capitalisation at the end of immediate previous financial
year |
|
2 |
Composition |
Majority of member of Committee
shall consist of Members of the board of directors or may be senior
executives (in case listed company has issued SR equity shares at
least two third of the committee shall comprise of independent directors). |
|
3 |
Chairperson |
Shall be Member of the board |
|
4 |
Frequency of Meeting |
at least once in a year |
|
5 |
Who will constitute |
Board of Directors |
** As per law majority
of the members of the committee should be the Member of Board.
Composition of committees of the board of directors of NTPC
is given at this link for familiarizing with the different committees of a company.
The Companies Act 2013 and
Revised Clause 49 specify requirements related to risk management. Audit
Committee and the independent directors of the company are entrusted with the
responsibility of evaluating the robustness of the risk management systems andpolicy laid down by the Board.
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