Audit Commitee and Other Types of Comittee.pdf
- 1. TABLE OF CONTENTS Audit Committee Corporate Social Responsibility Committee Nomination and Remuneration Committee Stakeholder Relationship Committee. Resolutions i. Ordinary Resolution ii. Special Resolution
- 2. AUDIT COMMITTEE S- 177 The new Companies Act has increased the responsibilities of Audit Committee to include auditors independence, evaluation of their performance, approval of related party transactions, scrutiny of loans and investments, valuation of assets and evaluation of internal controls and risk management. The members of the audit committee must be financially literate and the committee shall have majority of Independent directors. Further, large companies must mandatorily have professional internal auditors. Provisions Relating to Audit Committee – a. An Audit Committee is mandatory/compulsorily for- - Every Listed Companies; or - The following class of companies- (i.e.) - All public companies with paid up capital Rs 10 crore or more; - All public companies having turnover of Rs 100 crore or more; - All public companies having aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs 50 crore or more.
- 3. b. The Audit Committee shall comprise of minimum 3 directors with majority of directors being independent directors. Majority of members of audit committee including the chairperson shall be financially literate. As per clause 49 the chairman shall be an independent director. c. Functions of Audit Committee :- - Recommendation for appointment, remuneration and terms of appointment of auditors of the company. - Review and monitor the auditor’s independence and performance and effective audit process. - Examination of the financial statement and the auditors report. - Approval of any subsequent modifications of transactions of the company with related parties. - Scrutiny of inter-corporate loans and investments; - Valuation of undertakings or assets of the company, wherever it is necessary. - Evaluation of internal financial controls and risk management systems. - Monitoring the end use of funds raised through public offers and related matters.
- 4. d. The audit Committee hold the authority to investigation into matters or referred by the board and have the powers to obtain professional advice from external sources and have full access to the records of the company. e. The audit committee should meet at least 4 times in a year and not more than 4 months shall elapse between two meetings. The quorum shall be 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.
- 5. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE • Corporate Social Responsibility Committee is mandatory for- Companies having net worth of Rs 500 crores or more; Companies having turnover of Rs 1000 crores or more; Companies having net profits of Rs 5 crores or more. • The CSR Committee shall consists of three or more Directors, out of which at least one should be an independent director • The Eligible companies are required to spend in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years in pursuance of its CSR policy. • The Company shall give preference to the local area where it operates. If the company fails to spend the amount, the board shall specify the reasons for not spending the amount in the Board Report
- 6. NOMINATION AND REMUNERATION COMMITTEE S- 178 The Nomination and remuneration committee helps the Board of Directors in the election of members of the Board of Directors , and in handling matters within its scope of responsibility that relate to the conditions of employment and remuneration of senior management, and to management’s and management’s and personnel’s remuneration and incentive scheme. The applicability criteria for this committee is the same as audit committee. The other provisions are as- - The Committee shall consist of three or more non- executive directors out of which not less than one half shall be independent directors. - The Committee shall form a policy for determining qualifications, positive qualities and independence of a director and recommend to the Board the policy determining relating to the remuneration for directors, KMPs and other employee.
- 7. STAKEHOLDERS RELATIONSHIP COMMITTEE Section 178(5) of the Companies Act, 2013 provides for constitution of the stakeholders relationship committee. The Board of a company that has more than 1000 shareholders, debenture-holders, deposit-holders and any other security holders at any time during a financial year is required to constitute a Stakeholders Relationship Committee consisting of a chairperson who shall be a non-executive director and such other members as may be decided by the board. The Stakeholders Relationship Committee shall consider and resolve the grievances of security holders of the company.
- 8. RESOLUTIONS The purpose of a meeting is to arrive at decisions and the sense of a meeting is ascertained by voting upon proposals. Votes may be cast by show hands, electronically or by poll. A formal proposal put to the meeting is resolution. A company expresses its will through resolutions. There are two types of resolutions :- a. Ordinary Resolution b. Special Resolution
- 9. A. ORDINARY RESOLUTION A resolution shall be ordinary resolution when a notice required under the Companies Act has been duly given and the votes cast in favour of the resolution exceed the votes cast against it. In other words, where a resolution is passed by simple majority, it is known as an ordinary resolution . The casting (deciding) vote of the chairman of the meeting, if any shall also be included while counting votes provided it has been exercised by him.
- 10. B. SPECIAL RESOLUTION A resolution shall be special resolution if the following conditions are fulfilled :- - The intention of a special resolution has been duly specified in the notice calling the general meeting. - The notice of the meeting has been duly given; and - The votes cast in favour of the resolution and not less than 3 times the votes cast against the resolution i.e. more than or equal to 3/4th of the members voted in favour of the resolution .
- 11. MOTION AND RESOLUTION ‘Motions’ and ‘Resolutions’ are used synonymously but in legal sense there is difference between them. A Motion is proposal submitted for a discussion and a decision is adopted by means of a Resolution. A motion become resolution only after the requisite majority of members have adopted it.