Sections of the New
Companies Act, 2013 (“ 2013 Act”), as Applicable to a Listed Company
Definition of the term
“listed company” as provided in Section 2(52), which is as under:-
“listed company” means a
company which has any of its securities listed on any recognised stock exchange.
Section 91 of the 2013
Act, as provided for in Chaper VII of the 2013 Act, deals with :-
Power to close register of members or
debentureholders or other security holders
91. (1) A company may close the register of members or the register of
debentureholders or the register of other security holders for any period or periods not exceeding in the aggregate forty-five days in each year,
but not exceeding thirty days at any
one time, subject to giving
of previous notice of at least seven days or such lesser period as may be specified by Securities and Exchange
Board for listed companies or the companies which intend to get their
securities listed, in such manner as may be prescribed.
(2) If the register of
members or of debenture-holders or of other security holders is closed without giving the notice
as provided in sub-section (1), or after giving shorter notice than that so
provided, or for a continuous
or an aggregate period in excess of
the limits specified in that sub-section, the company and every officer of the company who is in default shall
be liable to a penalty of five thousand rupees for every day subject to a
maximum of one lakh rupees during which the register is kept closed.
[Compliance Note 1:-
Section 91 of the 2013 Act requires notice of closure to be given in the
prescribed manner. The prescribed manner has been provided for in the Rules [relevant provisions of the Rules as
applicable to a listed company, is listed down hereinbelow].
Since, the Section 91
line starts as “A company may....”, so every company need not close its register
of members etc. However, it may kindly be noted that for a Listed Company, as
per the Listing Agreement, entered into with the Stock Exchange, it is MANDATORY to close the Register
of Members etc, once a year for the the time frame provided for in the Section
91 [45 days in total in a year and not exceeding 30 days at one time].
…………………… Limited, is in compliance with this provision
of closure, which was earlier provided for in Section 154 of the Companies Act,
1956 (“Old Act”) and the Listing Agreement with DSE. We will continue to comply
with the New Section and the Rules]
Rule 10 of the
Companies (Management and Administration) Rules, 2014, provides as under
10. Closure of register
of members or debenture holders or other security holders.-
(1) A company closing
the register of members or the register of debenture holders or the register of
other security holders shall give at
least
seven days previous notice and in such manner, as may be specified by Securities and Exchange
Board of India, if such
company is a listed company or intends to get its securities listed,
by advertisement at least once in a vernacular
newspaper in the principal vernacular language of the district and having a
wide circulation in the place where the registered office of the company is
situated, and
at least once in English language in an English
newspaper circulating in that district and having wide circulation in the place
where the registered office of the company is situated and
publish the notice on the website as may be
notified by the Central Government and on
the website, if any, of the Company.
(2) The provisions
contained in sub-rule (1) shall not be applicable to a private company provided
that the notice has been served on all members of the private company not less
than seven days prior to closure of the register of members or debenture
holders or other security holders.
Section 92(2) of the 2013 Act, as
provided for in Chaper VII of the 2013 Act, deals with :-
Annual Return
(2) The annual return, filed by a listed company or, by a company having such paid-up capital
and turnover as may be prescribed, shall
be certified by a company secretary in practice in the prescribed form,
stating that the annual return discloses the facts correctly and adequately and
that the company has complied with all the provisions of this Act.
What does the Rules specify:-
Rule 11 of the
Companies (Management and Administration Rules), 2014, provides for:-
Rule 11 - Annual
Return-
(1) Every company shall
prepare its annual return in Form No. MGT.7.
(2) The annual return, filed by a listed company or a
company having paid-up share capital of ten crore rupees or more or turnover of
fifty crore rupees or more, shall be
certified by a Company Secretary in practice and the certificate shall be in Form
No. MGT. 8.
Rule 12 - Extract of
annual return
(1) The extract of the annual return to be attached with the Board’s Report
shall be in Form No. MGT.9
(2) A copy of the annual return shall be filed with the
Registrar with such fee as may be specified for the purpose.
[Compliance Note 2 :-
(a) Certain new additional
disclosures, like company’s promoters, directors, key managerial persons
alongwith changes since last FY; details of meeting of members, Board with
attendance details; remuneration of directors, KMP’s; penalties or punishments
imposed on the company, directors or officers; matters relating to
certification of compliances etc, have been introduced in the Annual Return as
per the 2013 Act, which was not required in the Old Act;
(b) Any changes in certain
key information about the company needs to be disclosed/mentioned in the Annual
Return;
(c) Extract of the Annual
Return to form part of the Board Report, is a new introduction;
(d) Penal provisions
introduced on Practising CS, who is certifying the Annual Return.
Section 93 (this is a New Provision, which was not there in the
Old Act) of the 2013 Act, as provided for in Chaper VII of the 2013
Act, deals with :-
Return to be filed with Registrar in case Promoters’
Stake Changes
93. Every listed company shall file a return in the prescribed form
with the Registrar with respect to change in the number of
shares held by promoters and top
ten shareholders of such company, within
fifteen days of such change.
What does the Rules specify:-
Rule 13 of the
Companies (Management and Administration Rules), 2014, provides for:-
Return of changes in
shareholding position of promoters and top ten shareholders
Every listed company shall file with the
Registrar, a return in Form No.MGT.10 along with the fee
with respect to changes relating to either increase or decrease of two percent, or more
in the shareholding position of
promoters and top ten
shareholders of the company in each case, either value or volume
of the shares,
within fifteen days of such change.
Explanation.- For the
purpose of this sub-rule, the “change” means increase or decrease by two
percent or more in the shareholding of each of the promoters and each of the
top ten shareholders of the company.
[Compliance Note 3:- This
Section 93 of the 2013 Act, is a New introduction and was not there in the Old
Act. So any increase or decrease in the shareholding position of promoters and
top ten shareholders of …………………. Limited by 2% needs to be filed with the
Registrar in the E-Form MGT 10.
Section 120 of the 2013
Act, as provided for in Chaper VII of the 2013 Act, deals with :-
Maintenance and Inspection of Documents in Electronic
Form
120. Without prejudice to any
other provisions of this Act, any document, record, register, minutes, etc.,—
(a) required to be kept by a
company; or
(b) allowed to be inspected
or copies to be given to any person by a company under this Act, may be kept or
inspected or copies given, as the case may be, in electronic form in such form
and manner as may be prescribed.
Section 121 of the 2013
Act, as provided for in Chaper VII of the 2013 Act, deals with :-
Report on Annual
General Meeting
121. (1) Every listed public company shall prepare in the prescribed manner a report on each annual general
meeting including the confirmation to the effect that the meeting was convened,
held and conducted as per the provisions of this Act and the rules made thereunder.
(2) The company shall file with the Registrar a copy of the report referred to in subsection (1) within thirty days of the conclusion of the annual general meeting
with such fees as may be prescribed, or with such additional fees as may be
prescribed, within the time as specified, under section 403.
(3) If the company fails to
file the report under sub-section (2) before the expiry of the period specified under
section 403 with additional fee, the company shall be punishable with fine
which shall not be less than one lakh rupees but which may extend to five lakh
rupees and every officer of the company who is in default shall be punishable
with fine which shall not be less than twenty-five thousand rupees but which
may extend to one lakh rupees.
What does the Rules specify:-
27. Maintenance and
inspection of document in electronic form -
(1) Every listed company or a
company having not less than one thousand shareholders, debenture holders and
other security holders, shall
maintain its records, as
required to be maintained under the Act or rules made there under, in
electronic form.
Explanation.- For the
purposes of this sub-rule, it is hereby clarified that in case of existing
companies, data shall be converted from physical mode to electronic mode within
six months from the date of notification of provisions of section 120 of the
Act.
[Compliance Note 4: - Notified
date: 26/03/2014 – six months – will be on or before 25/09/2014]
(2) The records in
electronic form shall be maintained in such manner as the Board of directors of
the company may think fit,
Provided that – [not
expanded]
31. Report on Annual
General Meeting -
(1) The report in pursuance of the provisions of
sub-section (1) of section 121 shall
be prepared in the following manner, namely:-
(a) the report under this section shall be prepared in addition to the minutes of the
general meeting;
(b) the report shall be signed and dated by the
Chairman of the meeting or in
case of his inability to sign, by
any two directors of the company, one
of whom shall be the Managing director, if there is one and company
secretary of the company;
(c) the report shall contain the details in
respect of the following, namely:-
(i) the day, date, hour
and venue of the annual general meeting;
(ii) confirmation with
respect to appointment of Chairman of the meeting;
(iii) number of members
attending the meeting;
(iv) confirmation of
quorum;
(v) confirmation with
respect to compliance of the Act and the Rules, secretarial standards made
there under with respect to calling, convening and conducting the meeting;
(vi) business
transacted at the meeting and result thereof;
(vii) particulars with
respect to any adjournment, postponement of meeting, change in venue; and
(viii) any other points
relevant for inclusion in the report.
(d) the Report shall contain fair and correct
summary of the proceedings of the meeting.
(2) The copy of the
report prepared in pursuance of sub-section (1) of section 121 and sub-rule
(1), shall be filed with the
Registrar in Form No. MGT.15, within
thirty days of the conclusion
of the annual general meeting along with the fee.
[Compliance Note 5: - Section 120 and 121 are new provisions,
which was not there in the Old Act. Section 121provides that every listed
public company shall prepare a report on each Annual General Meeting including
the confirmation to the effect that the meeting was convened, held and
conducted as per the provision of the Act and the Rules made thereunder and the
Report [in E-Form MGT 15] needs to be filed with the Registrar within 30 days
If we read the Rule 31
(1) (b) – it seems that the Appointment of Company Secretary seems to have been
made mandatory in Listed Company.
Rule 20 of the Companies (Management and
Adminsitration) Rules, 2014 is important and needs to be looked into:
What does Rule 20 specify:-
20. Voting through
electronic means -
(1) Every listed company or a company having not less than one thousand share holders, shall provide to its members facility to exercise their right to vote
at general meetings by electronic means.
(2) A member may
exercise his right to vote at any general meeting by electronic means and
company may pass any resolution by electronic voting system in accordance with
the provisions of this rule.
Explanation.- For the purposes of
this rule.- (i) the expressions ‘‘voting by electronic means’’ or ‘‘electronic
voting system’’ means a ‘secured system’ based process of display of electronic
ballots, recording of votes of the members and the number of votes polled in
favour or against, such that the entire voting exercised by way of electronic
means gets registered and counted in an electronic registry in a centralized
server with adequate ‘cyber security’;
(ii) the expression
‘‘secured system’’ means computer hardware, software, and procedure that –
(a) are reasonably
secure from unauthorized access and misuse;
(b) provide a
reasonable level of reliability and correct operation;
(c) are reasonably
suited to performing the intended functions; and
(d) adhere to generally
accepted security procedures.
(iii). the expression
“Cyber security” means protecting information, equipment, devices, computer,
computer resource, communication device and information stored therein from
unauthorised access, use, disclosures, disruption, modification or destruction.
(3) A company which opts to provide the
facility to its members to exercise their votes at any general meeting by
electronic voting system shall follow the following procedure, namely;
(i) the notices of the
meeting shall be sent to all the members, auditors of the company, or directors
either -
(a) by registered post
or speed post ; or
(b) through electronic
means like registered e-mail id;
(c) through courier
service;
(ii) the notice shall
also be placed on the website of the company, if any and of the agency
forthwith after it is sent to the members;
(iii) the notice of
the meeting shall clearly mention that the business may be transacted
through electronic voting system and the company is providing facility for voting by electronic means;
(iv) the notice shall
clearly indicate the process and manner for voting by electronic means and the
time schedule including the time period during which the votes may be cast and
shall also provide the login ID and create a facility for generating password
and for keeping security and casting of vote in a secure manner;
(v) the company shall
cause an advertisement to be published, not less than five days before the date
of beginning of the voting period, at least once in a vernacular newspaper in
the principal vernacular language of the district in which the registered
office of the company is situated, and having a wide circulation in that
district, and at least once in English language in an English newspaper having
a wide circulation in that district, about having sent the notice of the
meeting and specifying therein, inter alia, the following matters,
namely:-
(a) statement that the
business may be transacted by electronic voting;
(b) the date of completion
of sending of notices;
(c) the date and time
of commencement of voting through electronic means;
(d) the date and time
of end of voting through electronic means;
(e) the statement that
voting shall not be allowed beyond the said date and time;
(f) website address of
the company and agency, if any, where notice of the meeting is displayed; and
(g) contact details of
the person responsible to address the grievances connected with the electronic
voting;
(vi) the e-voting shall
remain open for not less than one day and not more than three days:
Provided that in all
such cases, such voting period shall be completed three days prior to the date
of the general meeting;
(vii) during the
e-voting period, shareholders of the company, holding shares either in physical
form or in dematerialized form, as on the record date, may cast their vote
electronically:
Provided that once the vote on a
resolution is cast by the shareholder, he shall not be allowed to change it
subsequently.
(viii) at the end of
the voting period, the portal where votes are cast shall forthwith be blocked.
(ix) the Board of
directors shall appoint one scrutinizer, who may be chartered Accountant in
practice, Cost Accountant in practice, or Company Secretary in practice or an advocate,
but not in employment of the company and is a person of repute who, in the
opinion of the Board can scrutinize the e-voting process in a fair and
transparent manner:
Provided that the scrutinizer so
appointed may take assistance of a person who is not in employment of the
company and who is well-versed with the e-voting system;
(x) the scrutinizer
shall be willing to be appointed and be available for the purpose of
ascertaining the requisite majority;
(xi) the scrutinizer
shall, within a period of not exceeding three working days from the date of
conclusion of e-voting period, unblock the votes in the presence of at least
two witnesses not in the employment of the company and make a scrutinizer’s
report of the votes cast in favour or against, if any, forthwith to the
Chairman;
(xii) the scrutinizer
shall maintain a register either manually or electronically to record the
assent or dissent, received, mentioning the particulars of name, address, folio
number or client ID of the shareholders, number of shares held by them, nominal
value of such shares and whether the shares have differential voting rights;
(xiii) the register and
all other papers relating to electronic voting shall remain in the safe custody
of the scrutinizer until the chairman considers, approves and signs the minutes
and thereafter, the scrutinizer shall return the register and other related
papers to the company.
(xiv) the results
declared along with the scrutinizer’s report shall be placed on the website of
the company and on the website of the agency within two days of passing of the
resolution at the relevant general meeting of members;
(xv) subject to receipt
of sufficient votes, the resolution shall be deemed to be passed on the date of
the relevant general meeting of members.
Section 134 (3) (p) of
the 2013 Act, as provided for in Chaper IX of the 2013 Act, deals with :-
Financial Statement, Board’s Report, etc.
134. (1) The financial statement, including consolidated financial
statement, if any, shall be approved
by the Board of Directors before
they are signed on behalf of the
Board at least by the
chairperson of the company where he is authorised by the Board or by two directors out of which one shall
be managing director and the Chief Executive Officer, if he is a director in
the company, the Chief
Financial Officer and the
company secretary of the company, wherever
they are appointed, or in the case of a One Person Company, only by one
director, for submission to the auditor for his report thereon.
(2) The auditors’ report shall be attached to every financial statement.
(3) There shall be attached
to statements laid before a company in general meeting, a report by its Board of Directors, which shall include—
(a) the extract of the annual return as provided under sub-section (3) of
section 92;
(b) number of meetings of the Board;
(c) Directors’ Responsibility Statement;
(d) a statement on declaration given by independent directors under
sub-section (6) of section 149;
(e) in case of a company covered under sub-section (1) of
section 178, company’s policy on directors’
appointment and remuneration including
criteria for determining qualifications, positive attributes, independence of a
director and other matters provided under sub-section
(3) of section 178;
(f) explanations or comments by the Board on every qualification,
reservation or adverse remark or disclaimer made—
(i) by the auditor in his
report; and
(ii) by the company secretary in practice in his secretarial audit report;
(g) particulars of loans, guarantees or investments under section 186;
(h) particulars of contracts or arrangements with related parties
referred to in sub-section (1) of section 188 in the prescribed form;
(i) the state of the company’s affairs;
(j) the amounts, if any, which it proposes to carry to any reserves;
(k) the amount, if any, which it recommends should be paid by way of
dividend;
(l) material changes and commitments, if any, affecting the financial
position of the company which have occurred between the end of the financial
year of the company to which the financial statements relate and the date of
the report;
(m) the conservation of energy, technology absorption, foreign exchange
earnings and outgo, in such manner as may be prescribed;
(n) a statement indicating development and implementation of a risk
management policy for the company including identification therein of elements
of risk, if any, which in the opinion of the Board may threaten the existence
of the company;
(o) the details about the policy developed and implemented by the
company on corporate social responsibility initiatives taken during the year;
(p) in case of a listed company and every other
public company having such paid-up share capital as may be prescribed, a
statement indicating the manner in which formal annual evaluation has been made
by the Board of its own performance and that of its committees and individual
directors;
(q) such other matters as may
be prescribed.
(4) The report of the Board
of Directors to be attached to the financial statement under this section
shall, in case of a One Person Company, mean a report containing explanations or
comments by the Board on every qualification, reservation or adverse remark or
disclaimer made by the auditor in his report.
(5) The Directors’ Responsibility Statement referred to in clause (c) of
sub-section (3) shall state that—
(a) in the preparation of the
annual accounts, the applicable accounting standards had been followed along
with proper explanation relating to material departures;
(b) the directors had
selected such accounting policies and applied them consistently and made
judgments and estimates that are reasonable and prudent so as to give a true
and fair view of the state of affairs of the company at the end of the financial
year and of the profit and loss of the company for that period;
(c) the directors had taken
proper and sufficient care for the maintenance of adequate accounting records
in accordance with the provisions of this Act for safeguarding the assets of
the company and for preventing and detecting fraud and other irregularities;
(d) the directors had
prepared the annual accounts on a going concern basis; and
(e) the directors, in the case of a listed company, had
laid down internal financial controls to be followed by the company and that
such internal financial controls are adequate and were operating effectively.
Explanation.—For the purposes of this
clause, the term “internal financial controls” means the policies and
procedures adopted by the company for ensuring the orderly and efficient
conduct of its business, including adherence to company’s policies, the
safeguarding of its assets, the prevention and detection of frauds and
errors, the accuracy and
completeness of the accounting records, and the timely preparation of reliable
financial information;
(f) the directors had devised
proper systems to ensure compliance with the provisions of all applicable laws
and that such systems were adequate and operating effectively.
(6) The Board’s report and any annexures thereto under sub-section (3)
shall be signed by its chairperson of the company if he is authorised by the
Board and where he is not so authorised, shall be signed by at least two
directors, one of whom shall be a managing director, or by the director where
there is one director.
(7) A signed copy of every
financial statement, including consolidated financial statement, if any, shall
be issued, circulated or published along with a copy each of—
(a) any notes annexed to or
forming part of such financial statement;
(b) the auditor’s report; and
(c) the Board’s report
referred to in sub-section (3).
(8) If a company contravenes
the provisions of this section, the company shall be punishable with fine which
shall not be less than fifty thousand rupees but which may extend to
twenty-five lakh rupees and every officer of the company who is in default
shall be punishable with imprisonment for a term which may extend to three
years or with fine which shall not be less than fifty thousand rupees but which
may extend to five lakh rupees, or with
both.
What does the Companies (Accounts) Rules, 2014
specify for Listed Companies
Rule 8(4) provides that
Every listed company and every other public
company having a paid up share capital of twenty five crore rupees or more
calculated at the end of the preceding financial year shall include, in the report by its Board of directors, a statement indicating the manner in
which formal annual evaluation has been made by the Board of its own
performance and that of its committees and individual directors.
(5) In addition to the information
and details specified in sub-rule (4),
the report of the Board shall also contain -
(i) the financial
summary or highlights;
(ii) the change in the
nature of business, if any;
(iii) the details of
directors or key managerial personnel who were appointed or have resigned
during the year;
(iv) the names of companies which have become
or ceased to be its Subsidiaries, joint ventures
or associate companies during
the year;
(v) the details
relating to deposits, covered under Chapter V of the Act,-
(a) accepted during the year;
(b) remained unpaid or unclaimed as at the end of the year;
(c) whether there has
been any default in repayment of deposits or payment of interest thereon during
the year and if so, number of such cases and the total amount involved-
(i) at the beginning of
the year;
(ii) maximum during the
year;
(iii) at the end of the
year;
(vi) the details of
deposits which are not in compliance with the requirements of Chapter V of the
Act;
(vii) the details of
significant and material orders passed by the regulators or courts or tribunals
impacting the going concern status and company’s operations in future; 8
(viii) the details in respect of adequacy of internal financial controls
with reference to the Financial Statements.
Rule 11 of the
Companies (Accounts) Rules, 2014
11. Manner of
circulation of financial statements in certain cases-
In case of all listed companies and such public companies which have a
net worth of more than one crore rupees and turnover of more than ten crore
rupees, the financial statements may
be sent-
(a) by electronic mode
to such members whose shareholding is in dematerialised format and whose email
Ids are registered with Depository for communication purposes;
(b) where Shareholding
is held otherwise than by dematerialised format, to such members who have
positively consented in writing for receiving by electronic mode; and
(c) by despatch of
physical copies through any recognised mode of delivery as specified under
section 20JD of the Act, in all other cases.
Section 138 of the 2013
Act, as provided for in Chaper IX of the 2013 Act, deals with :-
Internal Audit
138. (1) Such class or classes of
companies as may be prescribed shall be required to appoint an internal
auditor, who shall either be a chartered accountant or a cost accountant, or
such other professional as may be decided by the Board to conduct internal
audit of the functions and activities of the company.
(2) The Central Government
may, by rules, prescribe the manner and the intervals in which the internal
audit shall be conducted and reported to the Board.
What does the Rules specify:-
Rule 13 - Companies
required to appoint internal auditor.- (1) The following
class of companies shall
be required to appoint an internal
auditor or a firm of internal
auditors, namely:-
(a)
every listed company;
(b)
…..
Section 139 of the 2013
Act, as provided for in Chaper X of the 2013 Act, deals with :-
Audit and Auditors
Section 139 (2)
No listed company or a company belonging to
such class or classes of companies as may be prescribed, shall appoint or re-appoint—
(a) an individual as auditor for more than one term of five consecutive
years; and
(b) an audit firm as auditor for more than two terms of five consecutive
years:
Provided that—
(i) an individual auditor who
has completed his term under clause (a) shall not be eligible for re-appointment as
auditor in the same company for five years from the completion of his term;
(ii) an audit firm which has completed its term under clause (b), shall not be eligible for re-appointment as auditor in the same
company for five years from the completion of such term:
Provided further that as on the date of appointment
no audit firm having a common partner or partners to the other audit firm, whose tenure has expired in a company immediately preceding the
financial year, shall be
appointed as auditor of the same company for a period of five years:
Provided also that every company, existing on or before the
commencement of this Act which is
required to comply with provisions of this sub-section, shall comply with the requirements of
this sub-section within three years from the date of commencement of this Act:
Provided also that, nothing
contained in this sub-section shall prejudice the right of the company to
remove an auditor or the right of the auditor to resign from such office of the
company.
[Compliance Note 8:-
TheAct came into force on August 30, 2013. Three years to be
counted from August 30, 2013 – i.e August 29, 2016]
The Rules on the Companies (Audit and Auditors) Rules, 2014
needs to be reviewed, there is nothing specific for Listed Companies, but the
Rules applies to all the Companies, subject to the said Rules.
Section 149 of the 2013
Act as provided for in Chapter XI deals with
Company to have Board of Directors
149 (4) Every listed public company shall have
at least one-third of the total number of directors as independent directors
and the Central Government may prescribe the minimum number of independent
directors in case of any class or classes of public companies.
What does the Companies (Directors Appointment
& Qualification) Rules, 2014 specify:-
Rule 3 - Woman director
on the Board-
The following class of
companies shall appoint at least one woman director-
(i)
every listed company;
(ii)
…….
Section 151 of the 2013
Act deals with Appointment of Director elected by Small Shareholders and the
Rules provides for the same as under:-
Rule 7 - Small
shareholders’ director –
(1) A listed company, may upon notice of not less than one thousand small shareholders or one-tenth of the total number of such
shareholders, whichever is
lower, have a small
shareholders’ director elected by the small shareholders:
Provided that nothing
in this sub-rule shall prevent a listed company to opt to have a director
representing small shareholders suo motu and in such a case the provisions of
sub-rule (2) shall not apply for appointment of such director.
It may be noted that the provisions of Section 149(1) and
(4) needs to be complied with within one year from the date of the Commencement
of the 2013 Act (30/08/2013) so compliance of 149 section needs to be done on
or before 30/08/2014.
Section 177, 178 of the
2013 Act as provided for in Chapter XII deals with
Audit Committee
177. (1) The Board of Directors of
every listed company and such other class or classes of companies, as may be
prescribed, shall constitute an Audit Committee.
(2) The Audit Committee shall
consist of a minimum of three directors with independent directors forming a
majority:
Provided that majority of
members of Audit Committee including its Chairperson shall be persons with
ability to read and understand, the financial statement.
(3) Every Audit Committee of
a company existing immediately before the commencement of this Act shall,
within one year of such commencement, be reconstituted in accordance with
sub-section (2).
(4) Every Audit Committee
shall act in accordance with the terms of reference specified in writing by the
Board which shall, inter
alia, include,—
(i) the recommendation for
appointment, remuneration and terms of appointment of auditors of the company;
(ii) review and monitor the
auditor’s independence and performance, and effectiveness of audit process;
(iii) examination of the
financial statement and the auditors’ report thereon;
(iv) approval or any
subsequent modification of transactions of the company with related parties;
(v) scrutiny of
inter-corporate loans and investments;
(vi) valuation of undertakings
or assets of the company, wherever it is necessary;
(vii) evaluation of internal
financial controls and risk management systems;
(viii) monitoring the end use of
funds raised through public offers and related matters.
(5) The Audit Committee may
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 may also discuss
any related issues with the internal and statutory auditors and the management
of the company.
(6) The Audit Committee shall
have authority to investigate into any matter in relation to the items
specified in sub-section (4) or
referred to it by the Board and for this purpose shall have power to obtain
professional advice from external sources and have full access to information
contained in the records of the company.
(7) The auditors of a company
and the key managerial personnel shall 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.
(8) The Board’s report under
sub-section (3) of section 134 shall
disclose the composition of an Audit Committee and where the Board had not
accepted any recommendation of the Audit Committee, the same shall be disclosed
in such report along with the reasons therefor.
(9) Every listed company or
such class or classes of companies, as may be prescribed, shall establish a vigil
mechanism for directors and employees to report genuine concerns in such manner
as may be prescribed.
(10) The vigil mechanism under
sub-section (9) 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 in
appropriate or exceptional cases:
Provided that the details
of establishment of such mechanism shall be disclosed by the company on its
website, if any, and in the Board’s report.
Section 178 (1) The Board of Directors of every listed company and such other
class or classes of companies, as may be prescribed shall constitute the Nomination and Remuneration Committee consisting of three or more
non-executive directors out
of which not less than
one-half shall be independent directors:
Provided that the Chairperson
of the Company (whether executive or non-executive) may be appointed as a
member of the Nomination and Remuneration Committee but shall not chair such
Committee.
(2) The Nomination and
Remuneration Committee shall identify persons who are qualified to become
directors and who may be appointed in senior management in accordance with the
criteria laid down, recommend to the Board their appointment and removal and
shall carry out evaluation of every director’s performance.
(3) The Nomination and
Remuneration Committee shall formulate the criteria for determining
qualifications, positive attributes and independence of a director and
recommend to the Board a policy, relating to the remuneration for the
directors, key managerial personnel and other employees.
(4) The Nomination and
Remuneration Committee shall, while formulating the policy under sub-section (3) ensure that—
(a) the level and composition
of remuneration is reasonable and sufficient to attract, retain and motivate
directors of the quality required to run the company successfully;
(b) relationship of
remuneration to performance is clear and meets appropriate performance
benchmarks; and
(c) remuneration to directors,
key managerial personnel and senior management involves a balance between fixed
and incentive pay reflecting short and long-term performance objectives
appropriate to the working of the company and its goals:
Provided that such policy
shall be disclosed in the Board's report.
(5) The Board of Directors of a company which consists of more than one
thousand shareholders, debenture-holders, deposit-holders and any other security holders at any time
during a financial year shall 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.
(6) The Stakeholders
Relationship Committee shall consider and resolve the grievances of security
holders of the company.
(7) The chairperson of each
of the committees constituted under this section or, in his absence, any other
member of the committee authorised by him in this behalf shall attend the
general meetings of the company.
(8) In case of any contravention of the provisions of section 177 and
this section, the company shall be punishable with fine which shall not be less
than one lakh rupees but which may extend to five lakh rupees and every officer
of the company who is in default shall be punishable with imprisonment for a
term which may extend to one year or with fine which shall not be less than
twenty-five thousand rupees but which may extend to one lakh rupees, or with
both:
Provided that
non-consideration of resolution of any grievance by the Stakeholders
Relationship Committee in good faith shall not constitute a contravention of
this section.
Explanation.—The expression ‘‘senior
management’’ means personnel of the company who are members of its core
management team excluding Board of Directors comprising all members of
management one level below the executive directors, including the functional
heads.
The Companies (Meetings
of Board and its Powers) Rules, 2014, needs to be looked into.
Section 197 of 2013 Act
provided for in Chapter XIII of the 2013 Act deals with
Overall Maximum Managerial
Remuneration and Managerial Remuneration in case of absence or inadequacy of
profits
Section 203 of 2013 Act
provided for in Chapter XIII of the 2013 Act deals with
Appointment of Key Managerial Personnel
Section 2 (51) defines
the term key managerial personnel, in relation to a company, means—
(i) the Chief Executive Officer or the managing
director or the manager;
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may
be prescribed.
Section 203 of the 2013
Act, provides for
203 (1) Every company belonging to such class or classes of companies as may
be prescribed shall have
the following whole-time key
managerial personnel,—
(i) managing director, or
Chief Executive Officer or manager and in their absence, a whole-time director;
(ii) company secretary; and
(iii) Chief Financial Officer :
Provided that an individual
shall not be appointed or reappointed as the Chairperson of the company, in
pursuance of the articles of the company, as well as the Managing Director or
Chief Executive Officer of the company at the same time after the date of
commencement of this Act unless,—
(a) the articles of such a
company provide otherwise; or
(b) the company does not
carry multiple businesses:
Provided further that
nothing contained in the first proviso shall apply to such class of companies
engaged in multiple businesses and which has appointed one or more Chief
Executive Officers for each such business as may be notified by the Central
Government.
(2) Every whole-time key
managerial personnel of a company shall be appointed by means of a resolution
of the Board containing the terms and conditions of the appointment including
the remuneration.
(3) A whole-time key
managerial personnel shall not hold office in more than one company except in
its subsidiary company at the same time:
Provided that nothing
contained in this sub-section shall disentitle a key managerial personnel from
being a director of any company with the permission of the Board:
Provided further that
whole-time key managerial personnel holding office in more than one company at
the same time on the date of commencement of this Act, shall, within a period
of six months from such commencement, choose one company, in which he wishes to
continue to hold the office of key managerial personnel:
Provided also that a
company may appoint or employ a person as its managing director, if he is the
managing director or manager of one, and of not more than one, other company
and such appointment or employment is made or approved by a resolution passed
at a meeting of the Board with the consent of all the directors present at the
meeting and of which meeting, and of the resolution to be moved thereat,
specific notice has been given to all the directors then in India.
(4) If the office of any
whole-time key managerial personnel is vacated, the resulting vacancy shall be
filled-up by the Board at a meeting of the Board within a period of six months
from the date of such vacancy.
(5) If a company contravenes
the provisions of this section, the company shall be punishable with fine which
shall not be less than one lakh rupees but which may extend to five lakh rupees
and every director and key managerial personnel of the company who is in
default shall be punishable with fine which may extend to fifty thousand rupees
and where the contravention is a continuing one, with a further fine which may
extend to one thousand rupees for every day after the first during which the
contravention continues.
What does the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 specify:-
Rule 8- Appointment of
Key Managerial Personnel -
Every listed company and every other public
company having a paid-up share capital of ten crore rupees or more shall have whole-time key managerial
personnel.
Section 204 of 2013 Act
provided for in Chapter XIII of the 2013 Act deals with
Secretarial Audit for Bigger Companies
204. (1) Every listed company and a company belonging to other class
of companies as may be prescribed shall
annex with its Board’s report made in terms of sub-section (3) of
section 134, a secretarial audit report, given by a company secretary in practice,
in such form as may be prescribed.
(2) It shall be the duty of
the company to give all assistance and facilities to the company secretary in
practice, for auditing the secretarial and related records of the company.
(3) The Board of Directors, in
their report made in terms of
sub-section (3) of section 134, shall explain in full any
qualification or observation or other remarks made by the company secretary in
practice in his report under sub-section (1).
(4) If a company or any
officer of the company or the company secretary in practice, contravenes the
provisions of this section, the company, every officer of the comapny or the
company secretary in practice, who is in default, shall be punishable with fine
which shall not be less than one lakh rupees but which may extend to five lakh
rupees.
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