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Section 177 of the Companies Act, 2013 deals with the formation and appointment of chairperson of Audit Committee. Every company constitutes an audit committee in compliance with the Companies Act, 2013.
The article talks about the absence of the Chairperson of audit committee from the AGM.
An audit committee is a group of a Board of Directors of a company responsible for looking into the financial reporting and the disclosure process. An Audit committee must be aware of the internal controls and the process in the company.
An audit committee’s primary objective is to look after the financial reporting process, the company’s system of internal controls, the audit process, and compliance with laws and regulations.
The chairperson of audit committee has to act in accordance with the provisions of the section. The roles and responsibilities are:
The appointment of chairperson of Audit Committee under Companies Act, 2013
Under the Section 177 of the Companies Act, 2013, read with Rule 6 and Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 exclusively deals with the formation and appointment of chairperson of Audit Committee.
An Audit Committee is mandatory for:
An Audit Committee must constitute of 3 Directors minimum, with an independent director forming the majority.
The audit committee, including Chairperson of audit committee, must be able to read and understand the financial statement.
The powers of the audit committee are:
As per Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014 deals with establishing vigil mechanism.
It states that every listed company and the companies mentioned below:
The vigil mechanism is established for directors and employees to report their grievances and protect against victimization. The details of the establishment must be published on the company’s website.
A director from the Board of Directors must be nominated to play a role in the Audit Committee for Vigil Mechanism. The person aggrieved will have direct access with the Chairperson of the Audit Committee.
Action against Frivolous complaints
Suitable action must be taken against the director or an employee, including reprimand by the audit committee or the director nominated can take such actions.
The Companies Act 2013 provides various provisions related to auditors and the auditors’ committee. Section 146 of the Companies Act, 2013 states that the communication and all the general meeting notices must be sent to the company’s auditor and the auditor unless he is exempted from attending the meeting, must participate in the meeting or send his proxy to do so.
The chairperson of audit committee must attend the Annual General Meeting (AGM) as per clause 49 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, to clarify the doubts of any shareholders.
The Chairperson of Audit Committee represents the shareholders’ financial interests, so unless he is exempted from attending a meeting, he must come.
In the article, it is clear that the Chairperson of Audit Committee has to attend the AGM (Annual General Meeting) unless exempted from it.
Read our article:All you need to know about AGM under Companies Act, 2013