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For improving the
Board’s effectiveness and efficiency, Committees or ‘Board Committees’ are formed in areas where more specialized and
technical decisions are required to be taken. The Committee functions as a
communicator between the Board of Directors, Auditors. The Board in order to
achieve the desired results constitutes the committee that prepares the
framework for decision making and the report at the subsequent meeting.
Table of Contents
In the present
scenario, the regulatory requirement is such that the composition of the board is
relatively large in number which comprises of the Executive directors and Non-executive
At times it is practically
difficult to convene board meetings that suit the convenience and other
commitments of each director. By having smaller committees, the convenience and
commitments of the director also get addressed effectively.
The Board in
order to achieve the desired results has to concentrate more on selected team
members on particular business dealings and issues. For maintaining the
Corporate social responsibility, shareholders as well as stakeholder’s
relationship, the Committee is required for specialized companies.
As per Companies Act 2013, Mandatory Committees required to be formed for the Companies are as follows-
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,
Companies which have in aggregate, outstanding loans, debentures and deposits exceeding
50 crore rupees are required to constitute an Audit Committee.
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,
Public Companies which have in aggregate, outstanding loans, debentures and
deposits exceeding 50 crore rupees are required to constitute an Audit
At any time in a
financial year, A company having more than 1000 members, debenture holders,
deposit holder or security holders are required to constitute a Stake-holder
Committee shall comprise of a minimum of 3 directors with a majority
of directors being Independent Directors. Additionally, the members of the
Audit Committee shall be a person of integrity and with an ability to understand
the financial statement.
and Remuneration Committee shall comprise of 3 or more non-executive directors,
out of it more than half the directors shall be an Independent director.
The chairman of the company can be appointed as a member of the Nomination and
Remuneration Committee but shall not chair the committee.
The company at
any time during a financial year is required to constitute a stakeholder
Relationship Committee which shall consist of a chairperson who shall be a non-executive
director and such other members as may be recommended by the Board, which
shall consider and resolve the stakeholder’s grievances.
However, in the case of other companies, the Board of directors shall
nominate a director to play the role of the audit committee for the purpose of
the vigil mechanism.
shall identify the person who is qualified to be a director and can be
appointed in the senior management of the company in accordance with the
criteria laid down by the Board of the director.
committee recommends to the board the appointment and also the removal of the
person and shall also specify the approach for the effective mechanism as well
as evaluate the performance of the board and the individual director.
and Remuneration Committee shall draw up the criteria–
At any time in a
financial year, A Company having more than 1000 members, debenture holders, deposit
holders or security holders are required to constitute a Stake-holder Committee
which shall contemplate and settle the grievances of the stakeholders of the
stands for Corporate Social Responsibility, and every company shall constitute
a Corporate Social Responsibility Committee.
A. In the case of Listed Company, at least 3 directors, out of which at least 1 director shall be an Independent Director.
B. In the case of Private Company, the committee can be constituted without an Independent Director. In the case of a Private Company having 2 Directors, the committee can be constituted with 2 Directors only.
Also, Read: Appointment of Auditor: Procedure for Appointing First, Internal, and Cost Auditor.
Priyanka Bajpayee has done Masters in International Business Law and well versed in content writing covering the area of legal and finance. Also, she has practical experience of almost 1.5 years in Legal compliance and secretarial work.
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