{"id":80820,"date":"2023-11-21T11:48:48","date_gmt":"2023-11-21T06:18:48","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?post_type=act&#038;p=80820"},"modified":"2023-11-21T11:48:52","modified_gmt":"2023-11-21T06:18:52","slug":"section-177","status":"publish","type":"act","link":"https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-177\/","title":{"rendered":"Section 177.\u00a0Audit committee"},"content":{"rendered":"\n<p>(1) The Board of Directors of\u00a0<span id='easy-footnote-1-80820' class='easy-footnote-margin-adjust'><\/span><span class='easy-footnote'><a href='https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-177\/#easy-footnote-bottom-1-80820' title='Subs.by Act 1 of 2018, s. 57, for &amp;#8220;every listed company&amp;#8221; (w.e.f. 7-5-2018).'><sup>1<\/sup><\/a><\/span>[every listed public company] and such other class or classes of companies, as may be prescribed, shall constitute an Audit Committee.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(2) The Audit Committee shall consist of a minimum of three directors with independent directors forming a majority:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>Provided that majority of members of Audit Committee including its Chairperson shall be persons with ability to read and understand, the financial statement.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(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).<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(4) Every Audit Committee shall act in accordance with the terms of reference specified in writing by the Board which shall, inter alia, include,&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(i) the recommendation for appointment, remuneration and terms of appointment of auditors of the company;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(ii) review and monitor the auditor&#8217;s independence and performance, and effectiveness of audit process;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(iii) examination of the financial statement and the auditors report thereon;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(iv) approval or any subsequent modification of transactions of the company with related parties:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><span id='easy-footnote-2-80820' class='easy-footnote-margin-adjust'><\/span><span class='easy-footnote'><a href='https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-177\/#easy-footnote-bottom-2-80820' title='The proviso ins. by Act 21 of 2015, s. 14 (w.e.f. 14-12-2015).'><sup>2<\/sup><\/a><\/span>[Provided that the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to such conditions as may be prescribed;]<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><span id='easy-footnote-3-80820' class='easy-footnote-margin-adjust'><\/span><span class='easy-footnote'><a href='https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-177\/#easy-footnote-bottom-3-80820' title='Ins. by Act 1 of 2018, s. 57 (w.e.f. 7-5-2018).'><sup>3<\/sup><\/a><\/span>[Provided further that in case of transaction, other than transactions referred to in section 188, and where Audit Committee does not approve the transaction, it shall make its recommendations to the Board:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>Provided also that in case any transaction involving any amount not exceeding one crore rupees is entered into by a director or officer of the company without obtaining the approval of the Audit Committee and it is not ratified by the Audit Committee within three months from the date of the transaction, such transaction shall be voidable at the option of the Audit Committee and if the transaction is with the related party to any director or is authorised by any other director, the director concerned shall indemnify the company against any loss incurred by it:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>Provided also that the provisions of this clause shall not apply to a transaction, other than a transaction referred to in section 188, between a holding company and its wholly owned subsidiary company.]<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(v) scrutiny of inter-corporate loans and investments;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(vi) valuation of undertakings or assets of the company, wherever it is necessary;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(vii) evaluation of internal financial controls and risk management systems;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(viii) monitoring the end use of funds raised through public offers and related matters.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(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.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(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.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(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 auditors report but shall not have the right to vote.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(8) The Board&#8217;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.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(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.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(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:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>Provided that the details of establishment of such mechanism shall be disclosed by the company on its website, if any, and in the Boards report.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n","protected":false},"excerpt":{"rendered":"<p>(1) The Board of Directors of\u00a0[every listed public 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 [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":79763,"parent":79755,"menu_order":0,"template":"","format":"standard","meta":[],"categories":[11445],"tags":[1007],"acf":{"service_id":"215"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Section 177.\u00a0Audit committee - Enterslice<\/title>\n<meta name=\"description\" content=\"Explore the vital role of Section 177 Audit Committee in ensuring financial transparency and corporate governance. 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