{"id":26718,"date":"2019-11-18T16:39:43","date_gmt":"2019-11-18T11:09:43","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=26718"},"modified":"2019-11-18T16:39:45","modified_gmt":"2019-11-18T11:09:45","slug":"types-of-committee-as-per-the-companies-act-2013","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/types-of-committee-as-per-the-companies-act-2013\/","title":{"rendered":"Types of Committee as per the Companies Act, 2013"},"content":{"rendered":"<p class=\"has-drop-cap\">For improving the\nBoard&rsquo;s effectiveness and efficiency, Committees or <strong>&lsquo;Board Committees&rsquo;<\/strong> are formed in areas where more specialized and\ntechnical decisions are required to be taken. The Committee functions as a\ncommunicator between the Board of Directors, Auditors. The Board in order to\nachieve the desired results constitutes the committee that prepares the\nframework for decision making and the report at the subsequent meeting.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What\nis the Requirement of establishing the Committee as per the Companies Act 2013?<\/strong><\/h2>\n\n\n\n<p>In the present\nscenario, the regulatory requirement is such that the composition of the board is\nrelatively large in number which comprises of the Executive directors and Non-executive\nindependent directors. <\/p>\n\n\n\n<ul><li><strong>For the ease of the Board of Directors<\/strong><\/li><\/ul>\n\n\n\n<p>At times it is practically\ndifficult to convene board meetings that suit the convenience and other\ncommitments of each director. By having smaller committees, the convenience and\ncommitments of the director also get addressed effectively.<\/p>\n\n\n\n<ul><li><strong>For Good\nCorporate governance<\/strong> <\/li><\/ul>\n\n\n\n<p>The Board in\norder to achieve the desired results has to concentrate more on selected team\nmembers on particular business dealings and issues. For maintaining the\nCorporate social responsibility, shareholders as well as stakeholder&rsquo;s\nrelationship, the Committee is required for specialized companies.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Types of Committees as per the Companies Act, 2013<\/strong><\/h2>\n\n\n\n<p><strong>As per Companies Act 2013<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Companies_Act_2013\">[1]<\/a><\/sup>, Mandatory Committees required to be formed for the Companies are as follows-<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" loading=\"lazy\" width=\"531\" height=\"211\" src=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/Screen-Shot-2019-11-18-at-3.45.22-PM.png\" alt=\"Types of Committees\" class=\"wp-image-26721\" srcset=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/Screen-Shot-2019-11-18-at-3.45.22-PM.png 531w, https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/Screen-Shot-2019-11-18-at-3.45.22-PM-300x119.png 300w\" sizes=\"(max-width: 531px) 100vw, 531px\"\/><figcaption>Types of Committees<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Applicability of the Committee<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">1. In the case of the Audit Committee<\/h3>\n\n\n\n<p>Every listed\nPublic Companies, and Public Companies having a Paid-up share capital of <strong>10\nCrore rupees or more<\/strong>, and a Turnover of <strong>Rs 100 Crore or more<\/strong>,<\/p>\n\n\n\n<p>Additionally, Public\nCompanies which have in aggregate, outstanding loans, debentures and deposits exceeding\n50 crore rupees are required to constitute an Audit Committee.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. In case of Nomination and Remuneration Committee<\/h3>\n\n\n\n<p>Every listed Public\nCompanies, and Public Companies having a Paid-up share capital of <strong>10 Crore rupees\nor more<\/strong>, and a Turnover of <strong>Rs 100 Crore or more<\/strong>,<\/p>\n\n\n\n<p>Additionally,\nPublic Companies which have in aggregate, outstanding loans, debentures and\ndeposits exceeding 50 crore rupees are required to constitute an Audit\nCommittee.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. In Case of Stake-holder Relationship Committee<\/h3>\n\n\n\n<p>At any time in a\nfinancial year, A company having more than 1000 members, debenture holders,\ndeposit holder or security holders are required to constitute a Stake-holder\nCommittee.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Composition of the Committee<\/h2>\n\n\n\n<ul><li><strong>In the case of the Audit Committee<\/strong><\/li><\/ul>\n\n\n\n<p>The Audit\nCommittee shall comprise of a <strong>minimum of 3 directors<\/strong> with a <strong>majority\nof directors being Independent Directors<\/strong>. Additionally, the members of the\nAudit Committee shall be a person of integrity and with an ability to understand\nthe financial statement.<\/p>\n\n\n\n<ul><li><strong>In the case of the\nNomination and Remuneration Committee<\/strong><strong><\/strong><\/li><\/ul>\n\n\n\n<p>The Nomination\nand Remuneration Committee shall comprise of <strong>3 or more non-executive directors<\/strong>,\nout of it more than <strong>half the directors shall be an Independent director<\/strong>.\nThe chairman of the company can be appointed as a member of the Nomination and\nRemuneration Committee but shall not chair the committee.<\/p>\n\n\n\n<ul><li><strong>In the case of Stakeholder Relationship Committee<\/strong><\/li><\/ul>\n\n\n\n<p>The company at\nany time during a financial year is required to constitute a stakeholder\nRelationship Committee which shall consist of a chairperson who shall be a <strong>non-executive\ndirector<\/strong> and such other members as may be recommended by the Board, which\nshall consider and resolve the stakeholder&rsquo;s grievances.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The function performed by the Audit Committee<\/strong><\/h2>\n\n\n\n<ol><li>To give\nrecommendation for the appointment, remuneration, and terms of appointment of\nthe auditor of the company.<\/li><li>&nbsp;At the Annual General Meeting, Chairman\nof the Audit Committee shall be present to answer <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Shareholder&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A shareholder is an individual or entity that owns at least one share of a company&amp;#039;s stock, granting them partial ownership of the company. This status allows them certain rights, including(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/shareholder\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>shareholder<\/a> queries. <\/li><li>While considering the Auditor&rsquo;s report, the Auditor of a company and the\nKMP (Key managerial personnel) shall have a right to heard in the meeting of the\naudit committee but shall not have the right to vote. <\/li><li>To establish a Vigil Mechanism Policy: Every listed company and a\ncompany which has-<\/li><li>Accepted deposits from the public; &ndash; <\/li><li>The company has borrowed money from Bank\nand PFI&rsquo;s in excess of Rs. 50 crores<strong><\/strong><\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reasons for establishing the Vigil Mechanism Policy<\/strong><\/h2>\n\n\n\n<ul><li>The director and employee through the Vigil Mechanism Policy shall report genuine concerns <\/li><li>It shall also provide for adequate safeguards against victimization of persons.<\/li><li>It shall operate for employees and directors to enable them to bring to report genuine concerns of the Company.<\/li><li>The details of the policy are required to be disclosed by the company on its website.<\/li><\/ul>\n\n\n\n<div class=\"shadow1\"><strong>Note &ndash;<\/strong> In case, if any of the members of the committee have a conflict of interest in a case mentioned under vigil mechanism, they should recuse themselves and the remaining members on the committee would deal with the matter.<\/div>\n\n\n\n<p>However, in the case of other companies, the Board of directors shall\nnominate a director to play the role of the audit committee for the purpose of\nthe vigil mechanism.<\/p>\n\n\n\n<ul><li>To examine the financial statement and the auditor&rsquo;s report.<\/li><li>In case of related party transaction approval or subsequent modification\nof transactions of the company with related parties.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Functions performed by the Nomination\nand Remuneration Committee<\/strong><\/h2>\n\n\n\n<p>The committee\nshall identify the person who is qualified to be a director and can be\nappointed in the senior management of the company in accordance with the\ncriteria laid down by the Board of the director.<\/p>\n\n\n\n<p>Further, the\ncommittee recommends to the board the appointment and also the removal of the\nperson and shall also specify the approach for the effective mechanism as well\nas evaluate the performance of the board and the individual director.<\/p>\n\n\n\n<p><strong>The Nomination\nand Remuneration Committee shall draw up the criteria<\/strong>&ndash;<\/p>\n\n\n\n<ul><li>For determining Qualification, positive accredit and\nindependence of the director.<\/li><li>To recommend the policy which relates to the remuneration\nof the directors, KMPs to the Board of directors.<\/li><li>To overview the relationship of remuneration to\nperformance i.e. the performance is clear and meets the benchmark set for the\nperformance.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Functions performed by the Stakeholder relationship\nCommittee<\/strong><\/h2>\n\n\n\n<p>At any time in a\nfinancial year, A Company having more than 1000 members, debenture holders, deposit\nholders or security holders are required to constitute a Stake-holder Committee\nwhich shall contemplate and settle the grievances of the stakeholders of the\ncompany.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Other Committee required to be\nestablished by the Company as per the Companies Act, 2013<\/strong><\/h2>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>CSR Committee<\/strong><\/h2>\n\n\n\n<p>CSR Committee\nstands for Corporate Social Responsibility, and every company shall constitute\na Corporate Social Responsibility Committee.<\/p>\n\n\n\n<ul><li><strong>Having a net worth of Rs. 500 crore or more, or <\/strong><\/li><li><strong>Turnover of Rs. 1000 crore or more or<\/strong><\/li><li><strong>A net profit of Rs. 5 crores or more during any financial year.<\/strong><\/li><\/ul>\n\n\n\n<p><strong>Composition of\nCommittee<\/strong><strong><\/strong><\/p>\n\n\n\n<p>A. In the case of Listed Company, at least 3 directors, out of which at least 1 director shall be an Independent Director. <\/p>\n\n\n\n<div class=\"shadow1\"><strong>Exception-<\/strong>I n case of Unlisted Public Company it is not required to have an Independent Director, <\/div>\n\n\n\n<p>B. In the case of <strong>Private Company<\/strong>, 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.<\/p>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/appointment-of-auditor-procedure-for-appointing-first-subsequent-internal-and-cost-auditor\/\" target=\"_blank\" rel=\"noopener noreferrer\">Appointment of Auditor: Procedure for Appointing First, Internal, and Cost Auditor<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>For improving the Board&rsquo;s effectiveness and efficiency, Committees or &lsquo;Board Committees&rsquo; 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 [&hellip;]<\/p>\n","protected":false},"author":25,"featured_media":26730,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1322,2369],"tags":[2822,2821],"acf":{"service_id":"1"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Types of Committee as per the Companies Act, 2013 - Enterslice<\/title>\n<meta name=\"description\" content=\"Committees are formed in areas where more specialized and technical decisions are required to be taken for For improving the Board\u2019s efficiency,\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/types-of-committee-as-per-the-companies-act-2013\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Types of Committee as per the Companies Act, 2013 - Enterslice\" \/>\n<meta property=\"og:description\" content=\"Committees are formed in areas where more specialized and technical decisions are required to be taken for For improving the Board\u2019s efficiency,\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/types-of-committee-as-per-the-companies-act-2013\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2019-11-18T11:09:43+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2019-11-18T11:09:45+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/Types-of-Committee-as-per-the-Companies-Act-2013.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"630\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Priyanka Bajpayee","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/09\/81216.jpg","authorDescription":"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.","postViews":496,"readingTime":4,"nextPost":{"id":26714,"slug":"fraud-and-offences-punishable-under-companies-act-2013"},"prevPost":{"id":26696,"slug":"everything-you-need-to-know-about-business-risk-management"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/Types-of-Committee-as-per-the-Companies-Act-2013.jpg","postTerms":"Company Registration","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/26718"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/25"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=26718"}],"version-history":[{"count":0,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/26718\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/26730"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=26718"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=26718"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=26718"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}