{"id":11876,"date":"2020-07-25T17:32:52","date_gmt":"2020-07-25T12:02:52","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=11876"},"modified":"2020-07-27T10:51:23","modified_gmt":"2020-07-27T05:21:23","slug":"committees-under-the-companies-act-2013","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/","title":{"rendered":"Committees Under The Companies Act 2013: How they Function?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">For improving the <strong><em>efficiency<\/em><\/strong> and <strong><em>efficacy<\/em><\/strong> of the <strong><em>Board of Directors<\/em><\/strong>, various <strong><em>Committees under the Companies Act 2013<\/em><\/strong> are formed. These committees are formed for the sectors that need more <strong><em>technical, focused<\/em><\/strong>, and <strong><em>specialized decisions<\/em><\/strong>. <\/p>\n\n\n\n<p>The main function of these committees is to <strong><em>prepare<\/em><\/strong> and <strong><em>draft documents<\/em><\/strong> for decision making at the Board Meetings. In this blog, we will talk about the <strong><em>functioning<\/em><\/strong> of the <strong><em>committees under the Companies Act 2013<\/em><\/strong><a href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/Report_Companies_Law_Committee_01022016.pdf\">[1]<\/a> .<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a3af3c158d\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a3af3c158d\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Concept_of_Committees\" title=\"Concept of Committees\">Concept of Committees<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Objective_of_the_Committees\" title=\"Objective of the Committees \">Objective of the Committees <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Need_of_the_Committees\" title=\"Need of the Committees\">Need of the Committees<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Different_Committees_under_the_Companies_Act_2013\" title=\"Different Committees under the Companies Act 2013\">Different Committees under the Companies Act 2013<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Audit_Committee_under_Section_177\" title=\"Audit Committee under Section 177\">Audit Committee under Section 177<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Exceptions_to_Audit_Committee\" title=\"Exceptions to Audit Committee\">Exceptions to Audit Committee<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Nomination_and_Remuneration_Committee_under_Section_178\" title=\"Nomination and Remuneration Committee under Section 178\">Nomination and Remuneration Committee under Section 178<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Exceptions_to_Nomination_and_Remuneration_Committee\" title=\"Exceptions to Nomination and Remuneration Committee\">Exceptions to Nomination and Remuneration Committee<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Stakeholder_Relationship_Committee_under_Section_178\" title=\"Stakeholder Relationship Committee under Section 178\">Stakeholder Relationship Committee under Section 178<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Exceptions_to_Stakeholder_Relationship_Committee\" title=\"Exceptions\nto Stakeholder Relationship Committee\">Exceptions\nto Stakeholder Relationship Committee<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Corporate_Social_Responsibility_Committee_under_Section_135\" title=\"Corporate Social\nResponsibility Committee under Section 135\">Corporate Social\nResponsibility Committee under Section 135<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Penal_Provisions_for_Not_Forming_Committees_under_the_Companies_Act_2013\" title=\"Penal\nProvisions for Not Forming Committees under the Companies Act 2013\">Penal\nProvisions for Not Forming Committees under the Companies Act 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Different_Committees_under_SEBI_Listing_Obligations_and_Disclosure_Requirements_2020\" title=\"Different Committees under SEBI (Listing Obligations and Disclosure Requirements) 2020\">Different Committees under SEBI (Listing Obligations and Disclosure Requirements) 2020<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/swaritadvisors.com\/learning\/committees-under-the-companies-act-2013\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Committees\"><\/span>Concept of Committees<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term <strong><em>\u201cCommittees\u201d<\/em><\/strong> denotes a <strong><em>group<\/em><\/strong>\nor <strong><em>association\nof persons<\/em><\/strong> who work together to<strong><em> achieve a common objective<\/em><\/strong> and to\nperform a particular work that requires <strong><em>expert knowledge<\/em><\/strong>. Further, all the\nmembers of these committees are expected to have professional and specialized\nexperience regarding the <strong><em>functioning of the committee<\/em><\/strong>.<\/p>\n\n\n\n<p>However, it is significant to note that a committee\nis just responsible for <strong><em>performing the work<\/em><\/strong> and <strong><em>role<\/em><\/strong>\nprescribed by the <strong><em>Board of Directors<\/em><\/strong> (BOD). That means the <strong><em>ultimate authority<\/em><\/strong> is\nwith <strong><em>BOD\n<\/em><\/strong>only.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Objective_of_the_Committees\"><\/span>Objective of the Committees <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" loading=\"lazy\" width=\"1024\" height=\"768\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Objective-of-the-Committees-1024x768.png\" alt=\"Objective of the Committees \" class=\"wp-image-11883\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Objective-of-the-Committees-1024x768.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Objective-of-the-Committees-300x225.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Objective-of-the-Committees-768x576.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Objective-of-the-Committees.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure><\/div>\n\n\n\n<p>The objectives and aim of the <strong>committees under the Companies Act 2013<\/strong> are as follows:<\/p>\n\n\n\n<ol><li><strong>Improve<\/strong>\nthe <strong><em>Efficiency<\/em><\/strong>\nand <strong><em>Efficacy<\/em><\/strong>\nof the Board of Directors;<\/li><li><strong><em>Assist<\/em><\/strong> the Board of Directors to <strong><em>Focus<\/em><\/strong> more on <strong><em>Corporate\nGovernance<\/em><\/strong>;<\/li><li><strong><em>Examine<\/em><\/strong> the <strong><em>Specialized Areas<\/em><\/strong> of the Company;<\/li><li><strong><em>Propose New\nChanges<\/em><\/strong> to the Board of\nDirectors.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Need_of_the_Committees\"><\/span>Need of the Committees<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Normally, the need to form a\ncommittee is high in the companies that comprise of both <strong><em>Executive<\/em><\/strong> and <strong><em>Non-Executive\nIndependent Directors<\/em><\/strong>. Further, the <strong><em>main reasons<\/em><\/strong> behind the\nConstitution of <strong><em>Committees under the Companies Act 2013 <\/em><\/strong>are as follows:<\/p>\n\n\n\n<ol><li>To Assist the Board of Directors: Normally, it is <strong><em>tough<\/em><\/strong> to <strong><em>consider every issue<\/em><\/strong> and matter in the <strong><em>Board Meeting<\/em><\/strong>. But when a company have <strong><em>small committees<\/em><\/strong>, it is easy to <strong><em>tackle and address<\/em><\/strong> every matter effectively<\/li><li>To Maintain Corporate Governance: In order to concentrate on targeted issues and maintain <strong><em><a href=\"https:\/\/swaritadvisors.com\/learning\/corporate-social-responsibility\/\">Corporate Social Responsibility<\/a> (CSR)<\/em><\/strong>, <strong><em>Stakeholder\u2019s Relationship<\/em><\/strong>, these committees are needed by every company.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Different_Committees_under_the_Companies_Act_2013\"><\/span>Different Committees under the Companies Act 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Different-Committees-under-the-Companies-Act-2013-1024x768.png\" alt=\"Types of Committees under company act\" class=\"wp-image-11884\" width=\"524\" height=\"393\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Different-Committees-under-the-Companies-Act-2013-1024x768.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Different-Committees-under-the-Companies-Act-2013-300x225.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Different-Committees-under-the-Companies-Act-2013-768x576.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Different-Committees-under-the-Companies-Act-2013.png 1200w\" sizes=\"(max-width: 524px) 100vw, 524px\" \/><\/figure><\/div>\n\n\n\n<p><em>The <\/em><strong><em>different types of committees under the Companies Act 2013<\/em><\/strong><em> are as follows:<\/em><\/p>\n\n\n\n<ol><li><strong><em>Audit Committee<\/em><\/strong> under Section 177;<\/li><li><strong><em>Nomination and\nRemuneration Committee<\/em><\/strong> under Section\n178 (1) to (4);<\/li><li><strong><em>Stakeholders\nRelationship Committee<\/em><\/strong> under Section\n178 (5) to (8);<\/li><li><strong><em>Corporate Social\nResponsibility<\/em><\/strong> under Section\n135<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Audit_Committee_under_Section_177\"><\/span>Audit Committee under Section 177<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td><strong>Basis of Discussion<\/strong>   <\/td><td>\n  <strong>Details<\/strong>\n  <\/td><\/tr><tr><td><strong>Applicability<\/strong>   <\/td><td>The provisions of <strong><em>Section   177<\/em><\/strong> of the Companies Act applies to the companies as follows:   <br>a) Every <strong><em>Listed Public Company<\/em><\/strong>;<br>b) Any Public Company having the <strong><em>Paid-up   Share Capital<\/em><\/strong> of&nbsp;<strong><em>Rs 10   crore or more;<\/em><\/strong> <br>c) Any Public Company having an <strong><em>Annual   Turnover<\/em><\/strong> of&nbsp;<strong><em>Rs 100   crore or more;<\/em><\/strong><br>d) Any Public Company having an aggregate <strong><em>Outstanding Loans, Deposits,<\/em><\/strong> and <strong><em>Debentures<\/em><\/strong>,&nbsp;<strong><em>more than Rs 50 crore<\/em>.<\/strong>            <\/td><\/tr><tr><td><strong>Constitution<\/strong>   <\/td><td>A minimum of <strong><em>3 Directors<\/em><\/strong>;&nbsp;This committee will have a <strong><em>majority<\/em><\/strong> of <strong><em>Independent   Directors<\/em><\/strong>.      <\/td><\/tr><tr><td><strong>Qualification<\/strong>   <\/td><td>All the <strong><em>Members<\/em><\/strong> of an Audit Committee must have in-depth <strong><em>knowledge<\/em><\/strong> about the <strong><em>Financial   Statements<\/em><\/strong>.    <\/td><\/tr><tr><td><strong>Persons Eligible to Attend Audit Committee Meeting<\/strong>   <\/td><td>All the <strong><em>Auditors<\/em><\/strong> and <strong><em>Key Managerial Personnel (KMP)<\/em><\/strong> of the company has the <strong><em>right to attend<\/em><\/strong> the <strong><em>Meeting of Audit Committee<\/em><\/strong>.   However, these people will <strong><em>not<\/em><\/strong> have the right to Cast <strong><em>Vote in the Meeting<\/em><\/strong>.   <\/td><\/tr><tr><td><strong>Functions&nbsp;<\/strong>   <\/td><td>The Functions of an <strong><em>Audit   Committee<\/em><\/strong> under <strong><em>Section 177<\/em><\/strong> of the Companies Act   2013 are as follows:   <br>a) Give <strong><em>Recommendation<\/em><\/strong> for the <strong><em>Remuneration,   Appointment, <\/em><\/strong>and <strong><em>Tenure of Appointment<\/em><\/strong> of <strong><em>Auditors<\/em><\/strong> of the Company;<br>b) Monitor and Supervise the Work,   Performance, and Independence of Auditors, along with the Effectiveness of the <strong><em>Audit Process<\/em><\/strong>;<br>c) Examination of the Auditors   Report and Financial Statements; <br>d) <strong><em>Approval <\/em><\/strong>or <strong><em>Modification<\/em><\/strong> of   Transactions concerning <strong><em>Related Parties.<\/em><\/strong>            &nbsp;   <br><br><strong>ADDITIONAL PROVISIONS:<\/strong>   <br>a) Power to provide omnibus approval for some transactions, subject to conditions prescribed;<br>b) May Give Recommendation to the Board for the issues not mentioned under Section 188;<br>c) <strong><em>Examination<\/em><\/strong> of Inter-corporate Loans and Investments;<br>d)<strong> <em>Valuation<\/em><\/strong> of the Assets and undertaking of the Company;<br>e) <strong><em>Assessment<\/em><\/strong> of the Risk Management System and   Internal Financial Control;<br>f) <strong><em>Monitoring<\/em><\/strong> the Use of Funds raised through the Public.                  <br><br><strong>Note: <\/strong>Clause (b) will not be applicable in the case of Holding and Wholly-owned Subsidiary Company.   <strong>&nbsp;<\/strong>   <br><br><strong>The   Consequence of Non-Approval or Non-Ratification of Transaction by the Company   <\/strong>   <br>If in case any transaction worth <strong><em>up to Rs 1 crore<\/em><\/strong> carried out by the Directors of Company, <strong><em>without <\/em><\/strong>obtaining <strong><em>approval from Audit   Committee<\/em><\/strong> and <strong><em>not ratified within 3 months<\/em><\/strong> from the date of transactions, then:   <br>a) Such transaction will be <strong><em>Voidable <\/em><\/strong>at the option of Committee;<br>b) In case such a transaction involves <strong><em>Related Party<\/em><\/strong> or is <strong><em>authorized by the Director<\/em><\/strong>, then the said director will be liable to <strong><em>Indemnify the Loss incurred<\/em><\/strong>.      <\/td><\/tr><tr><td><strong>Powers<\/strong>   <\/td><td>The Powers of an Audit Committee are as follows:<br>a) <strong><em>Investigate any Matter<\/em><\/strong> specified by the Board of   Directors;<br>b) <strong><em>Power to acquire Professional Advice <\/em><\/strong>from the External Sources;<br>c) <strong><em>Full access to obtain information<\/em><\/strong> recorded in the Books of   Accounts;<br>d) May <strong><em>Call for the Auditor\u2019s Comment <\/em><\/strong>regarding the Internal Control Systems, Scope of Audit;<br>e) <strong><em>Review Financial Statements<\/em><\/strong> before their Submission to BOD (Board of Directors);<br>f) Can <strong><em>Discuss<\/em><\/strong> Issues be concerning <strong><em>Statutory and Internal Auditors<\/em><\/strong>;<br>g) Can <strong><em>Handle<\/em><\/strong> Issues concerning the <strong><em>Management of the Company<\/em><\/strong>.                        <\/td><\/tr><tr><td><strong>Disclosure in the Board Report<\/strong>   <\/td><td>The Items to be disclosed in the Board Report are as follows:<br>a) <strong><em>Composition <\/em><\/strong>of the Audit Committee;<br>b) <strong><em>Recommendations not approved <\/em><\/strong>by the Board of Directors.         <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Exceptions_to_Audit_Committee\"><\/span>Exceptions to Audit Committee<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>The exceptions to <\/em><strong><em>provisions of the Audit Committee<\/em><\/strong><em> are as follows:<\/em><\/p>\n\n\n\n<ol><li><strong>Section 8 Company<\/strong>: For a <strong><a href=\"https:\/\/swaritadvisors.com\/section-8-company-registration\">Section 8 Company<\/a><\/strong> the phrase \u201cform Audit Committee with a <strong><em>Majority of Independent Directors<\/em><\/strong>\u201d shall be <strong><em>omitted<\/em><\/strong>;<\/li><li><strong>Government Company<\/strong>: For a Government company the \u201c<strong><em>Recommendation for Remuneration<\/em><\/strong>\u201d shall be <strong><em>omitted<\/em><\/strong>;<\/li><li><strong>IFSC Public Company<\/strong>: The provisions of <strong><em>Section 177<\/em><\/strong> shall not apply to an IFSC Public Company.<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Nomination_and_Remuneration_Committee_under_Section_178\"><\/span>Nomination and Remuneration Committee under Section 178<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td><strong>Basis of Discussion<\/strong>   <\/td><td>\n  <strong>Details<\/strong>\n  <\/td><\/tr><tr><td><strong>Applicability<\/strong>   <\/td><td>The provisions of <strong><em>Section   178 <\/em><\/strong>of the Companies Act applies to the companies as follows:  <br>a) Every <strong><em>Listed Public Company<\/em><\/strong>;<br>b) Any Public Company having the <strong><em>Paid-up   Share Capital<\/em><\/strong> of&nbsp;<strong><em>Rs10   crore or more;<\/em><\/strong><br>c) Any Public Company having an <strong><em>Annual Turnover<\/em><\/strong> of&nbsp;<strong><em>Rs 100 crore or more;<\/em><\/strong><br>d) Any Public Company having an aggregate <strong><em>Outstanding Loans, Deposits,<\/em><\/strong> and <strong><em>Debentures<\/em><\/strong>,&nbsp;<strong><em>more than Rs 50 crore<\/em>.<\/strong>            <\/td><\/tr><tr><td><strong>Constitution<\/strong>   <\/td><td>a) <em style=\"font-weight: bold\">3<\/em> or more <strong><em>Non-Executive Directors<\/em><\/strong>,   out of which at least <strong><em>One-half<\/em><\/strong> needs to be the <strong><em>Independent   Directors<\/em><\/strong>;<br>b) The <strong><em>Chairman <\/em><\/strong>of the company can also be <strong><em>appointed<\/em><\/strong> as the <strong><em>Member <\/em><\/strong>of the Nomination and   Remuneration Committee. However, such a person will <strong><em>not<\/em><\/strong> be eligible to <strong><em>Chair such a committee<\/em><\/strong>.      <\/td><\/tr><tr><td><strong>Role<\/strong>   <\/td><td>The Functions of a <strong><em>Nomination and Remuneration Committee<\/em><\/strong> under <strong><em>Section 178<\/em><\/strong> of the Companies Act 2013 are as follows:<br>a) <strong><em>Identify<\/em><\/strong> the people eligible to become Director or promoted to Senior-level Management;<br>b) <strong><em>Recommend<\/em><\/strong> the Board of Directors regarding the Appointment and Removal of Directors;<br>c)<strong><em> Evaluate<\/em><\/strong> the Performance of Committees, Directors and other Individuals;<br>d) <strong><em>Review<\/em><\/strong> the Implementation and Compliance of Committees;<br>e) <strong><em>Determine<\/em><\/strong> the Criteria for assessing the Qualification, <br>f) <strong><em>Positive Attributes<\/em><\/strong> and most importantly Independence of a   Director;<br>g) <strong><em>Recommend <\/em><\/strong>the Board of Directors regarding the remuneration of Directors, KMP (Key Managerial Personnel), and other Employees.                     <\/td><\/tr><tr><td><strong>Points to Consider while   Formulating Policy&nbsp;<\/strong>   <\/td><td>The things to consider while formulating a Policy under Section 178 are as follows:   <br>a) The <strong><em>Composition <\/em><\/strong>and <strong><em>Remuneration<\/em><\/strong> is sufficient and reasonable to Retain, <br>b) Attract and Motivate the Directors to run the company efficiently;<br>c) The Relation  between the Performance and Remuneration is clearly defined and meets the Performance Benchmarks;<br>d) The Remuneration payable to <strong><em>Key Managerial Personnel (KMP), Senior Management,<\/em><\/strong> and <strong><em>Directors<\/em><\/strong> involve a <strong><em>balance<\/em><\/strong> between the <strong><em>Incentive<\/em><\/strong> and <strong><em>Fixed Pay<\/em><\/strong>. Moreover, the remuneration should be apt for short and long-term performance objectives.         <\/td><\/tr><tr><td><strong>Disclosure regarding the Policy in   the Board Report and on Official Website<\/strong>   <\/td><td>The directors of the company need to upload the Remuneration Policy on their Official Website. Moreover, all the changes, modifications, and key <strong><em>features<\/em><\/strong> of the policy must be <strong><em>disclosed in the Board Report<\/em><\/strong>.   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Exceptions_to_Nomination_and_Remuneration_Committee\"><\/span>Exceptions to Nomination and Remuneration Committee<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The\nexceptions to provisions of the Nomination and Remuneration Committee are as\nfollows:<\/p>\n\n\n\n<ol><li><strong>Government Company<\/strong>: The provisions of <strong><em>section 178<\/em><\/strong> will <strong><em>not apply <\/em><\/strong>to a <strong><em>government company<\/em><\/strong> except the appointment of senior-level management.<\/li><li><strong>Section 8 Company<\/strong>: The provisions of <strong><em>section 178<\/em><\/strong> will <strong><em>not apply <\/em><\/strong>to a <strong><em>Section 8 Company<\/em><\/strong>.<\/li><li><strong>IFSC Public Company<\/strong>: The provisions of <strong><em>section 178<\/em><\/strong> will <strong><em>not apply <\/em><\/strong>to an <strong><em>IFSC Public Company<\/em><\/strong><\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Stakeholder_Relationship_Committee_under_Section_178\"><\/span>Stakeholder Relationship Committee under Section 178<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td><strong>Basis of Discussion<\/strong>   <\/td><td>\n  <strong>Details<\/strong>\n  <\/td><\/tr><tr><td><strong>Applicability<\/strong>   <\/td><td>The provisions of <strong><em>Section 178 <\/em><\/strong>of the Companies Act applies to the companies as follows:   <br>a) Any company having <strong><em>more than 1000<\/em><\/strong>:<br>     I. Shareholders; <br>    II. Debenture-holders;<br>    III. Deposit-holders;   and <br>    IV. Any other security holder              <\/td><\/tr><tr><td><strong>Constitution<\/strong>   <\/td><td>a) <em style=\"font-weight: bold\">Chairperson <\/em>who will be a <strong><em>Non-executive Director<\/em><\/strong>;<br>b) Any other member as decided by the <strong><em>BOD   (Board of Directors)<\/em><\/strong>.<br><br><strong>Note: <\/strong><br>In case the <strong><em>Chairperson<\/em><\/strong> or any <strong><em>other member <\/em><\/strong>of the stakeholder relationship committee is <strong><em>absent from the meeting<\/em><\/strong> of the Stakeholder Relationship Committee, and then such person will <strong><em>need to attend<\/em><\/strong> the Company\u2019s <strong><em>General Meetings<\/em><\/strong>.            <\/td><\/tr><tr><td><strong>Role<\/strong>   <\/td><td>The main function of this committee is to consider and resolve the grievances raised by the security <strong><em>holders<\/em><\/strong> of the company.   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Exceptions_to_Stakeholder_Relationship_Committee\"><\/span>Exceptions\nto Stakeholder Relationship Committee<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The\nexceptions to provisions of the Stakeholder Relationship Committee are as\nfollows:<\/p>\n\n\n\n<ol><li>Section 8 Company:\nThe provisions of <strong><em>section 178<\/em><\/strong> will <strong><em>not apply <\/em><\/strong>to a <strong><em>Section 8 Company<\/em><\/strong>.<\/li><li>IFSC Public Company:\nThe provisions of <strong><em>section 178<\/em><\/strong> will <strong><em>not apply <\/em><\/strong>to an <strong><em>IFSC Public Company<\/em><\/strong><\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Corporate_Social_Responsibility_Committee_under_Section_135\"><\/span><strong>Corporate Social\nResponsibility Committee under Section 135<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td><strong>Basis of Discussion<\/strong>   <\/td><td>\n  <strong>Details<\/strong>\n  <\/td><\/tr><tr><td><strong>Applicability<\/strong>   <\/td><td>The provisions of Section 178 of the Companies Act applies to the companies as follows:   <br>a) Any Company that is having either of the following:<br>     I. <strong><em>Net Worth of Rs 500 crore<\/em><\/strong> or more;<strong> <\/strong><br>     II. <strong><em>Annual Turnover of Rs 1000 crore <\/em><\/strong>or more;<br>     III. <strong><em>Net Profit of Rs 5 crore<\/em><\/strong> or more;<br> At any time during the previous financial year.   <\/td><\/tr><tr><td><strong>Constitution<\/strong>   <\/td><td>a) <em style=\"font-weight: bold\">3 or more Directors<\/em>, out of which <strong><em>at least 1 <\/em><\/strong>needs to be <strong><em>an Independent Director<\/em><\/strong>.<br><br>If in case a company is not required to appoint an Independent Director under section <strong><em>149(4),<\/em><\/strong> then it shall comprise of <strong><em>2 or more directors<\/em><\/strong>;<br>If in case a <strong><em>Private Limited Company <\/em><\/strong>is having<strong> <em>2 directors<\/em><\/strong>, then it shall comprise of <strong><em>2 directors<\/em><\/strong>;<br>In the case of a Foreign Company, the committee needs to consist of at <strong><em>least 2 directors<\/em><\/strong>, out of which:<br>a) <em><strong>1 director<\/strong><\/em> needs to be an Indian Resident who is authorised to accept notices and documents on behalf of a foreign company;<br>b) <strong><em>Other directors <\/em><\/strong>will be nominated by the Foreign Company.&nbsp;                  <\/td><\/tr><tr><td><strong>Role<\/strong>   <\/td><td>The Functions of a <strong><em>Corporate   Social Responsibility Committee<\/em><\/strong> under <strong><em>Section 135<\/em><\/strong> of the Companies Act 2013 are as follows:  <br>a) <strong><em>Formulate and Recommend <\/em><\/strong>the Board of Directors, a Corporate Social Responsibility Policy representing the activities and issues undertaken by the company in subjects or areas prescribed in Schedule   VII; <br>b) <strong><em>Suggest the total amount of expenditure<\/em><\/strong> be incurred on the issues and activities referred to under the (1); <br>c) <strong><em>Monitor and Supervise<\/em><\/strong> the <strong><em>Corporate Social   Responsibility (CSR) Policy<\/em><\/strong> of the company on a timely basis.         <\/td><\/tr><tr><td><strong>Role of Board<\/strong>   <\/td><td>The Board of Directors will approve the CSR (Corporate Social   Responsibility) Policy only after incorporating the recommendations given by the committee. This will confirm that the activities and items included in the Policy are properly undertaken by the company.   <\/td><\/tr><tr><td><strong>Disclosure in the Board Report and Official   Website of the Company<\/strong>   <\/td><td>The <strong><em>Board of Directors<\/em><\/strong> needs to <strong><em>disclose<\/em><\/strong> the <strong><em>composition of the Corporate Social Responsibility<\/em><\/strong> in the Board   Report. Further, the company needs to disclose the <strong><em>contents and items of the CSR Policy on its Official Website<\/em><\/strong> as well, in the manner prescribed. &nbsp;      <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Penal_Provisions_for_Not_Forming_Committees_under_the_Companies_Act_2013\"><\/span>Penal\nProvisions for Not Forming Committees under the Companies Act 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nPenal Provisions for Not Forming Committees under the Companies Act 2013 are as\nfollows:<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>Basis<\/strong>\n  <\/td><td>\n  <strong>Penal Provision<\/strong>\n  <\/td><\/tr><tr><td><strong>Company<\/strong>   <\/td><td><strong>Fine   Amount:<\/strong>   <br>a) A Minimum of <strong><em>Rs 1 Lakh<\/em><\/strong>;   <br>b) A Maximum of <strong><em>Rs 5 Lakh<\/em><\/strong>   <\/td><\/tr><tr><td><strong>Every Officer of the Company<\/strong>   <\/td><td><strong>Fine   Amount:<\/strong>   <br>a) A Minimum of <strong><em>Rs 25000<\/em><\/strong>   <br>b) A Maximum of <strong><em>Rs 1 Lakh<\/em><\/strong>&nbsp;   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br><br><strong>Or<\/strong>   <br><br><strong>Imprisonment<\/strong>   <br>a) A Maximum of <strong><em>Rs 1 Year&nbsp;<\/em><\/strong>   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br><br><strong>Or   Both&nbsp;<\/strong>   <\/td><\/tr><tr><td><strong>Relaxation from Penalty<\/strong>   <\/td><td>If the Stakeholders Relationship Committee is not able to <strong><em>consider<\/em><\/strong> and <strong><em>resolve<\/em><\/strong> any grievance in good faith will <strong><em>not be construed as contravention<\/em><\/strong>.    <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Different_Committees_under_SEBI_Listing_Obligations_and_Disclosure_Requirements_2020\"><\/span>Different Committees under SEBI (Listing Obligations and Disclosure Requirements) 2020<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Different-Committees-under-SEBI-Listing-Obligations-and-Disclosure-Requirements-2020-1024x768.png\" alt=\"Committees under SEBI\" class=\"wp-image-11890\" width=\"504\" height=\"378\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Different-Committees-under-SEBI-Listing-Obligations-and-Disclosure-Requirements-2020-1024x768.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Different-Committees-under-SEBI-Listing-Obligations-and-Disclosure-Requirements-2020-300x225.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Different-Committees-under-SEBI-Listing-Obligations-and-Disclosure-Requirements-2020-768x576.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/07\/Different-Committees-under-SEBI-Listing-Obligations-and-Disclosure-Requirements-2020.png 1200w\" sizes=\"(max-width: 504px) 100vw, 504px\" \/><\/figure><\/div>\n\n\n\n<p>The different types of committees under the SEBI\n(Listing Obligations and Disclosure Requirements) 2020 are as follows: <\/p>\n\n\n\n<ol><li><strong><em>Audit Committee<\/em><\/strong> under <strong><em>Regulation 18<\/em><\/strong>;<\/li><li><strong><em>Nomination and\nRemuneration Committee<\/em><\/strong> under <strong><em>Regulation\n19<\/em><\/strong>;<\/li><li><strong><em>Stakeholder\nRelationship Committee<\/em><\/strong> under <strong><em>Regulation\n20<\/em><\/strong>;<\/li><li><strong><em>Risk Management\nCommittee<\/em><\/strong> under <strong><em>Regulation\n21<\/em><\/strong>;<\/li><li><strong><em>Vigil Mechanism<\/em><\/strong> under <strong><em>Regulation 22.<\/em><\/strong><\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In comparison to the Companies Act 1956, there is a significant expansion of committees under the Companies Act 2013. This Act clearly defines the roles and responsibilities of the committees, which was missing in the provisions of the Companies Act, 1956. <\/p>\n\n\n\n<p>It is always better to consult experts to have in-depth knowledge regarding the Committees under the Companies Act 2013. We at<em><strong> <a href=\"https:\/\/swaritadvisors.com\/\">Swarit Advisors<\/a><\/strong><\/em> have a team of experts who will assist you and provide customized solutions for the successful completion of the process.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read, Also<\/b>:<mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/swaritadvisors.com\/learning\/designations-in-a-private-company\/\">Designations in a Private Company<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For improving the efficiency and efficacy of the Board of Directors, various Committees under the Companies Act 2013 are formed. These committees are formed for the sectors that need more technical, focused, and specialized decisions. The main function of these committees is to prepare and draft documents for decision making at the Board Meetings. In [&hellip;]<\/p>\n","protected":false},"author":17,"featured_media":11886,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[60],"tags":[803],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/11876"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=11876"}],"version-history":[{"count":23,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/11876\/revisions"}],"predecessor-version":[{"id":11908,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/11876\/revisions\/11908"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/11886"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=11876"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=11876"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=11876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}