BSE Circular – Frequently asked questions on Audit, Nomination & Remuneration and Stakeholders Relationship Committee
As per the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the listed entity shall submit a quarterly compliance report on corporate governance in the format as specified by the SEBI from time to time to the recognised stock exchange(s) within twenty one days from the end of each quarter.
The BSE has issued a Circular to Listed Companies dated July 15, 2022 (ref no
20220715-31) on Frequently asked questions (FAQs) on Audit, Nomination & Remuneration and Stakeholders Relationship Committee while submitting Corporate Governance XBRL utility at Exchange (“FAQ’s”).
The aforesaid Committees i.e. Audit, Nomination & Remuneration and Stakeholders Relationship Committee are to be constituted under:
- The Companies Act, 2013 (“the Act) and its applicable Rules
- Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI LODR”)
Following are the brief provisions of the Committees as per the aforesaid Act and Regulation:
Audit Committee
1.The constitution of Audit Committee is mandated under the Act (and applicable Rules) and SEBI (LODR) Regulations.
2.Constitution of Audit Committee is as per [Section 177(1) and Rule 6 of the Companies (Meetings of the Boards and its Powers) Rules, 2014] as follows:
a. Every Listed Public Companies
b. Public Companies with paid up capital of 10 crore rupees or more
c. Public Companies having Turnover of 100 crore rupees or more
d. Public Companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding 50 crore rupees
The paid up share capital or turnover or outstanding loans or borrowings or debentures or deposits, will be taken into considered as existing on the date of last audited financial statements shall be taken into account for the purpose of this rule.
Following Unlisted Public Companies are not covered under this rule
a. Joint Venture
b. Wholly Owned Subsidiary
c. Dormant Company under section 455
3. Composition of Audit Committee
Under Section 177(2) of the Act:
Minimum 3 directors, with majority being Independent Chairperson should able to read and understand the financial statement Requirement of Independent Directors is not applicable to Section 8 Companies
Under SEBI (LODR) :
Minimum 3 Directors – Two-third members shall be Independent Director and in Listed entity having outstanding SR equity shares, it shall only comprise of Independent Directors All members shall be financially literate and at least one member shall have accounting or related financial management expertise Chairperson shall be the Independent Director
II. Nomination and Remuneration Committee as per the provisions of the Act and SEBI LODR
- As per Sec Following class of companies are obligated to constitute Nomination and Remuneration Committee as per the provisions of Companies Act, 2013 and SEBI (LODR) Regulations, 2015-
- Every listed public company
- Public Companies having paid up share capital of Rs. 10 crores or more
- Public Companies having turnover of Rs. 100 crores or more
- Public Companies having net total outstanding loans, debentures and deposits exceeding Rs. 50 crores
- Constitution –
As per the Act:3 or more non-executive directors out of which at least 1/2 shall be independent directors [as per the provisions of Companies Act, 2013]
As per SEBI LODR – the committee shall comprise of at least three directors, all directors of the committee shall be non-executive directors; and at least two-thirds of the directors shall be independent directors
- Nomination and Remuneration Committee shall meet at least once in a year.
- Chairperson of the Nomination and Remuneration Committee shall be an independent director. In case of a listed entity, chairperson may be appointed as a member of the Committee and shall not chair such Committee.
- The role of the nomination and remuneration committee shall be as specified as in Part D of the Schedule II.
III. Stakeholders Committee as per the provisions of the Act and SEBI LODR
- Under The Act
Under Section 178 (5) of the Act, every company which has more than 1000 shareholders, deposit holders or other security holders at any time during a financial year, shall constitute a Stakeholders Relationship Committee (‘SRC’), with a non-executive director as Chairperson with the objective of grievance redressal of various stakeholders. The Chairperson of the SRC is also mandated to attend the general meetings of the company. A penalty for non-compliance has been stipulated.
- Under SEBI LODR
- The listed entity shall constitute a Stakeholders Relationship Committee to specifically look into various aspects of interest of shareholders, debenture holders and other security holders.
- The chairperson of this committee shall be a non-executive director and at least three directors, with at least one being an independent director, shall be members of the Committee and in case of a listed entity having outstanding SR equity shares, at least two thirds of the Stakeholders Relationship Committee shall comprise of independent directors
- The Chairperson of the Stakeholders Relationship Committee shall be present at the annual general meetings to answer queries of the security holder
- The stakeholders relationship committee shall meet at least once in a year.
- The role of the Stakeholders Relationship Committee shall be as specified as in Part D of the Schedule II.
The Frequently asked questions (FAQs) on Audit, Nomination & Remuneration and Stakeholders Relationship Committee while submitting Corporate Governance XBRL utility at Exchange, being referred above and as issued by BSE are as follows:
Q. What should be the composition of Audit, Nomination & Remuneration and Stakeholders Relationship Committee?
Answer: On perusal of the respective regulations from SEBI LODR, 2015, the Committees is to be formed by Board members of the Company.
Regulation 18 (a), (b) and (c) of SEBI LODR provides for formation of Audit Committee wherein it states that “The audit committee shall have minimum three directors as members”, “At least two-thirds of the members of audit committee shall be independent directors [and in case of a listed entity having outstanding SR equity shares, the audit committee shall only comprise of independent directors]” and “All members of audit committee shall be financially literate and at least one member shall have accounting or related financial management expertise”.
Regulation 19 (a), (b) and (c) of SEBI LODR provides for formation of Nomination and Remuneration Committee wherein it states that “the committee shall comprise of at least three directors”, “all directors of the committee shall be non-executive directors” and at least two-thirds of the directors shall be independent directors”.
Regulation 20 (2A) of SEBI LODR provides for formation of Stakeholders Relationship Committee wherein it states that “At least three directors, with at least one being an independent director”, shall be members of the Committee”. The intent of the regulation is to constitute the committee with board members as the members of the Committee.
The intent of the all the above-mentioned regulations is to constitute the committee with the Board of Directors as the members of the Committees.
In case member(s) forming the part of the committee is not a Board Member(s), it will be deemed that the composition of the above-mentioned committees i.e. Audit, Nomination & Remuneration and Stakeholders Relationship Committee is not in compliance with the provisions of LODR and accordingly the actions as per SOP circular dated Jan 22, 2020 shall be initiated from the date of admission of non-Board Member(s) into the committee.
The aforesaid BSE Circular can be referred at:
https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20220715-31
Disclaimer: This Article is only a knowledge sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc if any.
