Composition Of Board Of Directors And Board Committees

PROVISIONS UNDER COMPANIES ACT, 2013

1. As per the provisions of section 149(1) of the Companies Act, 2013, every company shall have a Board of Directors consisting of individuals as directors in following manner:

2. Women Director

As per Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 following company shall have at least one women director:

(i) Every Listed Company

(ii) Every other Public Company having:

• Paid up share capital of Rs. 100 or more; or
• Turnover of Rs. 300 crore or more

3. Resident Director

Section 149(3) provides that every Company shall have at least one director who stays in India for a total period of not less than182 days during the financial yearin case of a newly incorporated company this requirement shall be applied proportionately at the end of the financial year in which it is incorporated.

4. Independent Directors

(i) Section 149(4) mandates every listed company to have at least 1/3of total number of Directors as Independent Director.

(ii) And as per Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 following class of Public Companies shall have at least 2 Independent Directors:

• Public Company having paid up share capital of Rs. 10 Crore or more; or
• Turnover of Rs. 100 Crore or more; or
• In aggregate, outstanding loans, debentures and deposits, exceeding Rs. 50 Crore

PROVISIONS UNDER SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS

1. As per Regulation 17(1) composition of Board of Directors of Listed Entities:

• Shall have optimum combination of Executive and Non-Executive Directors
• Shall have at least 1 Women Director
• Not less than 50% of the Board of Directors shall be Non-Executive Directors
• Board of Directors of top 1000 listed entities shall have at least 1 Independent Women Director

2. Chairperson of Board of Directors of Listed Entities:

Provided that with effect from 1^st April 2022, Chairperson of top 500 Listed Entities Shall be a Non-Executive Director and not be related to the Managing Director or the Chief Executive Officer as per the definition of the term “relative” defined under the Companies Act, 2013

COMMITTEES OF BOARD OF DIRECTORS

(A) AUDIT COMMITTEE -SECTION 177

(1) Every Listed Company and following class of Companies as prescribed under Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014 shall constitute an Audit Committee:

• All Public Companies with a paid-up capital of Rs. 10 Crore or more;
• All public Companies having turnover of Rs. 100 Crore or more;
• All public Companies having aggregate, outstanding loans or borrowing or debentures or deposits exceeding Rs. 50 Crore or more

(2) The Audit Committee shall consist of a Minimum of 3 directors with Majority of Independent Directors.

(3) As per SEBI (Listing Obligations and Disclosure Requirements) Regulations 2/3 members of Audit Committee shall be Independent Directors and in case of a Listed Company having outstanding SR equity shares, the Audit Committee shall only comprise of Independent Directors.

(4) Chairperson of the Audit Committee shall be Independent Director.

(B) NOMINATION AND REMUNERATION COMMITTEE-SECTION 178

(1) Every Listed Company and following class of Companies prescribed under Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014 shall constitute a Nomination and Remuneration Committee:

• All Public Companies with a paid-up capital of Rs. 10 Crore or more;
• All public Companies having turnover of Rs. 100 Crore or more;
• All public Companies having aggregate, outstanding loans or borrowing or debentures or deposits exceeding Rs. 50 Crore or more

(2) Nomination and Remuneration Committee shall consist of 3 or more non-executive directors out of which not less than one-half shall be independent directors.

(3) As per SEBI (Listing Obligations and Disclosure Requirements) Regulations Nomination and Remuneration Committee shall comprise of at least 3 directors, where all directors of the committee shall be non-executive directors and at least 50% of the directors shall be independent directors and in case of a listed company having outstanding SR equity shares, then 2/3 of the committee shall be independent directors.

(4) Chairperson of the Nomination and Remuneration Committee shall be Independent Director.

(5) Chairperson of the Company whether executive or non-executive can be appointed as a member of Nomination and Remuneration Committee but shall not be appointed as a chairperson of the Committee.

(C) VIGIL MECHANISM- SECTION 177(9)

• Every listed company and following class of companiesshall establish a vigil mechanism for directors and employees to report genuine concerns or grievances:
• The Companies which accept deposits from the public;
• The Companies which have borrowed money from banks and public financial institutions in excess of Rs. 50 Crores
• The Companies which are required to setup Audit Committee shall oversee the Vigil Mechanism through its Audit Committee and in other case the board shall nominate a director to play the role of Audit Committee for the purpose of Vigil Mechanism.
• Vigil Mechanism shall provide for adequate safeguards against victimisation of employees and directors who avail of the Vigil Mechanism and also provide for direct access to the Chairperson of Audit Committee or the director nominated to play the role of Audit Committee.

(D) STAKEHOLDER RELATIONSHIP COMMITTEE- SECTION 178(5)

• The Company which consists of more than 1000 shareholders, debenture holders, deposit holders and any other security holder at any time during a financial year shall constitute a Stakeholder Relationship Committee.
• As per SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015, every listed Company shall constitute a Stakeholder Relationship Committee.
• The committee shall consist of a chairperson who shall be non-executive director and other members as may be decided by the board.
• The Stakeholder Relationship Committee shall consider and resolve the grievances of security holders of the Company.

(E) CORPORATE SOCIAL RESPONSIBILITY (CSR) COMMITTEE- SECTION 135

(1) Every company having:

• Net worth of Rs. 500 crore or more, or
• Turnover of Rs. 1000 crore or more or
• Net profit of Rs. 5 crore or more

during 3 immediately preceding financial years, shall constitute a CSR Committee.

(2) The Committee shall consistof 3 or more directors, out of which at least 1 director shall be an independent director.

(3) Where a company is not required to appoint an independent director, then the CSR Committee shall be without such directors.

(4) Every company including its holding or subsidiary and a foreign company having its branch office or project office in India which fulfils the criteria shall comply with the provisions of section 135 of the Companies Act, 2013 and CSR Rules.

(F) RISK MANAGEMENT COMMITTEE

1. The board of directors shall constitute a Risk Management Committee.
2. The majority of members of the committee shall consist of members of the board of directors and in case of listed company having outstanding SR equity shares, then at least 2/3 of the committee shall be comprise of independent directors.
3. The chairperson of the committee shall be a member of the board of directors and senior executives of listed company may be members of the committee.
4. The provisions of this regulation shall be applicable to top 500 listed companies.
5. Risk management committee shall formulate risk management policy and oversee implementation of risk management policy and internal control system.

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Disclaimer: Please note that the above article is based on the interpretation of related laws, which may differ from person to person and is not legal advice.