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Remuneration Committee

Preeti Gandhi (Company Secretary) (90 Points)

15 December 2010

A Joint Venture Private Company which is a subsidiary of a foreign public company wants to appoint a Whole Time director in accordance with Schedule XIII. The Schedule requires constitution of remuneration committee, which should consist of at least 3 non executive independent directors. The BOD consist of 6 directors ( 3 from each joint venture partner). Since the definition of independent director is not provided in the Companies Act, can the remuneration committee be constituted with the non executive directors.

Is the word independent in the Schedule XIII used in the context of listed companies.

Please reply

Thanks

Preeti Gandhi

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3 Replies

HARDIK (COMPANY SECRETARY NCFM (Corporate Governance )) (664 Points)
Replied 15 December 2010

Independent Directors is define in clause 49 of listing agreement. Kindly consider that definition and appoint the Remuneratin Committee as per the clause 49 of the listing agreement.

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Jaideep (Service) (1368 Points)
Replied 15 December 2010

Considering your case

In terms of schedule XIII of the companies Act, word Independent director should be construed as director who is not in whole time-employment with the company. If we apply strict interpretation of law, it can be a director who is independent of such transactions.

"Is the word independent in the Schedule XIII used in the context of listed companies." No it is not used in the context of Listing Agreement. Listing agreement came into existance much after the amendment in schedule XIII.

You can very well form a remuneration commiitee consisting of non-executive director.

Regards

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 15 December 2010

If remuneration is in accordance with Part II Section I i.e. company having profits, no need to have a remuneration committee.

However if the appointment is in accordance with Part II Section II then you need to have a Remuneration committee consisting of 3 non-executive directors. In most of the public limited closely held companies, audit committee, remuneration committee, etc. are formed with non-executive directors only as they do not have independent directors.