CA Final Audit Marathon by CA Sarthak Jain
AUDIT COMMITTEE & CORPORATE GOVERNANCE
SN Topic
1. The legal framework
Why LODR instead of Listing
Agreement Clause 49?
LODR & corporate
governance
Applicability of LODR
regulations [regulation 3]
1.1 Applicability – chapter iv of
LODR (R15 to 48) -
Regulation 15
Applicability of Chapter IV
incl. Corporate Governance
Regulations
Exemption to certain LE
from Corporate Governance
Regulations
Additional Provision on
Applicability of Regulations
on Corporate Governance
1.2 Applicability on high value
debt listed entity-
Regulation 15(1A)
Provision Memory
Tags
-Listing agreement is a statutorily contract and not law
- Hence, SEBI issued LODRs – to consolidate provisions of various
contracts
LODR- Post listing regulations for listed entities.
Corp. Gov.- Chapter IV contains provisions of corp. gov.(Reg.17 to
27)
Listed entity - which has listed any of designated securities on
recognised stock exchange(s):
- Specified securities,
- Non-convertible securities, IDR,
- Securitised debt instruments;
- Security receipts; mutual fund & any other.
listed entity (LE) which has listed: NCDS-
- Specified securities listed on main board or SME Non-
- NCDS & has o/s value >= RS. 500 Crore convertible
debt sec.
(a) LE having:
i. paid-up ESC not > 10 crore; and
ii. net worth not > Rs. 25 crore; last day Pre.-FY
(b) listed securities at SME ex.
• When meets threshold - Comply within 6 months
• When capital / net worth reduces below thresholds –
Remain applicable until below for consecutive 3 FYs
- The regulation & reg. 16 to 27 on CG shall also apply to a HVD –
LE which has listed its NCDS and O/S Value >=`500 Crore High value
- First Time Applicability –its NCDS -triggers ` 500 Crore- debt
Ensure compliance within 6 Ms
- comply or explain’ basis until 31-03-23 & mandatory basis LE –
thereafter. Listed
- No exit clause for HVD listed entities entity
Audit Committee & Corporate Governance
 CA Final Audit Marathon by CA Sarthak Jain
Listed Entity under Regulation 17,18,19,20 and 21 shall not be applicable during IRP
Insolvency Resolution Process period - listed entity or HVD-LE which is undergoing CIRP

2. COMMITTEES UNDER LODR Refer Comparative Table (separately at last)

2.1 PART C OF SCHEDULE II:

ROLE OF AUDIT COMMITTEE

A. The role of the audit - oversight financial reporting process & disclosure
committee shall include - recommendation for appointment, remuneration and terms of
the following auditors
- approval of payment to auditors for any other services
- reviewing, with the MGT, the annual financial statements and
auditor's report
- reviewing, with the MGT, the quarterly FSs
- reviewing, with the MGT, the statement of uses / application of
funds raised by issue
- reviewing & monitoring – independence, performance &
effectiveness;
- approval or any subsequent modification of transacton
- scrutiny of inter-corporate loans
- evaluation of IFCs and RMS;
- reviewing, with MGT, performance of auditors, adequacy of ICS;
- reviewing the adequacy of internal audit function
- discussion with IAs - significant findings & follow up;
- reviewing the findings of any internal investigations
- discussion with statutory auditors before the audit commences,
about the nature and scope

B. The audit committee - MDA of financial condition & result of operation

shall mandatorily review - MGT letters, letters of IC weakness
the following information - Internal audit reports –on IC weaknesses;
- Appointment, removal & remuneration - Chief Internal Auditor-
subject to review by AC
- Statement of deviation (SoD): (Regulation 32)
Ø Quarterly SoD, report of monitoring agency
Ø Annual statement of fund utilized other than purpose

2.2 AUDIT PROCEDURES FOR COMMITTEES UNDER LODR

1. Introduction - Ascertain from the minutes book & other sources whether
reviewed the above- mentioned information
- Whether certain deficiencies or adverse findings are noted by
audit committee?

Audit Committee & Corporate Governance


2. Role of auditor in audit
committee and
certification of
compliance of conditions
of Corporate governance
3. Auditor’s responsibility
4. General principles of
audit
5. Management
representations
2.3 AUDIT PROCEDURES FOR
STAKE HOLDERS
RELATIONSHIP COMMITTEE
2.4 Resignation of Statutory
Auditors from Listed Entities
and their Material
Subsidiaries:
Relevant Regulations
A. LE and MS to ensure
compliance while appointing
/ re-appointing auditor
CA Final Audit Marathon by CA Sarthak Jain
- Right to be heard in meeting of AC
- No right to vote
- Communicate frequently with AC
- Assist MGT for better standards of corporate governance
Statutory auditor of listed entity shall undertake a limited review
of all the entities / companies - Whose accounts are to be
consolidated with the listed entity - As per – Ind-AS " In
accordance with guidelines issued by-> SEBI
- Verification & certification - actual implementation - LODR
Regulation
- it is neither an audit nor an expression of opinion on FS
Professional Assignment – comply COE
Corporate Governance & LODR – comply GN on certification of CG
Obtain as per SA – 580
- ascertain from minutes book of BM - whether a Board
committee has been set up for redressal of SH and
investors complaints
- whether such committee is prima facie functioning
- verify from the records of the SH/ Investors Grievance
Committee
If auditor resigns of - Listed Entity (LE) or Material subsidiary of
Listed entity (MS) - Entity is required to - Communicate such
resignation with reasons in detail -To Stock Exchange -
Immediately, not later than 24 hrs of resignation (LODR
requirement)
- if auditor resigns within 45 days – from end of a quarter of a FY:
before resignation, issue - limited review/ audit report.
- If auditor resigns after 45 days - from end of a quarter of a FY:
before resignation, issue the limited review/ AR for next quarter.
- If auditor has signed the limited review/ audit report for the first
3 quarters of FY: then before resignation -, issue limited review/
audit report for the last quarter & AR of such FY.
Audit Committee & Corporate Governance

B. Other conditions relating to
resignation
LE and MS to include
matters in appointment of
auditor
Obligations of the LE & MS
Compliance Certification
with these requirements
Auditor Disqualification
3. Board of directors
3.1 BoD - (under Regulations
and Companies Act)
3.2 Independent NED
3.3 Remuneration of directors
[part c of schedule v]
Disclosure
Approval of Remuneration of
Directors [Regulation 17 (6)]
CA Final Audit Marathon by CA Sarthak Jain
- In case of any concern with MGT -approach Chairman of
AC, shall receive such concern directly & immediately
without waiting quarterly AC meetings.
- If auditor proposes to resign - All concerns + documents –
brought notice of AC
- If proposed resignation is due to non-receipt of
information/explanation – inform AC - details of
information/explanation sought and not provided by MGT.
Ensure that the conditions above are suitably included in the terms
of appointment
- Obtain information from the auditor in format as
specified in the Annexure to SEBI Circular
- Cooperation by listed entity and its material subsidiary
- AC to deliberate auditors resignation, as soon as possible
- AC's views to the Stock Exc. to be communicated not later
than 24 hours of AC meeting.
Practicing company secretary shall certify compliance
Above provisions will not apply if the auditor is disqualified due to
Section 141
Refer Comparative Table
Refer Detail notes - appendix for definitions
(i) All pecuniary relationship or transactions
(ii) Criteria of making payments to NED
(iii) following disclosures on separate section annual report
- All elements of remuneration package, Details of
fixed component & performance linked incentives ,
Service contracts, Stock option details, if any
- NED & ID - BOD Recommends, SH Prior Approval required AR – Agg.
- Stock Options to NED - SH’s resolution to specify max limits of Rem.
ESOP – in any FY & in aggregate
- ID shall not be entitled to any stock option.
- NED & ID – Sitting Fees
Prior approval of SH in GM not required- if limit as per Act.
Audit Committee & Corporate Governance
 CA Final Audit Marathon by CA Sarthak Jain
- Special Resolution Required in Certain Cases:
A. NED Every year, in which:
Annual remuneration to a single NED > 50% of the total annual
remuneration payable to all NED; special resolution of SH is
required.
B. ED (executive directors) who are promoters or members of the
promoter group:
approval of SH by SR in GM when the fees or compensation
payable to ED is-
(i) Where there is 1 such director
the AR payable to such ED > Rupees
(a) 5 crore or (b) 2.5% of NP, whichever is higher; or
(ii) Where there is > 1 such director, AR to such directors > 5% of
NPs (NP as per S.198)

In this context, the auditor - ascertain from the minutes of the BoD meetings, SH’s
should meetings, relevant agenda papers etc
- refer to the AOA
- Examine the Report of the BoD on Corp. Gov.

3.3 Limited Review of the Audit Following to assist and ensure compliance with these procedure: -
of all the Entities whose all LE and the statutory auditors of such entities,
accounts are to be - all entities whose accounts are to be consolidated with the LE
consolidated with LE and the statutory auditors of them

3.4 ID Obligations - No person shall be appointed or continue as an alternate

[Regulation 25] director for an ID.
- maximum tenure of ID as per act
- hold at least one meeting in a FY without presence of non-
id & MGT
- The ID in such meeting shall, inter alia-
review the performance of non-ID and the BoD,
performance of the chairperson quality, quantity and
timeliness of flow of info between the MGT & BOD
- shall be held liable, only in respect of such acts of
omission or commission by the listed entity which had
occurred with his [/her] knowledge
- An ID who resigns or is removed from BoD LE shall be
replaced by a new ID by LE at the earliest but not later
than 3 months from vacancy.
- Declaration by I.D.- Every ID shall, at the 1 meeting of the
board in which he participates as a director and thereafter
at the first meeting -every financial year or whenever
there is any change in the circumstances which may
Audit Committee & Corporate Governance

3.5 Obligations of Director and
Senior Management
[Regulations 17(3) & 17(4),
26(1),(2),(5) & (6)]
4. Code of conduct [regulations
17(5), 26(3), 46(2) and
Part D of Schedule V]
5. Vigil mechanism [regulations
22 and 46 and Part C of
Schedule V]
6. RELATED PARTY TRANSACTIONS [REGULATIONS 23] (Not in ICAI SM)
1. Sub-Regulation 1
CA Final Audit Marathon by CA Sarthak Jain
affect his status as an ID submit a declaration that he
meets the criteria of independence
- Top 1000 Cos and high value debt listed entities to take
Directors and Officers insurance for all its ID for such
quantum and risks as determined by BoD (wef Jan22)
- ID resigns – Not appointed as ED for 1 year in company, H,
S, A or promoter group Co
1. Maximum Membership & Chairperson in Committees
- Membership – Maximum 10 committees
- Chairperson - Maximum 5 committees across all listed entities
- Public Limited Companies Committees only considered
- Provision for AC and SRC only
2. Intimation of committee positions in other LE by directors
3. Senior Management Disclosures to BoD on interested material
transactions
4. Review Legal Compliances- periodically review compliance
reports of all laws applicable
5. Succession Plans to the BoD and Senior Management - plans are
in place for orderly succession
6. The minimum information to be placed before the BoD is
specified in Part A of Schedule II.
- Board shall lay down COC for all Board members & senior
management
- Suitably incorporate the duties of ID
- Board & member shall affirm compliance with the code on
an annual basis
- Posted on the website
- declaration signed by the CEO stating that BoDs &
members affirmed compliances
- Compliance Certificate by CEO and CFO
1. The LE shall establish a vigil mechanism /whistle blower
policy - for directors and employees - to report genuine
concerns.
2. Provide for adequate safeguards against victimization of
director(s) / employee(s) or any other person
3. Disclosed by the company on its website and in the
Board’s report.
- LE- formulate a policy for material RPT
- Review by board - once in 3 year
Audit Committee & Corporate Governance
 CA Final Audit Marathon by CA Sarthak Jain
- Material transaction
Individual transaction with a related party shall be
considered material, if the transaction(s) to be entered
into individually or taken together with previous
transactions during a FY, exceeds:
(a) `1000 crore; or
(b) 10% of the annual consolidated Turnover
whichever is lower. (In case of royalty from brand replace
10% with 5%)

2. Sub-Regulation 1A Transaction involving payments made to a related party with

respect to brand usage or royalty - exceed 5% of the annual
consolidated turnover shall be considered material

3. Sub-Regulation 2 - All RPT and subsequent material modifications shall require prior
approval of the AC
-Exemption from prior approval for Listed Subsidiary - if regulation
23 and sub-regulation (2) of regulation 15 are applicable
4. Sub-Regulation 3 Audit committee may grant omnibus approval – shall lay down the
criteria, satisfy itself for need of such approval, the omnibus
approval shall specify relevant information, Review, at least on a
quarterly basis, shall be valid for a period not exceeding one year.
5. Sub-Regulation 4 All material RPTs and subsequent material modifications - shall
require prior approval of the SH - through resolution and no related
parties shall vote to approve such resolutions whether the entity is
a related party to the particular transaction or not
6. Sub-Regulation 5 The above provision of sub regulation (2) (3) & (4) shall not to be
applicable transaction entered between:
(i) 2 government companies
(ii) Holding & wholly owned subsidiary company whose
accounts are consolidated with such holding company
(iii) 2 wholly owned subsidiaries of the listed holding co.,
whose a/c's are consolidated with such holding co. &
placed before the SHs at the GM for approval
7. Sub-Regulation 6 and 8 - Prov. of regulation applicable to all prospective transactions
- All existing material related party contracts or arrangements
entered into prior to the date of notification of these regulations
and which may continue beyond such date shall be placed for
approval of the shareholders in the first GM subsequent to
notification of these regulations
8. Sub-Regulation 9 – - Disclosure of RP Transactions in format prescribed by Board
(Replaces earlier Sub- LE to submit to stock exc. publish the same on its website every 6

Audit Committee & Corporate Governance

 CA Final Audit Marathon by CA Sarthak Jain
Regulation 7) months within 15 days
- ‘High value debt listed entity’ submit such disclosures along with
its standalone financial results for the half year
9. Definition Refer detail notes for definition
10. (Amendment - 2022)

7. Subsidiary of listed entity

[Regulations 16(c), 24 and 46 and Part C of Schedule V]

Regulation 24(1) ID of LE in BOD of Unlisted Material Subsidiary (20% limit)

Regulation 16(c) Regulation 16(c) – Material Subsidiary

- investment in the subsidiary exceeds 10% of its
consolidated net worth
- Generated 10 % of the consolidated income of the
company during the previous financial year

Regulation 24(2) AC of LE to Review FS and Investments made by Unlisted

Subsidiary

Regulation 24(3) and (4) Board Minutes and Statement of Significant Transactions &
Arrangements of Unlisted Subsidiary placed to BOD of LE

Regulation 24(4) Explanation :

(i) The term “significant transaction or arrangement” mean any
individual transaction or arrangement that - exceeds or is likely to
exceed 10% of the total revenues or total expenses or total assets or
total liabilities,

Regulation 24(5) SR to dispose shares in Material Subsidiary leading to loss of

control - reduction of its shareholding to less than or equal to 50%
or cease the exercise of control over the subsidiary without passing
SR in GM
Except – plan approved u/s 31 of IBC

Regulation 24(6) SR to dispose substantial assets of Material Subsidiary

> 20 % of the assets of the material subsidiary on an aggregate
basis during a financial year shall require prior approval of
shareholders by way of special resolution
Except – plan approved u/s 31 of IBC

Regulation 24A Secretarial Audit and Secretarial Compliance Report

- Every listed entity and its material unlisted subsidiaries
shall annex Secretarial Audit report with annual report
- Every listed entity - submit -secretarial compliance report
- to stock exchanges- within 60 days from end of each FY

8. Statement of deviation(s) or 1. LE - submit to - stock exchange, after review of AC, the

variation(s) following statement(s) on a quarterly basis for public issue, rights

Audit Committee & Corporate Governance


9. Disclosures - management
discussion and analysis
[Schedule V]
10. Information to shareholders
[regulation 36]
CA Final Audit Marathon by CA Sarthak Jain
issue, preferential issue etc. ,-
- Indicating deviations,
- Indicating category-wise variation
2. Director’s report to contain explanations for any variations above
3. LE shall -prepare an annual statement of funds utilized for
purposes other than those stated
4. Where LE has appointed a monitoring agency to monitor
utilisation of proceeds of a public or rights issue
- LE shall submit to the stock exchange(s) any comments or
report received from the monitoring agency within 45 days from
the end of each quarter
5. LE having specified securities listed on SME Exchange: All
compliance to be made half yearly instead of quarterly
As part of the directors’ report or as an addition thereto, a MD&A
report should form part of the Annual Report to the SH.
This MD&A should include discussion on the following matters
within the limits set by the company’s competitive postion:
1. Industry structure and developments.
2. Opportunities and Threats.
3. Segment–wise or product-wise performance.
4. Outlook
5. Risks and concerns
6. Internal control systems and their adequacy etc.
(a) Annual Report
- The LE shall send the soft copy of the full AR to the SHs who
have registered their email or
- hard copies of the salient features of all the documents, where
the email not been registered, not less than 21 days before AGM.
(B) Information on proposed appointment of director
a) A brief resume
b) Nature of expertise
c) Disclosure of relationships
d) Names of listed entities in which the person also holds the
directorship and the membership
e) Shareholding of NED
f) In case of ID, the skills and capabilities
(C) Information on proposed appointment of auditor
(a) Proposed fees payable, terms of appointment etc.
(b) Basis of recommendation
Audit Committee & Corporate Governance

11. Transfer or transmission or
transposition of securities
[regulation 40]
CA Final Audit Marathon by CA Sarthak Jain
(1) LE to comply with the requirements as specified in this
regulation for effecting transfer of securities subject to provisions
of CA 2013.
Except - in case of transmission or transposition of securities,
requests for effecting transfer of securities shall not be processed
unless the securities are held in the dematerialized form with a
depository.
(2) The BOD of a listed entity shall delegate the power of transfer
of securities to;
a) a committee or
b) to the compliance officer or
c) to the registrar to an issue and/or
d) share transfer agents.
(3) BoD and/or the delegated authority shall attend to the
formalities pertaining to transfer of securities at least once in a
fortnight
(4) Time for executing Transfers – 15 days, Transmission – 7 days.
Audit Procedure – check compliance of above provision

12. Compliance certificate [part
B of schedule ii]
The CEO and the CFO shall provide the compliance certificate to
the BoDs as specified in Part B of Schedule II. This includes:
- have reviewed financial statements and the cash flow
statement
- no transactions - fraudulent, illegal or violative of the
listed entity’s code of conduct
- internal controls for financial reporting – effectiveness –if
deficiencies found - steps they have taken or propose to
take
- They have indicated to the auditors and the Audit
committee:
- Significant changes in IC over FR
- Significant changes in accounting policies
- Instances of significant fraud

13. Disclosures

Disclosure and transparency
[Regulation 4(e)]
-Information shall be prepared and disclosed –as per AS &
financial and non-financial disclosure
- Channels for disseminating information - equal, timely and cost
efficient
-Minutes of the meeting - maintained explicitly

Disclosure of events or - Every LE - shall make disclosures of info which- in the opinion of
information [regulation the BoD, is material

Audit Committee & Corporate Governance

 CA Final Audit Marathon by CA Sarthak Jain
30(1), (5) (8)] - BoD of LE - shall authorize one or more KMP for determining
materiality
- contact details of such personnel - disclosed to the stock
exchange(s) and as well as on the listed entity's website.
- Such disclosures hosted on the website – mini. period of 5 years
+ archival policy of LE

Other corp. Gov. Regulation 27

Requirements, RP disclosures - The LE shall submit a quarterly compliance report to ST.

[regulations 27, 23(9), 46 Ex.- within 21 days from close of the quarter.
and Schedule V] - Details of all material transactions with related parties -
signed either by the compliance officer or the chief
executive officer
Regulation 46
- Policy on dealing with RPT –on Website & link on AR
Regulation 23(9)
- The LE - stock exchanges disclosures of RPTs - website,
every 6 months within 15 days from the date of
publication of its standalone and CFS.
Schedule V
- The listed entity which has listed its nonconvertible securities,
shall make disclosures in compliance with the AS on “Related
Party Disclosures” in annual report.

Disclosure of accounting Treatment different from that prescribed in AS has been followed,

treatment [Schedule V] - fact - disclosed in F.S. together with MGT explanation

Disclosures in relation to a. complaints filed during the FY

sexual harassment b. complaints disposed of during the FY

c. complaints pending as on end of FY

14. Report on corporate governance [Regulation 27 and Schedule II]

Provisions [regulation 27] - LE- quarterly compliance report on corporate governance

- In the format as specified by the Board (SEBI)
- Submit – st.ex. - within 21 Days from close of quarter The
report shall be signed by the compliance officer or CEO

Corporate governance report - Listed entity’s philosophy on code of governance

schedule V – C - BoD
- Audit committee
- Nomination and Remuneration Committee
- Stakeholders' relationship committee
- Risk management committee:
- Remuneration of Directors:
- General body meetings
Audit Committee & Corporate Governance
 CA Final Audit Marathon by CA Sarthak Jain
- Means of communication
- General shareholder information
- Other Disclosures:
- Non-compliance of any requirement of CG

15. COMPLIANCE CERTIFICATE / As per Schedule V, a listed entity shall obtain a compliance

AUDITORS’ CERTIFICATE certificate from either the auditors or practicing company

secretaries regarding compliance of conditions of corporate
governance and shall annex it to the Directors’ Report.

Adverse or qualified Depending upon the facts and circumstances - adverse or qualified

statement or a disclosure without necessarily making it a subject matter of

qualification

Examples of such 1. The number of NED is less than 50% of the strength of BoD.

circumstances 2. A qualified and independent audit committee is not set up.

3. The Chairman of the audit committee is not an ID.
4. The Audit Committee does not meet four times a year.
5. The necessary powers in terms of Part C of
Schedule II have not been vested by the Board in the Audit
Committee.
6. The time gap between two Board meetings is more than one
hundred and twenty days.

Audit Committee & Corporate Governance

 2. COMMITTEES UNDER LODR
Particulars Audit Nomination and Stakeholder Relationship Risk Management
Committee Remuneration Committee (SRC) Committee (RMC)
Committee (NRC)
Regulation 18 Regulation 19 Regulation 20 Regulation 21
1.Applicability • All listed companies - listed its securities either on main board or applicable to:
on SME exchange or on IGP except provisions given in Reg. 17 to 27 • top 1000 listed entities;
are not applicable to: and,
(a) Companies with: • a ‘high value debt
a. Paid-up Eq.SC of <= 10 Crores; and listed entity
b. Net Worth <= 25 Crores
(b) LE- securities listed on the SME Exchange.
(c) The provisions as specified in regulation 17,18,19,20 and 21 shall
not be applicable during IRP
• Provision of regulation & reg. 16 to 27 of this chapter shall apply to
a LE which has listed its NC-Debt securities and its o/s value Rs.
500 and above
2. Who will Every listed entity BoD listed entity BoD
constitute?
3.Composition minimum 3 at least 3 directors; At least 3 directors, & minimum 3 members +
directors as All directors - NED; At least 1 being an ID majority – members of
members;+ at least 2/3rd – ID BoD including at least one
At least 2/3rd - ID ID
4.No. of ID in Only comprise of 2/3rd At least 2/3rd At least 2/3rd
case of listed ID (i.e. 100%)
entity having
outstanding SR
equity shares
5.Chairperson • Chairperson - ID • Chairperson-ID; • chairperson- NED; • Chairperson- member of
and secretary + present at • may be present at • shall be present at the the BoD and
AGM to answer the AGM, to answer AGM to answer queries • senior executives - of LE
SH queries; the SH' queries upto of the security may be members of the
• CS to act as - him to answer; holders. committee
secretary to AC.

6.Members • All members - • No such requirement • No such requirement • No such requirement

qualification financially
literate and

CA FINAL – Audit Marathon - By CA. Sarthak Niraj Jain 1

 • At least 1 – have
accounting or
related financial
management
expertise
7.Meetings and • at least 4 times in a • at least once in a year; • meet at least • meet at least twice in a
quorum year + not more than • quorum - either 2 once in a year
120 days gap; members or 1/3rd year • quorum - either 2
• quorum - either be 2 members, whichever is members or 1/3rd
members or 1/3rd greater, including at members of the
members of AC least one ID in committee, whichever is
members , whichever is attendance higher, including at least
greater, with at least 2 1 member of BoD in
ID. May invite Head of attendance
finance or finance • gap -180 days between
director, IA & SA two meetings
8.Powers of The audit committee • Not prescribed • Not The Risk Management
Committee shall have powers to: Prescribed Committee shall have
• Investigate, powers to :
• seek information • seek information from
• obtain legal advice any employee
• secure attendance • obtain legal advice and
Above powers are • secure attendance
illustrative. Board may
delegate or vest further
powers to Audit
Committee

2 Ab Audit Hoga Sabse Scoring - By CA. Sarthak Niraj Jain

9.Role of Part C - Sch II - Part D(A)-Sch II-Role of Part D(B)- Sch II- Role Part D(C) - Sch II-Role of
Committee Role of AC NRC of SRC RMC
Role of AC + (1) Formulation of the (1) Resolving the various (1) To formulate a detailed
information to criteria for grievances of the risk management policy
be reviewed by determining security holders. which shall include: (a) A
AC + mandatory qualifications etc. & (2) Review of measures framework for
review areas of recommend to the taken. identification of internal
AC (refer notes) BoD a policy relating (3) Review of adherence and external risks.
to, the remuneration to the service (b) Measures for risk
of the directors, KMP standards adopted. mitigation.
etc. (4) Review of the (c) Business continuity
(1A) The person various measures plan.
recommended to the and initiatives taken (2) ensure that
Board for appropriate methodology,
appointment as an ID processes and systems are
shall have the in place to monitor and
capabilities (skills, evaluate risks;
knowledge and (3) To monitor and oversee
experience) identified implementation of the RM
in such description. policy;
For this purpose (4) To periodically review
Committee may: the RM policy, at least
a. use of external once in two years;
agencies services (5) To keep the BoD
b. consider candidates of informed about the nature
wide range; and and content of its
c. consider the time discussions,
commitments recommendations and
(2) criteria for evaluation actions to be taken;
of performance of ID (6) The appointment,
and the BoD; removal and terms of
(3) devising a policy on remuneration of the Chief
diversity of BoD; Risk Officer (if any) shall
(4) identifying persons be subject to review by the
who are qualified to RMC.
become directors &
may appoint in SM
(5) whether to extend or
continue the term of

CA FINAL – Audit Marathon - By CA. Sarthak Niraj Jain 3

 appointment of ID, on
performance of ID.
(6) recommend to the
board all
remuneration, in
whatever form,
payable to senior.
MGT

4 Ab Audit Hoga Sabse Scoring - By CA. Sarthak Niraj Jain



3. BOARD OF DIRECTORS
BoD -
Particulars LODR (Regulation 17) Companies Act, 2013
(under
Board size • Top 2000 listed entities – Minimum 6 directors. The BoD to comprise of:
Regulatio
(Based on market capitalisation as at the end of • Minimum 3
ns and immediately preceding FY) • Maximum 15 directors
Compani If > 15 directors permission by
es Act) passing SR(Section 149)
Number of NED (& NED >= 50% of BOD No specific provision for NED.
Max Age of NED) NED age attained 75 years: At least 1 woman director required
Position to continue or appointment made only by a
special resolution
Number of ID • If Chairperson – NED; then atleast 1/3rd be ID; At least 1/3rd ID
else ½ be ID
• If Chairperson – NED but is a
(a) promoter or
(b) related to any promoters - then atleast ½ to
be ID
Listed company with outstanding SR equity shares:
ID >= ½ of BOD
Woman Director - Atleast 1 in BOD of a listed entity 1
- Top 1000 companies - atleast 1 Woman
Independent Director
Approval by SHs Appointment/Re-appointment – Post Approval also BOD is to be appointed at GM
permitted
Approval of SH for appointment of a person on the
BOD or as a manager is to be taken at the:
(a) next GM or
(b) within a time period of 3months from the date
of appointment, whichever is earlier.

Appointment / Re-appointment - Only with Prior

Approval of SH
• To appoint or re-appoint a person, including as a
MD or a WTD or a manager, who was earlier
rejected by the SH at a GM, prior approval must
be obtained
• Further, statement annexed to the notice shall
CA FINAL – Audit Marathon - By CA. Sarthak Niraj Jain 1
 contain a detailed explanation and justification
by NRC and BOD for recommending such a
person
Board Meeting • At least 4 times a
- Every company – 1st meeting of within 30 days of
year the date of its incorporation and thereafter
• Maximum time gap
- minimum number of 4 meetings maximum time gap
between two meetings
between two meetings not > 120 days.
not > 120 days
CG may provide exemption to certain class of companies.
Quorum for Board Top 2000 LE – Higher of 1/3rd of its total strength or 1/3rd or 2, whichever is
meeting 3directors, including at least 1 ID; higher

Maximum number a) Maximum Directorship - 7 listed entities Section 165

of directorships + b) Maximum ID – Maximum 20 directorships
any alternate If MD / WTD in any listed entity - ID in maximum 3 listed
directorships – Reg entities
17A Else – ID in maximum 7 listed entities
Listed here means equity shares are listed

2 Ab Audit Hoga Sabse Scoring - By CA. Sarthak Niraj Jain