Constitution of Committees by Companies as per Companies Act, 2013

Committees were constituted by companies in accordance with the Companies Act, 2013. Section 177 of the Companies Act, 2013 allowed the Board of Directors to delegate specific matters to committees established for this purpose. These committees were established to enhance the efficiency and effectiveness of the board in areas requiring more focused, specialized, and technically oriented discussions.

The committees were comprised of Board Members and experts in relevant fields. However, the ultimate responsibility for the committee’s actions lay with the Board of Directors, which was tasked with defining the roles and structures of these committees.

Audit Committee

Public companies listed or public limited companies with a paid-up capital of 10 Crores or more, a profit of 100 Crores or more, or combined loans, balances, borrowings, or deposits of 50 Crores or more were mandated to form an Audit Committee. This committee consisted of a minimum of three directors, a majority of whom were independent directors, if any. It was recommended to include a financial sector expert in the committee.

The role of the Audit Committee included recommending the appointment, remuneration, and conditions of appointment of company auditors, reviewing internal control systems, conducting internal financial control audits and risk management systems, among other responsibilities. Companies not required to form such a committee could voluntarily establish one.

Nomination and Remuneration Committee

Similar to the Audit Committee, public companies meeting certain criteria were required to establish a Nomination and Remuneration Committee comprising at least three Non-Executive Directors, with a majority being independent directors, if any.

The role of this committee involved identifying individuals suitable for directorial and executive positions, recommending the removal of directors or Key Managerial Personnel (KMP) along with reasons, evaluating the Board’s performance effectively, determining qualifications and independence criteria for directors/KMP/employees, and recommending remuneration policies for directors/KMPs/staff.

Stakeholders Relations Committee

Companies with more than 1000 shareholders/creditors/depositors or other security owners were obligated to form a Stakeholders Relations Committee. This committee consisted of a chairperson, who was a non-executive director, and other members determined by the Board.

The role of the Stakeholders Relations Committee included processing and resolving complaints from company security owners.

Corporate Social Responsibility Committee

Companies with a net worth of 500 Crores or more, a turnover of 1000 Crores or more, or a net profit of 5 Crores or more in any financial year were required to establish a Corporate Social Responsibility Committee. Companies not mandated to form such a committee could do so voluntarily.

The role of this committee encompassed recommending CSR policies, monitoring expenditure, costs, and projects, and overseeing CSR programs.

Committee under POSH Act

The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 necessitated institutions with 10 or more employees, both formal and informal, to establish an Internal Complaints Committee (ICC). This committee included a senior female employee, at least two staff members, who could be social workers or legal practitioners, and one external member from an NGO or an organization dedicated to women’s causes.

The committee’s responsibilities involved implementing policies for preventing sexual harassment, resolving victims’ complaints, and making recommendations regarding complaints.

Conclusion

The Companies Act of 2013 introduced an expanded range of committees and delineated their functions more comprehensively compared to the 1956 Act. It ensured the formation of committees by companies in compliance with its provisions. Additionally, there seemed to be efforts to align the 2013 Act with the Listing Agreement to some extent, emphasizing transparency and disclosure procedures. While the roles assigned to these committees were commendable, ultimate authority rested with the Board of Directors. Only through continued implementation could the effectiveness of these committees in co-management be gauged.