Audit Committee and Remuneration Committee
Online Link to Act/Rule/Legislation
Initial Setup or Ongoing Maintenance
Ongoing compliance requirement
Filing and Maintenance Requirements
Section 177 and 178 of the Act provide that a listed company and public company having :
(a) a paid up capital of Rs. 10,00,00,000 (Rupees Ten Crores only) or more;
(b) a turnover of Rs. 1,00,00,00,000 (Rupees One Hundred Crores only) or more;
(c) in aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs. 50,00,00,000 (Rupees Fifty Crores only) more,
is required to constitute an audit committee and a nomination and remuneration committee of the board.
The audit committee is required to consist of a minimum of three (3) directors with independent directors forming a majority.
The nomination and remuneration committee is required to consist of three (3) or more non-executive directors out of which not less than one-half (1/2) are required to be independent directors.
The company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.
Application Guidelines / Responsible Persons / Comments
The Audit Committee shall consist of a minimum of 3 directors with independent
directors forming a majority.
The majority of members of Audit Committee including its Chairperson shall be persons with ability to read and understand, the financial statement.
The Board’s report under section 134(3) shall disclose the composition of an Audit committee and where the Board had not accepted any recommendation of the Audit Committee, the same shall be disclosed in such report along with the reasons there for.
Every Audit Committee of a company existing immediately before the commencement of this Act shall be reconstituted within one year of such commencement.(i,e., on or before 31st March 2015)
Functions of Audit Committee:
Every Audit Committee shall act in accordance with the terms of reference specified
in writing by the Board which shall, inter alia, include,—
(i) the recommendation for appointment, remuneration and terms of appointment of auditors of the company;
(ii) review and monitor the auditor’s independence and performance, and effectiveness of audit process;
(iii) examination of the financial statement and the auditors’ report thereon;
(iv) approval or any subsequent modification of transactions of the company with related parties;
(v) scrutiny of inter-corporate loans and investments;
(vi) valuation of undertakings or assets of the company, wherever it is necessary;
(vii) evaluation of internal financial controls and risk management systems;
(viii) monitoring the end use of funds raised through public offers and related matters.
Powers of Audit Committee:
The Audit committee shall have the authority –
To call for the comments of the auditors about internal control systems, the scope of audit, including the observations of the auditors and review of financial statement before their submission to the Board
To discuss any related issues with the internal and statutory auditors and the management of the company.
To investigate into any matter in relation to the items or referred to it by the Board
To obtain professional advice from external sources
To have full access to information contained in the records of the company.
The auditors of a company and the KMP shall have a right to be heard in the meetings of the Audit Committee when it considers the auditor’s report but shall not have the right to vote.