Presentation on requirement of Audit Committee as per Section 177 of Companies Act, 2013 & Regulation 18 of SEBI (Listing Obligation & Disclosure Requiremnet) Regulation, 2015

1. Audit Committee
Team Chartreuse

2. Topics to be Covered
 Introduction
 Applicability
 Composition
 Eligibility of Members
 Frequency & Quorum
 Roles & Responsibilities
 Powers of Audit Committee
 Vigil Mechanism & Penalty
 LODR Vs Companies Act, 2013

3. Introduction
 Audit Committee is a committee formed by the Board of Directors of
the Company to look into Financial & other Allied matters of the
Company.
 An Audit Committee is a key element in the Corporate Governance
process of any organization to safeguard the interest of the
stakeholders.
Governing Section:
 Section 177 of the Companies Act, 2013 (“the Act”) read with Rule 6
and 7 of Companies (Meetings of Board and its Powers) Rules, 2014
(“the Rules”) deals with Audit Committee
 Regulation 18 of SEBI (LODR) Regulation s, 2015 deals with Audit
Committee.

4. Applicability
Section 177(1) of the Act read with Rule 6 set forth the
requirement of constitution of audit committee:
 all listed companies; and
 all public companies
 with a paid up capital of Rs.10 Crores or more;
 having turnover of Rs.100 Crores or more;
 having in aggregate, outstanding loans or borrowings or
debentures or deposits exceeding Rs.50 Crores or more.
Note: The above criteria shall be as per latest audited
Financials.

5. Composition
Companies Act, 2013:
 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 auditors and KMP have a right to be heard in the
meetings when it considers the auditor’s report, but
have no right to vote.

6. SEBI (LODR) Regulations, 2015:
 The audit committee shall have minimum 3 directors as
members of which 2/3rd of the members of the committee
shall be independent directors.
 All members of audit committee shall be financially
literate and at least one member shall have accounting or
related financial management expertise.
 Chairperson of the committee shall be an independent
director & shall be present at AGM to answer.
 Company Secretary shall act as secretary to the
committee.
 Finance director, representative of the statutory auditor
shall be invitees.

7. Frequency & Quorum
SEBI (LODR) Regulation:
Frequency:
The listed entity shall meet at least 4 times in a year and not
more than 120 days shall elapse between 2 meetings.
Quorum:
2 members or 1/3rd of the committee, whichever is greater, with
at least 2 Independent Directors.
Companies Act, 2013:
No such specific provisions w.r.t frequency and Quorum, but
certain business required to be approved through Audit
Committee.

8. Roles & Responsibilities
 Every Audit Committee shall act in accordance with the
terms of reference specified in writing by the Board which
shall, inter alia, include,—The recommendation for
appointment, remuneration and terms of appointment of
auditors of the company;
 Review and monitor the auditor’s independence and
performance, and effectiveness of audit process;
 Examination of the financial statement and the auditors’
report thereon;

9. Conti…
 Approval or any subsequent modification of
transactions of the company with related parties;
 Scrutiny of inter-corporate loans and investments;
 Valuation of undertakings or assets of the company,
wherever it is necessary;
 Evaluation of internal financial controls and
risk management systems;
 Monitoring the end use of funds raised through public
offers and related matters.

10. Powers of Committee
The 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

11. Vigil Mechanism
 Every listed company,
 companies which accept deposits from the public and
 companies which have borrowed money from banks and public
financial institutions in excess of Rs.50 crores
shall establish a vigil mechanism for directors and employees to
report genuine concerns in such manner as may be prescribed.
 The companies shall oversee the vigil mechanism through the
committee and if any of the members of the committee have a
conflict of interest in a given case, they should rescues
themselves to deal with the matter.

12. Continues…
Where the companies are not required to constitute an audit
committee, the Board of directors shall nominate a director to
play the role of audit committee for the purpose of vigil mechanism
to whom other directors and employees may report their concerns.
 The existence of the mechanism may be appropriately
communicated within the organization.
 The details of establishment of Vigil mechanism shall be
disclosed by the company in the website, if any, and in
the Board’s Report.

13. Penalty
 Reasons:
Repeated frivolous complaints being filed by
1. Director(or)
2. Employee
 Amount of Penalty:
 25000-100000(or)
 Imprisonment up to 1 year(or
 Both

14. Major Differences:
Companies Act, 2013
 Independent Director
forming majority
 Chairman need not be an
independent director
 CS need not be secretary
of the Audit Committee
 Majority (including
Chairperson )shall be
Financially literate
SEBI (LODR)
Regulation:
 2/3 of member shall be
Independent Director
 Chairman should be
Independent Director
 CS of the company should
be the Secretary of the
Committee.
 All member shall be
financially Literate

16. THANK
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