Committees are usually formed as a means of improving board effectiveness and efficiency, in areas where more focused, specialized and technical discussions are required. These committees prepare the groundwork for decision making and report at the subsequent board meeting. Committees enable better management of full board’s time and allow in-depth scrutiny and focused attention. Members of the committee are expected to have expertise in the specified field.
Need for Committees:
(i). To strengthen the governance of the company and support the Board to achieve their strategic objective.
(ii).To improve Board effectiveness and efficiency.
(iii).To maximise the value of inputs received from Non-Executive directors, given that they have limited time.
The Companies Act, 2013 (“Act”) and Securities Exchange Board of India (Listing Obligations and Disclosure Requirement) Regulations, 2015 (“SEBI (LODR) Regulations”) has mandated certain committees to be formed for certain companies. The applicability, Constitution and details of meeting, are discussed in this article.
Mandatory Committees of the Board
| Companies Act, 2013 | SEBI (LODR) Regulations, 2015 |
| Audit Committee | Audit Committee |
| Nomination and Remuneration Committee | Nomination and Remuneration Committee |
| Stakeholders Relationship | Stakeholders Relationship |
| Corporate Social Responsibility Committee | – |
| – | Risk Management Committee |
Mandatory Committees under Companies Act, 2013