DIRECTORS, KMP’S & BOARD GOVERNANCE

1. DIRECTORS, KMP’S & BOARD GOVERNANCE RashidaAdenwala Founder Partner R & A Associates Hyderabad, Gurgaon, Chennai

2. Coverage under the Act CHAPTER XI Appointment And Qualification Of Directors CHAPTER XII Meetings Of Board And Its Powers CHAPTER XIII Appointment & Remuneration Of Managerial Personnel

3. No of Directorships Sec 149 Max. 15 Directors (previously 12) Co. may appoint > 15 directors by passing a SR

4. Woman DirectorsSection 149(3) Time Frame to appoint Within 1yr from date of commencement of Act (i.e., 01/04/2014) Intermittent vacancy At the earliest but not later than immediate next Board meeting or 3 months from such vacancy. Applicability • Every listed Company and • Every other Public Co. having • Paid-up capital of Rs. 100 crs or more or • Turnover of Rs. 300 crs or more.

5. Resident Director [Sec 149(2)] At least 1 director to be a person who has stayed in India for at least 182 days in the previous calendar year.

6. Independent DirectorSection149 (5) Class or classes of Co.s to have at least 2 directors as Independent Directors Public Co. having paid up Sh. Cap. Of Rs. 10 cr or more Public Co. having Turnover of Rs. 100 cr or more Public Co. which have, in aggregate, o/s loans, debentures and deposits, exceeding Rs. 50 crs Every Co. within 1yr from such commencement or from the date of notification of the rules, comply with the requirements of the above provisions.

7. Independent Director DefinitionSection149 (5) Independent director means a director other than a Managing Director or a Whole time director or a nominee director and…..

9. *During the 2 preceding Financial year or Current Financial Year. ^Amounting 2% or more of its gross total turnover ^ or Rs. 50 Lakh which ever is lower ^such amount as may be prescribed

10. Company Associate Holding Subsidiary Immediately for 3 preceding Financial year

11. Company Secretary Auditor Cost Auditor Legal and Consulting Immediately for 3 preceding Financial year

12. Independent DirectorSection149 (6) & 150 in a general meeting as a Special Business by Ordinary Resolution Appointment has to be approved by the Co. To be selected from Data Banks maintained by any body.. Detailed Explanatory Statement. No requirement to retire by Rotation. Two terms of 5 yrs each. Cool off period of 3 yrs.

13. Nominee Director/ Representative Director not to be considered as ID’s • Letter of appointment sent to ID should give complete details of Terms and conditions as given in schedule VI. • Any intermittent vacancy of an ID shall be filled-up not later than immediate next Meeting or 3 months from the date of such vacancy, whichever is later. • where a Co. ceases to fulfill any of 3 conditions for 3 consecutive years, it shall not be required to comply with these provisions until such time as it meets any of such conditions.

14. Declaration by Independent DirectorSection149 (7) Independent director to give declaration at • The first board meeting as an Independent Director • At every first board meeting of financial year.

15. RemunerationSection149(8) • Reimbursement of expenses incurred for attending meeting • Sitting fees • Commission on profit not exceeding the limits prescribed • Not eligible for ESOP’s

16. Professional conduct, Duties and RolesSchedule IV (1) (2) (3) • Guidelines for Professional conduct • Roles and function defined • Duties to be performed by Independent Directors

17. Separate MeetingsSchedule IV (7) • To conduct one meeting at least per year. • Only Independent directors to be present • The meeting shall discuss the performance evaluation of other Directors.

18. Evaluation MechanismSchedule IV (8) • Performance evaluation of Independent Directors • Extension of term of appointment.

19. LiabilitySection149 (11) Liable for omissions or commissions held with • His knowledge • Attributable to whole Board • With his consent and convenience

20. Appointment of DirectorSection151

21. Rights & Duties of DirectorSection152

22. Right of persons other than retiring Directors to stand for directorshipSection 160 • Notice in writing > 14 days before the meeting • deposit of Rs. 1 L or such higher amount as may be prescribed This deposit amount shall be refunded to such person/member, as the case may be, if- The proposed person gets elected as a Director or • Gets more than 25% of total valid votes cast either on show of hands or on poll on such resolution

23. Alternative DirectorSection 161 In his absence of a Directors from India for a period not less than 3 months. Shall vacate the office on return of the director to India.

24. Vacation of DirectorSection167 Absent for BMs for a period of 12 months, with or without Leave of absence. Contravention of provisions of Sec. 184 Disqualifications U/S 164 Ceases to hold any office or other employment in the holding, subsidiary or associate by virtue of which he was appointed. Convicted by a court, whether involving moral turpitude and sentenced to imprisonment for > 6months Becomes disqualified by a order by a Court or Tribunal.

25. Committees of Board

26. Audit CommitteeSection 177

27. Audit CommitteeSection 177 • Transition period of 1 year provided. • Composition with minimum 3 directors with majority of Independent Directors • The meeting shall discuss the performance evaluation of other Directors. • To establish Vigil Mechanism and protect interest of Whistle Blowers • To Investigate into the affairs of the Company.

28. Audit Committee DutiesSection 177 (4) • Terms of appointment of Statutory Auditors. • Review of Statutory Auditors Performance. • Examination of Financials and Auditors Report. • Examination of Related Party Transactions. • Scrutiny of Inter Corporate Loans • Evaluation of Internal Financial control • Monitoring the use of Funds raised from Public Offers.

29. Nomination & remuneration CommitteeSection 178

30. Nomination & remuneration CommitteeSection 178 • Transition period of 1 year provided. • Composition with minimum 3 directors with majority of Independent Directors • Identification of Qualified persons for Directorship • Formulate policy for appointment & remuneration of Directors • Policy to be disclosed in Board’s Report

31. Stakeholders Relationship CommitteeSection 178 To consider and resolve the grievances of Securities Holders.

32. Penalty • Company: • Minimum fine - Rs. 1.00 Lac • Maximum fine – Rs.5.00 Lacs • Officer in Default: • Minimum fine Rs. 25,000; Maximum fine Rs.1.00 Lac or • Imprisonment – Maximum 1 year or • both fine and imprisonment.

33. CSR CommitteeSection 135

34. CSR CommitteeSection 135 • Minimum of 3 Directors or more • At least 1 Independent director to be present. • Appointment of Independent Director not required if Company doesn’t have to appoint such Director. • A private Company with 2 directors can form committee with such directors.

35. CSR DutiesSection 135 • Duties of Committee • formulate and recommend a CSR policy to the board • recommend the amount of expenditure to be incurred • monitor CSR policy from time to time. • Duties of Board • consider & approve CSR policy recommended by committee. • Ensure that activities included in CSR policy are undertaken. • Ensure that company spends, in every financial year, at least 2% of the average net profits

36. CSR CommitteeSection 135 • The Board shall spend 2% of the average net profits for last 3 financial years. • CSR Activities shall be conducted as per Schedule VII. • Disclosures as per the CSR rules should be given in Board’s Report and Website of Company. • Procedure to conduct activities are detailed in rules.

37. Meetings of the BoardSection 173 & 174 • First Board Meeting - 30 days after incorporation of the Company. • At least four board meetings every year with the gap time of 120 days between two board meetings. • At least Four Board Meetings every year. • Notice : 7 days prior notice in writing to every director by hand or by post or by courier or by email or by any other electronic. • Shorter Notice - allowed if at least one Independent director is present and if no independent director is present, decisions taken be circulated to all the directors and be finalized only on ratification thereof by at least one independent director. • Quorum • 1/3rd of the total strength of the board or two directors, whichever is higher. • Participation through video conferencing counted for the purpose of quorum • Penalty for contravention: Every officer fine of Rs 25000

38. Restrictions On Powers of The BoardSec.180 Applicable to all classes of companies. Special Resolution of shareholder required for: • Sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of company • To Invest otherwise in trust securities amount of compensation received on merger or amalgamation • To borrow money • To remit or give time for the repayment of, any debt due from a director • Contribution to Charitable funds as donation-shifted to new section –Sec.181

39. Restrictions On Powers of The BoardSec.180 “Undertaking” shall mean in which the investment of the company exceeds 20 % of its net worth or which generates 20 % of the total income of the company during the previous financial year. “Substantially the whole of the undertaking” in any financial year shall mean 20% or more of the value of undertaking as per the audited balance sheet of the preceding financial year. General Penalty under section 450 • Company and Every officer of the company who is in default or such other person shall be punishable with fine upto Rs.10,000 and • Contravention is continuing one, further fine upto Rs.1,000 for every day after the first during which the contravention continues

40. Key Managerial Person (KMP) Section 203 • Who is KMP? • the Chief Executive Officer or the managing director or the manager; • the Company Secretary; • the Whole-Time Director; • the Chief Financial Officer. Applicability • Every Listed company. • Public companies having paid-up share capital of Rs. 10 Crore or more. Restriction • Whole-time key managerial personnel not to hold office in more than one company except in its subsidiary company

41. Obligations of KMP • Interest of the KMP to be disclosed in the explanatory statement to be annexed to the notice calling the general meeting (Section 102) • Prohibition on forward dealings in securities of the company by KMP (Section 194) • Prohibition on insider trading of securities by a KMP (Section 195): • Officer in default

42. Duties and liabilities of Chief Financial Officer (CFO): • Safe keeping and maintenance of books of accounts • Ensure the financial statement gives true and fair view of the affairs of the company • Effective compliance of accounting standards. • Manitain the financial statement in the form as provided under schedule III and to specify deviations if any • Financial statement is laid before the members at AGM. • Preparation of consolidated financial statements in case of subsidiaries. • In case of contravention: Imprisonment which may extend to 1 year or fine of minimum Rs. 50,000/- and maximum Rs. 5,00,000/- or with both

43. Duties and liabilities of Chief Financial Officer (CFO) • Sign the financial statement including the consolidated financial statement, if • signed copy of every financial statement is issued circulated or published along with the auditor’s report, boards report and any notes forming part thereof (In case of contravention: penalty of Rs. 5,000/-). • Copy of every financial statement along with all the documents to be attached is filed with the registrar within 30 days of the AGM • In case the AGM is not been held, financial statement are filed along with statement of facts and reasons for not holding AGM within 30 days of due date for holding AGM (In case of contravention: Imprisonment which may extend to 6 months or with fine of minimum Rs. 1,00,000/- and maximum of Rs. 5,00,000/- or with both). • Certification as to the financial statements of the company pursuant to clause 49 of the listing agreement.

44. Functions of Company Secretary Section 205 • Report to the board about the compliance with the provisions of the Companies Act, 2013 and rules made there under and other laws applicable to the company. • Complies with the applicable secretarial standards. • Provide to the directors guidance with regard to their duties, responsibilities and powers • Facilitate the convening of meetings and attend Board, committee and general meetings and maintain the minutes of these meetings. • Obtain approvals from the Board, general meeting, the government and such other • Represent before various regulators, and other authorities in connection with discharge of various duties • To assist the Board in the conduct of the affairs of the company. • To assist and advise the Board in ensuring good corporate and best practices.

45. Annual General MeetingSection 96 • AGM shall be held • During business hours i.e., between 9 A.M. And 6 P.M. • The day should not be a National Holiday

46. QuorumSection 103 • For Private Companies – 2 members. • For Public Companies – • 5 Members where total members < 1000. • 15 Members where total members are between 1000 - 5000. • 30 Members where the total members are > 5000.

47. ProxiesSection 105 • A Section 8 Co. can’t appoint a Proxy other than its members. • Proxy Form should be in Form MGT. 11 & be deposited with Company 48 hours before meeting. • Proxy forms can be inspected by member before 24 hours of General Meeting by providing 3 days prior notice to the Company. • A proxy can’t act as proxy for more than 50 members & holding more than 10% of total Share Capital.

48. THANK YOU