Board Roles & Responsibilities under - PowerPoint Presentation

1. Board Roles & Responsibilities underCompanies Act, 2013 & Clause 49 of Listing Agreement11/14/2014

2. 11/14/2014Board- An IntroductionDecision making by BoardChanging role & state of BoardSignificant provisions relating to BoardNew and Mandatory CommitteesPolicies of CompanyAn Introduction

3. 11/14/2014BOARD – AN INTRODUCTION

4. 11/14/2014Director appointed to the Board of a company“Director”Collective body of directors of the company “Board of directors”or Board “Director in the Whole Time Employment of the Company”“Whole Time Director”“Executive Director” means a whole time director.Definitions

5. 11/14/2014Women DirectorIndependent DirectorResident DirectorSmall Shareholder DirectorBoard to have an optimum combination of executive & non-executive and not less than 50% of Board of Directors comprising non-executive directors.Board Composition- Companies Act, 2013

6. Board shall have at least one Woman Director on the Board by 1st April, 2015Company is required to have at least one director on its Board as Resident Director who has stayed in India for a minimum of 182 days during the previous calendarWoman Director & Resident Director on the Board

7. Chairman of BoardNon-Executive DirectorExecutive Director1/3rd of Board to comprise Independent Directors1/2nd of Board to comprise Independent DirectorsIf the Non-executive Chairman is a promoter of the company or is related to any promoter or person occupying management positions at the Board level or at one level below theBoard, at least 1/2nd of the Board shall consist of Independent Directors.Number of Independent Directors on the Board

8. Qualifications of ID has been separately provided.Nominee director not considered as ID.Independent director to furnish declaration of independence on yearly basis Appointment to be approved at a general meeting with explanatory statement justifying appointmentID are not liable to retire by rotation and thus not taken in the limit of rotational directors;ID is not entitled for stock options.Familiarization programme for ID is introduced.ID’s to conduct their separate meetings at least once in year.Limited liability of IDIndependent Directors (ID) on the Board

9. 11/14/2014 Help in bringing independent judgement on issues like strategy, key appointments, etc. Bring an objective view in performance evaluation of board & management Safeguard interest of all stakeholders particularly minorities. Determine appropriate levels of remuneration for ED’s, KMP & senior management Balance conflicting interest of stakeholders Satisfy themselves on integrity of financial statements & financial controls & system of risk management are robust Scrutinize performance of management in meeting agreed goals Moderate & arbitrate in the interest of the company in conflict situationsRole & Functions of Independent Director

10. 11/14/2014 Undertake induction & regularly update skills Seek clarifications & professional advice where necessary Ensure their concerns about running of company are well addressed Strive to attend and participate in all Board , Committee & general meetings Be well informed about company & external environment Do not unfairly obstruct the functioning of meeting Pay attention & ensure adequate deliberation are held before approving RPT Ascertain & ensure functioning of vigil mechanism Not to disclose confidential information Report concerns about unethical behavior , actual or suspected fraudDuties of Independent Director

11. Listed CompanyNotice of atleast 1000 small shareholders/ 1/10th of total small shareholders, whichever is lowerSuo MottoeitherorMay appoint a small shareholder director elected by small shareholders.Small Shareholder Director on the Board

12. A transition period of 1 year is provided to comply with the requirement of maximum no. of directorships. An intimation of their choice of companies shall be given to the respective company as well as to ROC.A person can be director in maximum 20 companies out of which maximum 10 can be public companies. The directorships in private companies that are either holding or subsidiary of public companies are treated as public companies.Alternate Directorship shall be included in calculating the maximum directorships limit.Members by Special Resolution can specify any lesser number of companies in which a director can act as directors.11/14/2014Maximum No. of Directorships

13. 11/14/2014 Maximum no. of directors to be appointed in a company has been increased from 12 to 15. More than 15 directors can also be appointed by passing Special resolution.Maximum No. of Directors on the Board

14. 11/14/2014 DECISION MAKING BY BOARD

15. 11/14/2014Frequency of Board meeting: Min. 4 meetings in a year with a maximum gap of 120 days between 2 consecutive meetings Notice shall be sent to all the directors at least 7 days before the date of meetingNotice may be sent, through electronic means or others Notice of Board meeting shall specify the option to attend the meeting through video conferencing or through other audio visual meansBoard Meetings

16. 11/14/2014Participation through video conferencing or other audio visual means to be counted as quorum.With respect to every meeting conducted through video conferencing the scheduled venue of the meeting as set forth in the notice convening the meeting shall be deemed to be the place of said meeting & all recordings of the proceedings at meeting shall be deemed to be made at such place. Chairman required to make a roll call with respect to every director participating through video conferencing.Company to send draft minutes to all directors within fifteen days of the meeting Confirmation of accuracy of draft minutes by every directors who attended meeting within 7 days (or some reasonable time decided by the Board) of receipt of draft minutes, failing which it will be deemed approved.Meeting through video conferencing

17. 11/14/2014Matters not to be dealt in meeting through video conferencingTo approve the annual financial statements;To approve the board’s report;To approve prospectus;To approve merger, amalgamation, demerger, acquisition and takeover; andThe audit committee meetings for consideration of financial statement including consolidated financial statement, if any, to be approved by the Board under the Act. Matters not to be dealt through video conferencing

18. 11/14/2014Meeting of Board to transact urgent business at shorter Notice :Presence of at least 1 Independent Director required in the meeting called at shorter notice. Else decision to be circulated to all the directors and to be valid only after ratification by at least one IDQuorum for the Board Meeting shall be 1/3rd of total strength or 2 directors whichever is higherDis-interested quorum If interested directors are 2/3rd of the board, dis-interested directors not less than 2 will form the quorum. Interested DirectorDirector who in any way whether by :-Himself;Through relatives;Firm;Body corporate;Association of individuals in which he or any relative is partner/ director or member, interested in a contract or arrangement, entered into or to be entered into by or on behalf of company.Quorum for Board Meeting

19. 11/14/2014Draft resolution to be sent to all directors whether in India or outside IndiaDraft Resolution may be circulated to the directors along with necessary papers by e-mail /fax /post /courier or by hand. Approval of majority directors required, who are entitled to vote on the resolution In case of 1/3rd or more Directors decide that the resolution shall be decided at the meeting, then the resolution shall be decided at the meeting and not by circulationCircular resolution shall be noted at a subsequent Board meeting or committee meeting and shall form minutes of such meeting.Circular Resolution

20. 11/14/2014Following powers shall be exercised by the Board only at their meeting:-To make calls on shareholders in respect of money unpaid on their shares;To authorise buy-back of securities;To invest the funds of company;Issue of Securities – Equity, Preference, Debentures;Grant Loans, give guarantee or provide security in respect of loans;Approve financial statements and Director’s report;To make political contribution;To diversify the business of company;To approve amalgamation, merger or reconstruction;To appoint internal auditors and secretarial auditors.Powers of Board to be exercised in its meetings

21. 11/14/2014To appoint or remove KMP or take note of appointment(s) or removal(s) of one level below KMP;To take note of the disclosure of director’s interest and shareholding;To buy, sell investments held by company constituting 5% or more of paid up share capital and free reserves of investee company;To invite/ accept/ renew/ review/ the public deposits;To take over a company or acquire a controlling or substantial stake in another company;To review or change the terms & conditions of public deposits;To approve quarterly, half early and annual financial statements or financial results.Powers of Board to be exercised in its meetings

22. 11/14/2014 CHANGING ROLE & STATE OF BOARD

23. Board & top management to conduct themselves to meet the expectations of operational transparency to stakeholdersMaintaining confidentiality of information in order to foster a culture for good decision makingDirectors & key executives are required to disclose the Board whether they, directly, indirectly or on behalf of third parties, have a material interest in any transaction or matter directly affecting company.Board should provide strategic guidance to the company, ensure effective monitoring of management & should be accountable to company & shareholders.Responsibilities of Board

24. Board should encourage continuing directors training to ensure Board members are kept up to date.Board should treat all shareholders fairly. Board should apply high ethical standards. It should take into account the interest of stakeholders. Board should be able to exercise objective independent judgment on corporate affairs.Responsibilities of Board

25. Board should have ability to “step back” to assist executive management by challenging the assumptions underlying: strategy, strategic initiatives, risk appetite.When committees of the Board are established, their mandate, composition & working procedures should be well defined & disclosed by Board. In order to fulfil their responsibilities, board members should have access to accurate, relevant & timely information.Board & senior management should facilitate the independent directors to perform their role effectively as a Board member and also a member of a committee. Board should consider assigning a sufficient number of non-executive Board members capable of exercising independent judgment to tasks where there is a potential of conflict of interest.Responsibilities of Board

26. Monitoring effectiveness of company’s governance practices & making changes as needed.Selecting, compensating, monitoring &, when necessary, replacing key executives & overseeing succession planning.Aligning key executive & board remuneration with the longer term interests of company & shareholders. Ensuring transparent board nomination process with diversity of thought, experience, knowledge, perspective & gender in the Board.Reviewing & guiding corporate strategy, major action plans, risk policy, annual budgets & business plans, setting performance objectives, etc.Role of Board

27. Ensuring the integrity of the company’s accounting & financial reporting systems & that appropriate systems of control are in place, in particular, systems for risk management, financial & operational control, and compliance with law & relevant standards.Overseeing the process of disclosure & communications.Monitoring & reviewing Board evaluation framework Monitoring & managing potential conflicts of interest of management, board members & shareholders, including misuse of corporate assets & abuse in related party transactionsRole of Board

28. 11/14/2014Duties of Directors

29. 11/14/2014 SIGNIFICANT PROVISIONS RELATING TO BOARD

30. 11/14/2014Restriction for sale/ leasing of undertaking applicable to all classes of companies Term “Undertaking” and “Substantial Undertaking” has now been defined to invest otherwise in trust securities the amount of compensation received by it as a result of merger or amalgamation Borrowing in excess of the paid –up capital & free reservesTo remit, or give time for the repayment of, any debt due from the directorA special resolution is required to be passed instead of Ordinary resolutionRestrictions on Powers of Board

31. 11/14/2014Director of a company or of its holding/ subsidiary/Associate company or any connected person can not acquire assets for consideration other than cash from the company & vice versa. Approval at a general meeting is requiredIf the Director or connected person is director of holding company then approval of holding company in general meeting is also requiredValuation of the assets by registered valuerRestrictions on non-cash transactions

32. 11/14/2014Forward dealing in the shares and debentures of a company, its holding, subsidiary or associate by Directors and KMPs is prohibitedBoth forward contracts and option contracts are bannedSecurities acquired in violation to be surrendered to companyRestriction on Directors, KMP and any other person for indulging in Insider tradingCommunication required in ordinary course of business or under law exemptedProhibition on forward/insider dealing

33. Following transactions are the related party transactions under Companies Act, 2013 and clause 49 of the Listing Agreement:- Transfer of resources, services or obligations, regardless of whether a price is charged or not.sale, purchase or supply of any goods or materialsSelling or otherwise disposing of, or buying, property of any kind; Leasing of property of any kind;availing or rendering of any services; Appointment of any agents for purchase or sale of goods, materials, services or property; Appointment of any related party to any office or place of profit in the company / its subsidiary company / its associate company; Contract for underwriting the subscription of securities or derivatives thereof.Related Party Transactions (RPTs)

34. Every related party transaction shall require prior approval of audit committee.Audit Committee may grant omnibus approval for Related Party Transactions proposed to be entered into by the company as the criteria laid down by the Audit Committee subject to the following conditions: Criteria for granting the omnibus approval shall be laid down Transaction shall be repetitive in nature. Omnibus approval should be in the interest of the company. Such omnibus approvals shall be valid for a period not exceeding one year. Review the details of RPTs entered into by the company pursuant to each of the omnibus approval given at least on a quarterly basis.Role of Audit Committee in RPTs

35. Consent of Board of Directors and prior approval of shareholders by special resolution, if transaction or transactions to be entered into with related parties exceeding by such limit as prescribed under law. Company is not required to take consent of the Board and approval of shareholders by way of special resolution if such related party transaction entered into by the company in its ordinary course of business and on an arm’s length basisHowever, all material Related Party Transactions shall require approval of the shareholders irrespective of the fact whether the transaction is on arm’s length basis and on ordinary course of business. Approval of Board & Shareholder

36. A transaction with a related party shall be considered material if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the company as per the last audited financial statements of the company.All existing material related party contracts or arrangements as on 1st October 2014 which are likely to continue beyond March 31, 2015 shall be placed for approval of the shareholders in the first General Meeting subsequent to October 01, 2014.What is Material Related Party Transaction?What about existing Related Party Transaction/s?Material Related Party Transaction

37. 11/14/2014No Company can directly/indirectly give loan/ security/ guarantee in favour of DirectorsRelative of directors Any other person in whom director is interestedExemption given to MD & WTD if as a part of conditions of service extended to all employees or pursuant to any scheme approved by members by Special ResolutionThere is no facility of seeking approval of Central GovernmentLoans to Directors & Persons in whom directors are interested

38. 11/14/2014 Any director of the lending company, or of company which is its holding company or any partner or relative of any such director;Any firm in which any such director or relative is a partner;Any private company of which any such director is a director or member;Any body corporate at a general meeting of which not less than 25% of total voting power may be exercise or controlled by any such director, or by two or more such directors, together, or;Any body corporate, the Board of Directors, Managing Director or Manager, whereof is accustomed to act in accordance with directions or instructions of the Board, or any or director or directors, of lending company.Any other person in whom director is interested

39. 11/14/2014Loan, Investment and Guarantee allowed in :CompanyAll persons (other than directors and person in whom director is interested )Body corporate Limits :By Board Resolution:60% of its paid-up capital, free reserves & securities premium account ;or 100% of its free reserves & security premium whichever is higherIn case of exceeding above limits: By Special ResolutionLoan & Investments

40. 11/14/2014NEW AND MANDATORY COMMITTEES

41. 11/14/2014Every Listed Company to constitute Audit CommitteeComposition:- Min 3 directors with majority of ID1 year transition period for constitution / reconstitution of Audit committeeAudit committee to: Recommend appointment, remuneration and terms of appointment of the auditorsReview and monitor auditor’s independence, performance and effectiveness of audit processExamine financial statements and auditor’s reportApprove / modify the transactions of companies with related partyScrutinize inter-corporate loans and investments Monitor end use of funds raised through Public offers and related matters Perform valuation of undertaking or assets of the company.Evaluate internal financial controls and risk management systems Audit Committee

42. 11/14/2014Every Listed Company to constitute Audit CommitteeComposition:- Min 3 Directors (all to be non-executive directors) ≥ ½ comprising IDs. 1 year transition period for constitution / reconstitution of Nomination & Remuneration committeeNomination & Remuneration committee to :-Formulate criteria for determining qualifications, positive attributes & independence of director;Recommend to board a policy relating to remuneration of directors, KMP’s & other employees; Identification of qualified Directors and senior management personnelPerformance evaluation of directors & Board;Devising a policy on Board Diversity.Nomination & Remuneration Committee

43. 11/14/2014In Every Company having more than 1,000 share / debenture / deposit / security holders.Composition:- to be decided by BoD. Chairperson to be an NED.Mandate of the Committee:-Consider and resolve the grievances of Securities holders.Stakeholder Relationship Committee

44. 11/14/2014CSR Committee to be constituted (3+ Dir incl. at least 1 ID)CSR Committee for promoting following CSR welfare initiativesCSR Activities to be undertaken as projects or programmes excluding activities undertaken in pursuance of the normal course of business of a companyIn the area nearby the operations of the companyMay implement the same through trust/society set up by company or otherwise having track record of three yearsActivities to be undertaken within IndiaActivities not exclusively for the benefit of employees or their family members Nature of projects/programmes to be covered for eradicating extreme hunger and Poverty, for promotion of education…..etc as given in schedule VII Corporate Social Responsibility Committee

45. 11/14/2014 POLICIES OF BOARD

46. Networth ≥ 500 Crs orTurnover ≥ 1000 Crs orNet Profits ≥ 5 CrsCSR Committee to be constituted (3+ Dir incl. at least 1 ID)Committee shall formulate and recommend CSR policy and amount of expenditure as well as monitor CSR activities (CSR policy on web)Preference to local areas in which the company operatesActivities specified in Schedule VIICSR spend of at least 2% of avg. net profits made during 3 immediately preceding FYs COMPLY OR EXPLAINTo promote welfare Initiatives;Sustainable Business Development;More business opportunities;Satisfied Stakeholders;Long term future for your business. Board report to contain details about such policy development & initiatives taken by company during the year.Corporate Social Responsibility Policy

47. ObjectiveLay down criteria & terms & conditions with regard to identify persons qualifying for directors & senior management;To determine remuneration based on company’s size & financial position;To carry out evaluation of performance of directors, KMP, Senior Management Functional heads & the Board;To have a diversified BoardScopeApplicable to the following in the company:-Directors;Key Managerial Personnel (KMP);Senior Management Personnel, andOther employeesDisclosureSuch policy shall be disclosed in Board’s Report.Nomination & Remuneration Policy

48. If the investment of company in subsidiary exceeds 20% of consolidated net worth as per audited balance sheet of P.Y; orSubsidiary has generated 20% of consolidated income during the P.Y.Material SubsidiaryExcept with the Special Resolution following transactions are not possible:-Disposing shares of material subsidiary company which reduce its shareholding (either on its own or together with other subsidiaries) to less than 50% or cease exercise of control over subsidiary;Selling, disposing & leasing of assets to more than 20% of assets of material subsidiary.Note: Exceptions are also provided.Disclosure of policy on the company’s website;Web-link to be provided in Annual Report.DisclosureMaterial Subsidiary Policy

49. Company to lay down procedure for risk assessment & minimization procedures.Board to be responsible for framing, implementing & monitoring the risk management plan.Company may constitute a Risk Management Committee to delegate monitoring & reviewing of risk management plan.Risk Management Policy

50. ObjectiveEstablished to report concerns about unethical behavior, actual or suspected fraud or violation of company’s code of conduct or ethics policy.Provides adequate safeguard against victimization who avail mechanism.Provides direct access to Chairman of Audit Committee in exceptional cases.ScopeApplicable to the following in the company:-Directors;KMP’s; & Stakeholders including individual employees & their representative bodies.DisclosureDisclosure of such policy in Board’s Report;Disclosure of details of establishment of mechanism on website.Whistle Blower Policy/ Vigil Mechanism

51. ObjectiveCompany to formulate a policy on materiality on Related Party transactions & also on dealing with Related Party Transactions.Scope of Material TransactionsAll transactions with related party entered individually or taken together with previous transactions in a financial year, exceeding 10% of annual consolidated turnover.DisclosureDisclosure of policy on company’s website & its weblink in annual report.ApprovalAll RPT’s require prior Audit Committee approval / omnibus approval granted by Audit Committee.All material RPT’s requires approval by Special ResolutionRelated Party Transaction Policy

52. Corporate Professionals D-28, South Extension –I, New Delhi-110 049Ph: +91.11.40622211; Fax: +91.11.40622201; E: manoj@indiacp.comManoj KumarThank You