Audit Committee (Companies Act And Sebi)

Section 177 of the Companies Act, 2013 and along with the various rules of Companies (Meetings of Board and its Power) Rules, 2014 lays down the constitution, composition, the roles, and responsibilities of the Audit Committees.

REGULATORY FRAMEWORK OF AUDIT COMMITTEE

The legal provisions regulating an Audit Committee are as follows:

• Section 177 of the Companies Act 2013.
• Rule 6 and 7 of the Companies (Meetings of Board and its Powers) Amendment Rules, 2020.
• SEBI Advisory in India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Constitution of Audit Committee under Companies Act, 2013

Section 177(1) of the Companies Act, 2013 provides that the following companies are required to constitute an Audit Committee of the Board –

Composition of the Audit Committee: 

As per the Companies Act, 2013 the audit committee shall consist of

1. Shall have a minimum of three directors as a member of the committee
2. The majority of the members of the committee shall be Independent Director
3. The chairperson shall be the person with the ability to read and understand the financial statement.

Constitution of Audit Committee under SEBI Listing Regulations, 2015

Regulation 18(1) of SEBI Listing Regulations, 2015 prescribes that

• Every listed entity shall constitute a qualified and independent audit committee as per the conditions specified under the rule:

1. Shall have a minimum of three directors as a member of the committee
2. Two-third of the members of the committee shall be the independent director and in the case of the listed companies if there is any outstanding equity share, then all the members of the committee shall be independent directors.
3. All the members of the committee shall be financially literate and at least one member having accounting and financial management expertise.
4. The chairman of the committee shall be an independent director and shall be present in AGM to answer all the queries of members of the company
5. The company secretary of the company will be the secretary of the committee.

This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by:

CS Neetu Saini

AKGVG & Associates

Tags: secretarial, Secretarial Audit, secretarial service, Secretarial Support