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Corporate
Governance Code
Corporate
Governance
Clause
49 of Listing Agreement on Corporate Governance will
become mandatory for the Company within financial year
2001-02 but not later than 31st March, 2002.
The
main features of Corporate Governance are as under :-
l. Board of Directors
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The
board of directors of the company shall have an
optimum combination of executive and non-executive
directors with not less than fifty percent of the
board of directors comprising of non-executive directors.
The number of independent directors would depend
whether the Chairman is executive or non-executive.
In case of a non-executive chairman, at least one-third
of board should comprise of independent directors
and in case of an executive chairman, at least half
of board should comprise of independent directors.
Explanation:
For the purpose of this clause the expression ‘independent
directors’ means directors who apart from receiving
director’s remuneration, do not have any other
material pecuniary relationship or transactions with
the company, its promoters, its management or its subsidiaries,which
in judgement of the board may affect independence of
judgement of the director.
II.
Audit Committee
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A
qualified and independent audit committee shall
be set up and that :
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The audit committee shall have minimum three
members, all being non-executive directors,
with the majority of them being independent,
and with at least one director having financial
and accounting knowledge;
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The chairman of the committee shall be an independent
director;
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The chairman shall be present at Annual General
Meeting to answer shareholder queries;
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The audit committee should invite such of the
executives, as it considers appropriate (and
particularly the head of the finance function)
to be present at the meetings of the committee,
but on occasions it may also meet without the
presence of any executives of the company. The
finance director, head of internal audit and
when required, a representative of the external
auditor shall be present as invitees for the
meetings of the audit committee;
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The Company Secretary shall act as the secretary
to the committee.
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The audit committee shall meet at least thrice a
year. One meeting shall be held before finalisation
of annual accounts and one every six months. The
quorum shall be either two members or one third
of the members of the audit committee, whichever
is higher and minimum of two independent directors.
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The audit committee shall have powers which should
include the following :
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The role of the audit committee shall include the
following:
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To oversee the company’s financial reporting
process and the disclosure of its financial
information to ensure that the financial statement
is correct, sufficient and credible.
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Recommending the appointment and removal of
external auditor, fixation of audit fee and
also approval for payment for any other services.
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Reviewing with management the annual financial
statements before submission to the board, focusing
primarily on;
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Any
changes in accounting policies and practices.
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Major
accounting entries based on exercise of judgement
by management.
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Qualifications
in draft audit report.
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Significant
adjustments arising out of audit.
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The
going concern assumption.
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Compliance
with accounting standards.
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Compliance with stock exchange and legal requirements
concerning financial statements.
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Any
related party transactions i.e. transactions of
the company of material nature with promoters or
the management, their subsidiaries or relatives
etc. that may have potential conflict with the interest
of company at large.
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Reviewing with the management, external and
internal auditors, the adequacy of internal
control systems.
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Reviewing the adequacy of internal audit function,
including the structure of the internal audit
department, staffing and seniority of the official
heading the department, reporting structure
coverage and frequency of internal audit
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Discussion with internal auditors any significant
findings and follow up there on.
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Reviewing the findings of any internal investigation
by the internal auditors into matters where
there is suspected fraud or irregularity or
a failure of internal control systems of a material
nature and reporting the matter to the board.
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Discussion with external auditors before the
audit commences nature and scope of audit as
well as have post-audit discussion to ascertain
any area of concern.
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Reviewing
the company’s financial and risk management
policies.
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To
look into the reasons for substantial defaults
in the payment to the depositors, debenture
holders, shareholders (in case of non payment
of declared dividends) and creditors.
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