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Corporate Laws > Lecture 2 ( Code of corporate governance for listed companies) > Flashcards

Lecture 2 ( Code of corporate governance for listed companies) Flashcards

1
Q

As per section 156 of the companies act who will provide the framework to ensure compliance with good corporate practices?

A

Securities and Exchange commission

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2
Q

Does the code of corporate governance regulations 2019 follows comply or explain approach?

A

Yes

For non mandatory provisions they should be complied and if not the company needs to explain the reasons for non compliance.
For mandatory provisions they must be followed or penal action would be taken.

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3
Q

What is the limit to the number of directorships in a listed company ? and what is the exception to the rule?

A
  1. Seven listed companies
  2. if the directorship is in the listed subsidiary of the listed company in which there is a directorship.
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4
Q

What is the listed company required to attach to the notice of the meeting for the candidate representing minority shareholders?

A
  1. statement by the candidate including profile of the candidate
    2.an additional copy of proxy form duly filled by the candidate

also the candidate should be provided with the information regarding shareholding structure and members.

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5
Q

What should be the number of independent directors?

A

2 or 1/3 of the total number of directors.
If rounded down explain it.

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6
Q

Is the independent director required to submit any kind of consent to act as director?

A

Yes the independent director is required to submit a written consent to act as a director along with a declaration that he qualifies the criteria of independence.

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7
Q

Is the independent director required to submit any kind of consent to act as director?

A

Yes the independent director is required to submit to the chairman a written consent to act as a director along with a declaration that he qualifies the criteria of independence.

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8
Q

When is the independent director required to submit the consent to act as director and declaration of independence?

A

On the first meeting which is held after the election of directors as well as on an event of any change affecting the independence.

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9
Q

How many female directors are required to be elected on board of a listed company?

A

1

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10
Q

What is maximum number allowed for the executive directors on the board of a listed company?

A

Shall not be more than 1/3 of the board including the chairman.

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11
Q

Who is an executive director?

A

A director who spends whole or substantially whole of the time to the company.
Is involved in day to day affairs of the company/
Takes salary from the company.

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12
Q

Chairman of the board = executive ? non executive? or no such requirement?

A

Non-executive

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13
Q

For how long will the chairman of the board hold the office?

A

3 Years

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14
Q

Can chairman and chief executive be the same individuals?

A

No, because the chairman is from among the non-executive directors and chief executive is an executive director.

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15
Q

Who is responsible for the requirements of code of corporate governance?

A

Board

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16
Q

Who is responsible for the governance of risk and determination of risk tolerance?

A

Board

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17
Q

Who will be the company secretary of a listed company?

A

Company secretary shall be the same as Secretary to the Board

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18
Q

What are the means available to a director if his dissenting note is not properly recorded in the minutes of the meeting?

A

Refer the matter to the company secretary for appending such note to the minutes.
If the company secretary fails to do so he may file an objection before the commission in the form of statement within 30 days from the date of confirmation of minutes.

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19
Q

What is the requirement regarding the attendance in board meeting in code of corporate governance?

A

The CFO and the company secretary shall attend all of the meetings of the board.
In their absence their nominees.

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20
Q

Who shall review and approve the related party transactions?
And what should be the frequency of such reviews?

A

Audit committee shall review the related party transactions and recommend them to board of directors for review and approval.

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21
Q

Who shall review the related party transactions if the majority of the directors are interested in a transaction?

A

In that case, matter shall be placed before the general meeting for approval.

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22
Q

How shall the remuneration of the directors be determined?

A
  1. There shall be a formal policy
  2. No director shall decide his/her own remuneration
  3. The levels of the remuneration shall be appropriate and commensurate with the level of expertise and responsibility.
  4. As per provisions of the act and articles of association.(generic )
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23
Q

What is the requirement related to the director’s training ?

A

All the directors on the board of a listed company are required to have completed the directors training program approved by the commission.
In case of newly appointed directors they should get the respective training within 1 yr of the appointment.

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24
Q

What is the exception to the rule regarding the directors training?

A

A director who has 14 years of education and 15 years experience on the board of a listed company ( local/foreign) shall be exempt from this requirement.

25
Q

What is the requirement for companies to arrange directors training?

A

Companies are encouraged to arrange training for
1. at least 1 female executive
2. at least 1 head of department every year

26
Q

Who is responsible for the appointment of CFO , Company Secretary and head of internal audit division?

A

Board is responsible to appoint determine remuneration and terms and conditions of the appointment of the these personnel.

27
Q

Who is authorized to remove the CFO , company secretary and head of internal audit ?

A

Board. Provided that the head of the internal audit committee shall be removed only upon the recommendation of the audit committee.

28
Q

How much of a managerial experience is required to be a CFO of a listed company if a person is a member of ICAP or ICMAP?

A

at least 3 years

29
Q

Experience in which domains is required for a CFO?

A

Managerial experience in the fields of audit or accounting or in managing financial or corporate affairs functions of a company.

30
Q

How much of a managerial experience is required for a CFO if a person is a member of a professional body of accountants whose qualification is recognized as eq to post graduate degree by HEC or has a post graduate finance degree by HEC or equivalent recognized and approved by HEC?

A

5 years

31
Q

How much of a managerial experience is required for a CFO if a person has a graduate degree recognized and approved from HEC?

A

7 years

32
Q

What is the exemption to the requirements regarding qualification of a CFO?

A

CFO of a listed company having at least 15 years of experience on the same position of a listed company shall be exempted.

33
Q

What is the requirement regarding the qualification of internal auditor if the person is a member of ICAP or ICMAP?

A

3 years of relevant experience

34
Q

What is the requirement regarding the qualification of internal auditor if the person is a certified internal auditor?

A

5 years of relevant experience in audit or finance or compliance

35
Q

What is the requirement regarding the qualification of internal auditor if the person is a certified fraud examiner?

A

5 years of relevant experience in audit or finance or compliance

36
Q

What is the requirement regarding the qualification of internal auditor if the person is a certified Internal control auditor?

A

5 years of relevant experience in audit or finance or compliance

37
Q

What is the requirement regarding the qualification of internal auditor if the person has post graduate degree in finance or equivalent approved by HEC or is member of a professional body relevant to such qualification?

A

5 years of relevant experience in audit or finance or compliance

38
Q

What is the requirement regarding the qualification of internal auditor if the person has a graduate degree recognized and approved by HEC?

A

7 years of managerial experience in fields of audit or accounting or in managing financial or corporate affairs functions of a company.

39
Q

What is the exemption to the requirements regarding qualification of an internal auditor?

A

Existing head of internal audit of a listed company having atleast 15 years of experience on the same position in a listed company shall be exempted.

40
Q

What is the qualification requirement for a company secretary?

A

given in regulation 8-

41
Q

Can a person simultaneously hold the position of a company secretary and CFO?

A

For a listed company, NO

42
Q

Who shall endorse the financial statements of a listed company before presentation of the same before the board?

A

The CFO and the CEO

43
Q

What are the conditions regarding the financial statements before presenting them before the board?

A

CEO and CFO shall endorse them and FS shall be initialed by the external auditors before presentation before the board

44
Q

What should be the min member requirement for an audit committee?

A

3 members

45
Q

What should be the composition of an audit committee>

A

The audit committee should comprise of non-executive directors and at least one independent director

46
Q

What is the requirement regarding to the chairman of the audit committee?

A

the chairman of the audit committee should be an independent director and should not be the same person as the chairman of the board

47
Q

What is the literacy requirement for the members of the audit committee?

A

at least one of the members of the audit committee should be financially literate.

48
Q

What does it mean by being financially literate?

A
  1. A member of recognized body of accountants
    or
  2. post graduate degree approved and recognized by HEC
    or
  3. at least 10 years of experience as audit committee member
    or
    4.atleast 20 years experience as senior management in finance audit etc.
49
Q

Who shall be the secretary to the audit committee?

A

secretary to the audit committee shall either be the company secretary or head of the internal audit

50
Q

How frequently should the audit committee meetings be held?

A

at least once every quarter before approval of interim financials by the board and after completion of the external audit.

51
Q

Who can request a meeting of the audit committee?

A

External auditors, head of the internal audit, chairman of the audit committee

52
Q

Who is required to attend the audit committee meeting other than the members in which issues related to accounts or audit are to be discussed?

A

Head of the internal audit and external audit partner

53
Q

Who cannot be the member of the audit committee?

A

CEO and CFO but they may attend the committee meetings on invitation of the chairman of the audit committee

54
Q

How frequently the external auditors shall meet the audit committee?

A

once a year and in the absence of the CFO or head of the internal audit

55
Q

How frequently should the audit committee meet the head of the internal audit?

A

Once a year and in the absence of the CFO and external auditors.

56
Q

Who shall determine the terms of reference of the audit committee?

A

it is mandatory that the board shall determine the terms of reference of the audit committee

57
Q

What shall be included in the terms of reference of the audit committee?

A
  1. appropriate measures to safeguard company’s assets
  2. review of the interim and annual financial statements before approval by the board
  3. review of the preliminary announcements of results prior external communication
  4. review of ML and tis response
  5. ensuring coordination between internal and external auditors
  6. review the scope and extent of internal audit
  7. review of major findings of internal investigations
  8. ascertaining internal control systems
  9. review of company’s statement on internal control systems prior to endorsement by the Board and internal audit reports
58
Q

Who shall circulate the minutes of the meetings of the audit committee? to whom? and when? and what is the requirement in case it is not possible?

A

It is mandatory that the secretary of the audit committee shall circulate the minutes of the meeting of the audit committee to all members, director, head of the internal audit and where required to chief financial officer prior to the next meeting of the board.
where it is not practicable, the chairman of the audit committee shall communicate the synopsis of the proceedings to the board and the minutes shall be circulated along with the minutes of the meeting of the board.

Corporate Laws (14 decks)

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