MODULE-2

Question 1

Section 2(e) of LODR

Answer 1

“chief executive officer” or “managing director” or “manager” shall mean the person so appointed in terms of the Companies Act, 2013

Question 2

Section 2(f) of LODR

Answer 2

chief financial officer” or “whole time finance director” or “head of finance”, by whatever name called, shall mean the person heading and discharging the finance function of the listed entity as disclosed by it to the recognised stock exchange(s) in its filing under these regulations

Question 3

Section 2(o) of LODR

Answer 3

“key managerial personnel” means key managerial personnel as defined in sub-section (51) of section 2 of the Companies Act, 2013;

Question 4

Section 2(p) of LODR

Answer 4

“listed entity” means an entity which has listed, on a recognized stock exchange(s), the designated securities issued by it or designated securities issued under schemes managed by it, in accordance with the listing agreement entered into between the entity and the recognized stock exchange(s)

Question 5

Section 2(w) of LODR

Answer 5

promoter” and “promoter group” shall have the same meaning as assigned to them respectively in clauses 15[(oo)]and 16[(pp)] of sub-regulation (1) of regulation 2 of the [Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018

Question 6

Section 2(zf) of LODR

Answer 6

“securities laws” means the Act, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996, and the provisions of the Companies Act, 1956 and Companies Act, 2013, and the rules, regulations, circulars or guidelines made thereunder

Question 7

Regulation 3-Applicability of the Regulations

Answer 7

[(1)] Unless otherwise provided, these regulations shall apply to listed entity which] has listed any of the following designated securities on recognized stock exchange(s):

(a) specified securities listed on main board or SME Exchange or Innovators
Growth Platform];
(b) non-convertible securities;
(c) Indian depository receipts;
(d) securitized debt instruments; (da) security receipts;]
(e) units issued by mutual funds;
(f) any other securities as may be specified by the Board.

(2) The applicability of the provisions of these regulations to a listed entity on the basis of market capitalisation shall be determined as follows:
(a) Every recognized stock exchange shall, at the end of the calendar year i.e., 31st December, prepare a list of entities that have listed their specified securities ranking such entities on the basis of their average market capitalization from 1st July to 31st December of that calendar
year.

(b) The relevant provisions shall then become applicable to a listed entity that is required to comply with such requirements for the first time (or, if applicable, required to comply after
any interim period) after a period of three months from December 31 (i.e. April 1) or from the beginning of the immediate next financial year, whichever is later:

Provided that the listed entity, which is required to comply for the first time or after a period
of cessation, shall put in place systems and processes for compliance with clause (f) of sub- regulation (2) of regulation 34 within a period of three months from December 31 (i.e. on or before April 1) or from the beginning of the immediate next financial year, whichever is later, and further disclose the Business Responsibility and Sustainability Report and/or assurance as per the Business Responsibility and Sustainability Report Core in the Annual Report prepared for the financial year in which systems and processes were required to be put in place in accordance with this proviso.

(c) The listed entity shall continue to comply with relevant provisions that were applicable to it based on the market capitalisation of previous year and continue(s) to remain applicable on the basis of its rank in the list prepared by recognized stock exchanges as per clause (a) of this sub-regulation.]

(2A) The provisions of these regulations, which become applicable to a listed entity on the basis of criteria of market capitalisation, shall continue to apply to such an entity unless its ranking changes in the list prepared in accordance with sub-regulation (2) of this regulation and such change results in the listed entity remaining outside the applicable threshold for a period of three consecutive years.

(2B) For such listed entities which remain outside the applicable threshold for a period of three consecutive years in terms of sub-regulation (2A) of this regulation, the provisions that apply on the basis of criteria of market capitalisation shall cease to apply at the end of the financial year following the 31st December of the third consecutive year:

Provided that for those listed entities that follow January to December as its financial year, the provisions shall cease to apply at the end of three months from 31st December of the third consecutive year (i.e. on 31st March).]

[(3) The provisions of these regulations which become applicable to listed entities on the basis of the criterion of the value of outstanding listed debt securities shall continue to apply to such entities even if they fall below such thresholds as mentioned in sub-regulation (1A) of
regulation 15.]

Question 8

Regulation 6- Compliance Officer and his/her Obligations

Answer 8

(1) A listed entity shall appoint a qualified company secretary as the compliance officer.

[(1A) Any vacancy in the office of the Compliance Officer shall be filled by the listed entity at the earliest and in any case not later than three months from the date of such vacancy:

Provided that the listed entity shall not fill such vacancy by appointing a person in interim capacity, unless such appointment is made in accordance with the laws applicable in case of a fresh appointment to such office and the obligations under such laws are made applicable to such person.]

(2) The compliance officer of the listed entity shall be responsible for-

(a) ensuring conformity with the regulatory provisions applicable to the listed entity in letter and spirit.

(b) co-ordination with and reporting to the Board, recognised stock exchange(s) and depositories with respect to compliance with rules, regulations and other directives of these authorities in manner as specified from time to time.

(c) ensuring that the correct procedures have been followed that would result in the correctness, authenticity and comprehensiveness of the information, statements and reports filed by the listed entity under these regulations.

(d) monitoring email address of grievance redressal division as designated by the listed entity for the purpose of registering complaints by investors:
Provided that the requirements of this regulation shall not be applicable in the case of units issued by mutual funds which are listed on recognised stock exchange(s) but shall be governed by the provisions of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

Question 9

Regulation 15 - Applicability

Answer 9

(1) The provisions of this chapter shall apply to a listed entity which has listed its specified securities on any recognised stock exchange(s) either on the main board or on SME Exchange or on Innovators Growth Platform]:

(1A) The provisions of this regulation and regulation 16 to regulation 27 of this chapter shall apply to a listed entity which has listed its non-convertible debt securities and has an outstanding value of listed non-convertible debt securities of Rupees Five Hundred Crore and above:

Provided that in case an entity that has listed its non-convertible debt securities triggers the specified threshold of Rupees Five Hundred Crore during the course of the year, it shall ensure compliance with these provisions within six months from the date of such trigger:
Provided further that these provisions shall be applicable to a ‘high value debt listed entity’ on a ‘comply or explain’ basis until March 31, 2025] and on a mandatory basis thereafter.

Explanation (1)- The entities referred in the first proviso to sub-regulation (1A) of regulation 15 are referred to as ‘high value debt listed entities’ for the purpose of this chapter.
Explanation (2) - The ‘high value debt listed entities’ on the date of notification of this amendment would be determined on basis of value of principal outstanding of listed debt securities as on March 31, 2021.

(2) The compliance with the corporate governance provisions as specified in regulations 17, [17A,] 18, 19, 20, 21,22, 23, 24, 62[24A,] 25, 26, 27 and clauses (b) to (i) 63[and (t)] of sub- regulation (2) of regulation 46 and para C, D and E of Schedule V shall not apply, in respect
of -
(a) a listed entity having paid up equity share capital not exceeding rupees ten crore and net worth not exceeding rupees twenty five crore, as on the last day of the previous financial year:

[Provided that where the provisions of regulations 17 to 27, clauses (b) to (i) and (t) of sub-regulation (2) of regulation 46 and para C, D and E of Schedule V become applicable to a listed entity at a later date, it shall ensure compliance with the same within six months from such date:]

[Provided further that once the above regulations become applicable to a listed entity, they shall continue to remain applicable till such time the equity share capital or the net- worth of such entity reduces and remains below the specified threshold for a period of three consecutive financial years.

(2A) The provisions as specified in regulation 17 shall not be applicable during the insolvency resolution process period in respect of a listed entity or a ‘high-value debt listed entity’] which is undergoing corporate insolvency resolution process under the Insolvency Code:

Provided that the role and responsibilities of the board of directors as specified under regulation 17 shall be fulfilled by the interim resolution professional or resolution professional in accordance with sections 17 and 23 of the Insolvency Code.

(2B) The provisions as specified in regulations 18, 19, 20 and 21 shall not be applicable during the insolvency resolution process period in respect of a listed entity or a ‘high value debt listed entity’] which is undergoing corporate insolvency resolution process under the Insolvency Code:

Provided that the roles and responsibilities of the committees specified in the respective regulations shall be fulfilled by the interim resolution professional or resolution
professional.

Question 10

Regulation 16(B)

Answer 10

“independent director” means a non-executive director, other than a nominee director of the listed entity:

(i) who, in the opinion of the board of directors, is a person of integrity and
possesses relevant expertise and experience;
(ii) who is or was not a promoter of the listed entity or its holding, subsidiary or associate company or member of the promoter group of the listed entity];
(iii) who is not related to promoters or directors in the listed entity, its holding, subsidiary or associate company;
(iv) who, apart from receiving director’s remuneration, has or had no material pecuniary relationship with the listed entity, its holding, subsidiary or associate company, or their promoters, or directors, during the [three] immediately preceding financial years or during the current financial year;
(v) none of whose relatives—

[ (A) is holding securities of or interest in the listed entity, its holding,
subsidiary or associate company during the three immediately
preceding financial years or during the current financial year of face
value in excess of fifty lakh rupees or two percent of the paid-up capital
of the listed entity, its holding, subsidiary or associate company,
respectively, or such higher sum as may be specified;
(B) is indebted to the listed entity, its holding, subsidiary or associate
company or their promoters or directors, in excess of such amount as may be specified during the three immediately preceding financial
years or during the current financial year;
(C) has given a guarantee or provided any security in connection with
the indebtedness of any third person to the listed entity, its holding,
subsidiary or associate company or their promoters or directors, for
such amount as may be specified during the three immediately
preceding financial years or during the current financial year; or
(D) has any other pecuniary transaction or relationship with the listed entity, its holding, subsidiary or associate company amounting to two
percent or more of its gross turnover or total income:

Provided that the pecuniary relationship or transaction with the listed entity, its holding, subsidiary or associate company or their promoters, or directors in relation to points (A) to (D) above shall not exceed two percent of its gross turnover or total income or fifty lakh rupees or such higher amount as may be specified from time to time, whichever is lower.]
(vi) who, neither himself 78[“/herself], nor whose relative(s) —

(A) holds or has held the position of a key managerial personnel or is or
has been an employee of the listed entity or its holding, subsidiary or
associate company or any company belonging to the promoter group of the listed entity,] in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed:

[Provided that in case of a relative, who is an employee other than
key managerial personnel, the restriction under this clause shall not
apply for his / her employment.]
(B) is or has been an employee or proprietor or a partner, in any of the
three financial years immediately preceding the financial year in
which he is proposed to be appointed, of —
(1) a firm of auditors or company secretaries in practice or cost
auditors of the listed entity or its holding, subsidiary or associate
company; or
(2) any legal or a consulting firm that has or had any transaction with
the listed entity, its holding, subsidiary or associate company
amounting to ten per cent or more of the gross turnover of such
firm;
(C) holds together with his relatives two per cent or more of the total
voting power of the listed entity; or
(D) is a chief executive or director, by whatever name called, of any non-
profit organisation that receives twenty-five per cent or more of its
receipts or corpus from the listed entity, any of its promoters, directors
or its holding, subsidiary or associate company or that holds two per
cent or more of the total voting power of the listed entity;
(E) is a material supplier, service provider or customer or a lessor or lessee of the listed entity;
(vii) who is not less than 21 years of age.
[(viii) who is not a non-independent director of another company on the board of which any non-independent director of the listed entity is an independent
director:]

Question 11

Regulation 17-Board of Directors

Answer 11

(1) The composition of board of directors of the listed entity shall be as follows:
(a) board of directors shall have an optimum combination of executive and non- executive directors with at least one woman director and not less than fifty per cent. of the board of directors shall comprise of non-executive directors;

[Provided that the Board of directors of the top 1000 listed entities
shall have at least one independent woman director.
(b) where the chairperson of the board of directors is a non-executive director, at least one-third of the board of directors shall comprise of independent directors and where the listed entity does not have a regular non-executive chairperson, at least half of the board of directors shall comprise of independent directors:
Provided that where the regular non-executive chairperson is a promoter of the listed entity or is related to any promoter or person occupying management positions at the level of board of director or at one level below the board of directors, at least half of the board of directors of the listed entity shall consist
of independent directors.

Explanation.- For the purpose of this clause, the expression “related to any
promoter” shall have the following meaning:
(i) if the promoter is a listed entity, its directors other than the independent
directors, its employees or its nominees shall be deemed to be related to it;
(ii) if the promoter is an unlisted entity, its directors, its employees or its nominees shall be deemed to be related to it.
(c) The board of directors of the top 2000 listed entities shall comprise of not less than six directors.

(d) where the listed company has outstanding SR equity shares, atleast half of the board of directors shall comprise of independent directors.]

(2) The board of directors shall meet at least four times a year, with a maximum time gap of one hundred and twenty days between any two meetings.

(3) The board of directors shall periodically review compliance reports pertaining to all laws applicable to the listed entity, prepared by the listed entity as well as steps taken by the listed entity to rectify instances of non-compliances.

(4) The board of directors of the listed entity shall satisfy itself that plans are in place for orderly succession for appointment to the board of directors and senior management.

(5) (a) The board of directors shall lay down a code of conduct for all members of board of directors and senior management of the listed entity.
(b) The code of conduct shall suitably incorporate the duties of independent directors
as laid down in the Companies Act, 2013.

(6) (a) The board of directors shall recommend all fees or compensation, if any, paid to
non-executive directors, including independent directors and shall require approval of shareholders in general meeting.
(b) The requirement of obtaining approval of shareholders in general meeting shall not apply to payment of sitting fees to non-executive directors, if made within the limits
prescribed under the Companies Act, 2013 for payment of sitting fees without approval of the Central Government.
(c) The approval of shareholders mentioned in clause (a), shall specify the limits for the maximum number of stock options that may be granted to non-executive directors, in any financial year and in aggregate.
[(ca) The approval of shareholders by special resolution shall be obtained every year, in which the annual remuneration payable to a single non-executive director
exceeds fifty per cent of the total annual remuneration payable to all non-executive directors, giving details of the remuneration thereof.]
(d) Independent directors shall not be entitled to any stock option.
(e) The fees or compensation payable to executive directors who are promoters or members of the promoter group, shall be subject to the approval of the shareholders by special resolution in general meeting, if-
(i) the annual remuneration payable to such executive director exceeds rupees 5 crore or 2.5 per cent of the net profits of the listed entity, whichever is higher; or
(ii) where there is more than one such director, the aggregate annual remuneration to such directors exceeds 5 per cent of the net profits of the listed entity:
Provided that the approval of the shareholders under this provision shall be valid only till the expiry of the term of such director.
Explanation: For the purposes of this clause, net profits shall be calculated as per section 198 of the Companies Act, 2013.]

(7) The minimum information to be placed before the board of directors is specified in Part A of Schedule II.

(8) The chief executive officer and the chief financial officer shall provide the compliance certificate to the board of directors as specified in Part B of Schedule II.

(9) (a) The listed entity shall lay down procedures to inform members of board of directors about risk assessment and minimization procedures.
b) The board of directors shall be responsible for framing, implementing and monitoring the risk management plan for the listed entity.

[(10) The evaluation of independent directors shall be done by the entire board of directors which shall include -
(a) performance of the directors; and
(b) fulfillment of the independence criteria as specified in these regulations and their independence from the management:

Provided that in the above evaluation, the directors who are subject to evaluation shall not participate.]

(11). The statement to be annexed to the notice as referred to in sub-section (1) of section 102 of the Companies Act, 2013 for each item of special business to be transacted at a general meeting shall also set forth

Question 12

Regulation 17-A-Maximum Number of Directorships

Answer 12

The directors of listed entities shall comply with the following conditions with respect to the maximum number of directorships, including any alternate directorships that can be held by them at any point of time -

(1) A person shall not be a director in more than eight listed entities with effect from April 1, 2019 and in not more than seven listed entities with effect from April 1, 2020:
Provided that a person shall not serve as an independent director in more than seven listed entities.

(2) Notwithstanding the above, any person who is serving as a whole time director / managing director in any listed entity shall serve as an independent director in not
more than three listed entities.

[Explanation,—] For the purpose of this regulation], the count for the number of listed entities on which a person is a director / independent director shall be only those whose equity shares are listed on a stock exchange.]

Question 13

Regulation 18-Audit Committee

Answer 13

(1) Every listed entity shall constitute a qualified and independent audit committee in accordance with the terms of reference, subject to the following:

(a) The audit committee shall have minimum three directors as members.
(b) [At least] two-thirds of the members of audit committee shall be independent directors and in case of a listed entity having outstanding SR equity shares, the audit committee shall only comprise of independent directors].
(c) All members of audit committee shall be financially literate and at least one member shall have accounting or related financial management expertise.

Explanation (1).
- For the purpose of this regulation, “financially literate” shall mean
the ability to read and understand basic financial statements i.e. balance sheet, profit and loss account, and statement of cash flows.
Explanation (2).- For the purpose of this regulation , a member shall be considered to have accounting or related financial management expertise if he or she possesses
experience in finance or accounting, or requisite professional certification in accounting, or any other comparable experience or background which results in the
individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.
(d) The chairperson of the audit committee shall be an independent director and he /she shall be present at Annual general meeting to answer shareholder queries.
(e) The Company Secretary shall act as the secretary to the audit committee.
(f) The audit committee at its discretion shall invite the finance director or head of the finance function, head of internal audit and a representative of the statutory auditor and any other such executives to be present at the meetings of the committee:
Provided that occasionally the audit committee may meet without the presence of any executives of the listed entity.

(2) The listed entity shall conduct the meetings of the audit committee in the following manner:
(a) The audit committee shall meet at least four times in a year and not more than one hundred and twenty days shall elapse between two meetings.
(b) The quorum for audit committee meeting shall either be two members or one third of the members of the audit committee, whichever is greater, with at least two independent directors.
(c) The audit committee shall have powers to investigate any activity within its terms of reference, seek information from any employee, obtain outside legal or other
professional advice and secure attendance of outsiders with relevant expertise, if it considers necessary.
(3) The role of the audit committee and the information to be reviewed by the audit committee shall be as specified in Part C of Schedule II.

Question 14

Section 177 of CA-13

Answer 14

(1) The Board of Directors of every listed company and such other class or classes of companies, as may be prescribed, shall constitute an Audit Committee.
(2) The Audit Committee shall consist of a minimum of three directors with independent directors forming a majority:

Provided that majority of members of Audit Committee including its Chairperson shall be persons with ability to read and understand, the financial statement.

(3) Every Audit Committee of a company existing immediately before the commencement of this Act
shall, within one year of such commencement, be reconstituted in accordance with sub-section (2).

(4) Every Audit Committee shall act in accordance with the terms of reference specified in writing by
the Board which shall, inter alia, include,—
(i) the recommendation for appointment, remuneration and terms of appointment of auditors of
the company;
(ii) review and monitor the auditor‘s independence and performance, and effectiveness of audit process;
(iii) examination of the financial statement and the auditors‘ report thereon;
(iv) approval or any subsequent modification of transactions of the company with related parties:
[Provided that the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to such conditions as may be prescribed;]
(v) scrutiny of inter-corporate loans and investments;
(vi) valuation of undertakings or assets of the company, wherever it is necessary;
(vii) evaluation of internal financial controls and risk management systems;
(viii) monitoring the end use of funds raised through public offers and related matters.

(5) The Audit Committee may call for the comments of the auditors about internal control systems, the scope of audit, including the observations of the auditors and review of financial statement before their submission to the Board and may also discuss any related issues with the internal and statutory auditors and the management of the company.

(6) The Audit Committee shall have authority to investigate into any matter in relation to the items
specified in sub-section (4) or referred to it by the Board and for this purpose shall have power to obtain professional advice from external sources and have full access to information contained in the records of the company.

(7) The auditors of a company and the key managerial personnel shall have a right to be heard in the
meetings of the Audit Committee when it considers the auditor‘s report but shall not have the right to
vote.

(8) The Board‘s report under sub-section (3) of section 134 shall disclose the composition of an Audit
Committee and where the Board had not accepted any recommendation of the Audit Committee, the same
shall be disclosed in such report along with the reasons therefor.

(9) Every listed company or such class or classes of companies, as may be prescribed, shall establish a vigil mechanism for directors and employees to report genuine concerns in such manner as may be
prescribed.

(10) The vigil mechanism under sub-section (9) shall provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases:

Provided that the details of establishment of such mechanism shall be disclosed by the company on its website, if any, and in the Board‘s report.

Question 15

Regulation 19- Nomination and Remuneration Committee

Answer 15

(1) The board of directors shall constitute the nomination and remuneration committee as follows:

(a) the committee shall comprise of at least three directors ;
(b) all directors of the committee shall be non-executive directors; and
(c) at least two-thirds of the directors shall be independent directors.

(2) The Chairperson of the nomination and remuneration committee shall be an independent director:
Provided that the chairperson of the listed entity, whether executive or non-executive, may be appointed as a member of the Nomination and Remuneration Committee and shall
not chair such Committee.
[(2A) The quorum for a meeting of the nomination and remuneration committee shall be either two members or one-third of the members of the committee, whichever is greater, including at least one independent director in attendance.]
(3) The Chairperson of the nomination and remuneration committee may be present at the
annual general meeting, to answer the shareholders’ queries; however, it shall be up to the chairperson to decide who shall answer the queries.

[(3A) The nomination and remuneration committee shall meet at least once in a year.]

(4) The role of the nomination and remuneration committee shall be as specified as in Part D
of the Schedule II.

Question 16

Section 178 of CA-13

Answer 16

(1) The Board of Directors of every listed company and such other class or classes of companies, as may be prescribed shall constitute the Nomination and Remuneration Committee consisting of three or more non-executive directors out of which not less than one-half shall be independent directors:

Provided that the chairperson of the company (whether executive or non-executive) may be appointed
as a member of the Nomination and Remuneration Committee but shall not chair such Committee.

(2) The Nomination and Remuneration Committee shall identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal and shall carry out evaluation of every director‘s performance.

(3) The Nomination and Remuneration Committee shall formulate the criteria for determining
qualifications, positive attributes and independence of a director and recommend to the Board a policy,
relating to the remuneration for the directors, key managerial personnel and other employees.

(4) The Nomination and Remuneration Committee shall, while formulating the policy under sub-
section (3) ensure that—
(a) the level and composition of remuneration is reasonable and sufficient to attract, retain and
motivate directors of the quality required to run the company successfully;
(b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and
(c) remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals:

Provided that such policy shall be disclosed in the Board’s report.

(5) The Board of Directors of a company which consists of more than one thousand shareholders,
debenture-holders, deposit-holders and any other security holders at any time during a financial year shall
constitute a Stakeholders Relationship Committee consisting of a chairperson who shall be a non-
executive director and such other members as may be decided by the Board.

(6) The Stakeholders Relationship Committee shall consider and resolve the grievances of security holders of the company.

(7) The chairperson of each of the committees constituted under this section or, in his absence, any
other member of the committee authorised by him in this behalf shall attend the general meetings of the
company.

(8) In case of any contravention of the provisions of section 177 and this section, the company shall
be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh
rupees and every officer of the company who is in default shall be punishable with imprisonment for a
term which may extend to one year or with fine which shall not be less than twenty-five thousand rupees
but which may extend to one lakh rupees, or with both:

Provided that non-consideration of resolution of any grievance by the Stakeholders Relationship Committee in good faith shall not constitute a contravention of this section.

Explanation.—The expression “senior management‘‘ means personnel of the company who are members of its core management team excluding Board of Directors comprising all members of management one level below the executive directors, including the functional heads.

Question 17

Regulation 20- Stakeholders Relationship Committee

Answer 17

(1) The listed entity shall constitute a Stakeholders Relationship Committee to specifically look into various aspects of interest] of shareholders, debenture holders and other security holders.
(2) The chairperson of this committee shall be a non-executive director.
(2A) At least three directors, with at least one being an independent director, shall be members of the Committee and in case of a listed entity having outstanding SR equity shares, at least two-thirds of the Stakeholders Relationship Committee shall comprise of independent directors].
(3) The Chairperson of the Stakeholders Relationship Committee shall be present at the annual general meetings to answer queries of the security holders.]
(3A) The stakeholders relationship committee shall meet at least once in a year.]
(4) The role of the Stakeholders Relationship Committee shall be as specified as in Part D of
the Schedule II.

Question 18

Regulation 21- Risk Management Committee

Answer 18

(1) The board of directors shall constitute a Risk Management Committee.
(2) The Risk Management Committee shall have minimum three members with majority of them being members of the board of directors, including at least one independent
director and in case of a listed entity having outstanding SR equity shares, at least two thirds of the Risk Management Committee shall comprise independent directors.]
(3) The Chairperson of the Risk management committee shall be a member of the board of
directors and senior executives of the listed entity may be members of the committee.
(3A) The risk management committee shall meet at least twice in a year.]
(3B) The quorum for a meeting of the Risk Management Committee shall be either two members or one-third of the members of the committee, whichever is higher, including at least
one member of the board of directors in attendance.
(3C) The meetings of the risk management committee shall be conducted in such a manner
that on a continuous basis not more than one hundred and eighty days shall elapse between any two consecutive meetings.]
(4) The board of directors shall define the role and responsibility of the Risk Management Committee and may delegate monitoring and reviewing of the risk management plan to
the committee and such other functions as it may deem fit such function shall specifically cover cyber security]:

[Provided that the role and responsibilities of the Risk Management Committee shall
mandatorily include the performance of functions specified in Part D of Schedule II.]

(5) The provisions of this regulation shall be applicable to:
i. the top 1000 listed entities, determined on the basis of market capitalization as at the end of the immediate preceding financial year; and,
ii. a ‘high value debt listed entity’.]

(6) The Risk Management Committee shall have powers to seek information from any employee, obtain outside legal or other professional advice and secure attendance of outsiders with relevant expertise, if it considers necessary.]

Question 19

Regulation 22- Vigil Mechanism

Answer 19

(1) The listed entity shall formulate a vigil mechanism whistle blower policy for directors and employees to report genuine concerns.
(2) The vigil mechanism shall provide for adequate safeguards against victimization of director(s) or employee(s) or any other person who avail the mechanism and also provide
for direct access to the chairperson of the audit committee in appropriate or exceptional cases.

Question 20

Regulation 24

Answer 20

(1) At least one independent director on the board of directors of the listed entity shall be a director on the board of directors of an unlisted material subsidiary, whether incorporated in India or not.

Explanation - For the purposes of this provision, notwithstanding anything to the contrary contained in regulation 16, the term “material subsidiary” shall mean a subsidiary, whose income or net worth exceeds twenty percent of the consolidated
income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.]
(2) The audit committee of the listed entity shall also review the financial statements, in particular, the investments made by the unlisted subsidiary.
(3) The minutes of the meetings of the board of directors of the unlisted subsidiary shall be placed at the meeting of the board of directors of the listed entity.
(4) The management of the unlisted subsidiary shall periodically bring to the notice of the board of directors of the listed entity, a statement of all significant transactions and arrangements entered into by the unlisted subsidiary.

Explanation.
- For the purpose of this regulation, the term “significant transaction or
arrangement” shall mean any individual transaction or arrangement that exceeds or is
likely to exceed ten percent of the total revenues or total expenses or total assets or total liabilities, as the case may be, of the unlisted subsidiary for the immediately
preceding accounting year.

(5) A listed entity shall not dispose of shares in its material subsidiary resulting in reduction
of its shareholding (either on its own or together with other subsidiaries) to less than or equal to] fifty percent or cease the exercise of control over the subsidiary without passing
a special resolution in its General Meeting except in cases where such divestment is made under a scheme of arrangement duly approved by a Court/Tribunal[, or under a resolution
plan duly approved under section 31 of the Insolvency Code and such an event is disclosed to the recognized stock exchanges within one day of the resolution plan being
approved.

(6) Selling, disposing and leasing of assets amounting to more than twenty percent of the assets of the material subsidiary on an aggregate basis during a financial year shall require prior approval of shareholders by way of special resolution, unless the sale/disposal/lease is made under a scheme of arrangement duly approved by a Court/Tribunal, or under a resolution plan duly approved under section 31 of the Insolvency Code and such an event is disclosed to the recognized stock exchanges within one day of the resolution plan being approved
.
(7) Where a listed entity has a listed subsidiary, which is itself a holding company, the provisions of this regulation shall apply to the listed subsidiary in so far as its subsidiaries
are concerned.

Question 21

Regulation 25- Obligations with respect to Independent Directors

Answer 21

(1) No person shall be appointed or continue as an alternate director for an independent director of a listed entity with effect from October 1, 2018.
(2) The maximum tenure of independent directors shall be in accordance with the Companies
Act, 2013 and rules made thereunder, in this regard, from time to time.

[(2A). The appointment, re-appointment or removal of an independent director of a listed
entity, shall be subject to the approval of shareholders by way of a special resolution.]

Provided that where a special resolution for the appointment of an independent director fails to get the requisite majority of votes but the votes cast in favour of the
resolution exceed the votes cast against the resolution and the votes cast by the public shareholders in favour of the resolution exceed the votes cast against the resolution,
then the appointment of such an independent director shall be deemed to have been made under sub-regulation (2A):

Provided further that an independent director appointed under the first proviso shall be removed only if the votes cast in favour of the resolution proposing the removal exceed the votes cast against the resolution and the votes cast by the public shareholders in favour of
the resolution exceed the votes cast against the resolution.

(3) The independent directors of the listed entity shall hold at least one meeting in a [financial] year, without the presence of non-independent directors and members of the
management and all the independent directors shall strive to be present at such meeting.

(4) The independent directors in the meeting referred in sub-regulation (3) shall, inter alia-
(a) review the performance of non-independent directors and the board of directors as a whole;
(b) review the performance of the chairperson of the listed entity, taking into account the views of executive directors and non-executive directors;
(c) assess the quality, quantity and timeliness of flow of information between the management of the listed entity and the board of directors that is necessary for the
board of directors to effectively and reasonably perform their duties.

(5) An independent director shall be held liable, only in respect of such acts of omission or commission by the listed entity which had occurred with his/ her knowledge, attributable through processes of board of directors, and with his/her] consent or connivance or where he/she] had not acted diligently with respect to the provisions contained in these regulations.

(6) An independent director who resigns or is removed from the board of directors of the listed entity shall be replaced by a new independent director by listed entity at the earliest but not later than three months from the date of such vacancy.

Provided that where the listed entity fulfils the requirement of independent directors in its
board of directors without filling the vacancy created by such resignation or removal, the requirement of replacement by a new independent director shall not apply.

(7) The listed entity shall familiarise the independent directors through various programmes about the listed entity, including the following:
(a) nature of the industry in which the listed entity operates;
(b) business model of the listed entity;
(c) roles, rights, responsibilities of independent directors; and
(d) any other relevant information.

[(8) Every independent director shall, at the first meeting of the board in which he participates as a director and thereafter at the first meeting of the board in every financial year
or whenever there is any change in the circumstances which may affect his status as an independent director, submit a declaration that he meets the criteria of independence as provided in clause (b) of sub-regulation (1) of regulation 16 and that he is not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact his ability to discharge his duties with an objective independent judgment and without any external influence.
(9) The board of directors of the listed entity shall take on record the declaration and confirmation submitted by the independent director under sub-regulation (8) after undertaking due assessment of the veracity of the same.
(10) With effect from January 1, 2022}, the top 1000 listed entities by market
capitalization calculated as on March 31 of the preceding financial year, shall undertake Directors and Officers insurance (‘D and O insurance’) for all their independent directors of such quantum and for such risks as may be determined by its board of directors.]
[(11). No independent director, who resigns from a listed entity, shall be appointed as an
executive / whole time director on the board of the listed entity, its holding, subsidiary or associate company or on the board of a company belonging to its promoter group, unless a period of one year has elapsed from the date of resignation as an independent director.]
[(12) A ‘high value debt listed entity’ shall undertake Directors and Officers insurance (D and O insurance) for all its independent directors for such sum assured and for such risks as may be determined by its board of directors.]

Question 22

Section 135 of the CA-13

Answer 22

(1) Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors , out of which at least one director shall be an independent director .

Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors.

(2) The Board’s report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee shall,—

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII;

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time.

(4) The Board of every company referred to in sub-section (1) shall,—

(a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company’s website, if any, in such manner as may be prescribed; and

(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial year , or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:

Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities:

Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount and, unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.

Provided also that if the company spends an amount in excess of the requirements provided under this sub-section, such company may set off such excess amount against the requirement to spend under this sub-section for such number of succeeding financial years and in such manner, as may be prescribed.

Explanation.—For the purposes of this section “net profit” shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of section 198.

(6) Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in persuance of its Corporate Social Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.

(7) If a company is in default in complying with the provisions of sub-section ( 5 ) or sub section ( 6), the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.”

(8) The Central Government may give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of provisions of this section and such company or class of companies shall comply with such directions.

(9) Where the amount to be spent by a company under sub-section (5) does not exceed fifty lakh rupees, the requirement under sub-section (1) for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee provided under this section shall, in such cases, be discharged by the Board of Directors of such company.