Audit Committee u/s 292A

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Querist : Anonymous

Querist : Anonymous (Querist)

22 December 2010 My Company is closely held public company having paid up share capital more than Rs 5.00 Crore hense section 292A of Companies Act is applicable. As per requirment of 292A there should be al least 3 directors as member of Audit Committee and 2/3 should be other than M.D. or Whole time director. But our company having all the director as Whole time director ( There is no Independend or Non Executive Director). What we shold do

Ajay Mishra

Ajay Mishra (Expert)

22 December 2010 Composition of the Audit Committee

As per clause 49 of the Listing Agreement, the audit committee shall have minimum three directors as members. Two third of the members of audit committee shall be independent directors. All the members of the audit committee shall be financially literate and at least one member shall have accounting or related financially management expertise. By implication, audit committee can to the extent of one-third of the strength comprise of non-independent directors including executive directors.

As per section 292A of the Companies Act, 1956, not less than three directors or such higher number of the directors as the Board may determine of which two third of the total number of directors shall be a directors other than MD or WTD.

Your company violating the provisions of Audit committee. You should appoint new director to constitute such Audit Committee.

Regards

udit sharma

udit sharma (Expert)

22 December 2010 Hi...

As cited by the expert Clause 49 of the Listing Agreement is applicable only in case of Listed Comapnies.

But the query in quesion clearly suggests that the Company in question is not a Listed Company but a closely held Public Company having a paid up capital of more than Rs. 5 Crores. In this case constitution of the Audit Committee shall be governed by the provisions of section 292A of the Companies Act, 1956 and not by Clause 49 of the Listing Agreement.

Now, as per section 292A of the Companies Act, 1956 every Public Company or a Private Company which is a subsidiary of a Public Company having a paid up capital of Rs. 5 Crores or more is required to constitute a Committee of its BOD consisting of not less than 3 Directors of whom not less than 2/3rd of the total number of Directors must be Directors other than Managing or Whole time Directors i.e. other than Executive Directors.

It is clear that at the most an Audit Committee can have 1/3rd of the total number of members as Executive Directors.
Since, this is not the case in your Company, where all the Directors are WTD, u will have to appoint 2 Additional Directors as Non-Executive Directors.

The Audit Committee of your Company must have 3 Directors of whom one can be existing WTD and the remaining members should be the 2 Additional Directors appointed.

God Bless

Udit Sharma

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