A HAND CHART ON REVISED CLAUSE 49 OF THE LISTING AGREEMENT Part - 3

A HAND CHART ON REVISED CLAUSE 49 OF THE LISTING AGREEMENT

Part - 3

BY 

CS K VINOTH AND D HEM SENTHIL RAJ

CLAUSE 49 (IV) of Listing Agreement

CLAUSE 49 (IV) (A) – NOMINATION AND REMUNERATION COMMITTEE

Clause 49(IV) (A) of Listing Agreement mandates every Listed Companies/Entity to set up a Nomination and Remuneration Committee with an objective to ensure the concept of “Right Person to Right Job” by formulating the criteria for determining the qualification, remuneration etc. for appointment of Executive Directors, KMP and Key Employees of the Company.

Composition of the Committee to have:

Minimum – Three Members – Non – Executive.

Chairman – Independent Director.

Member – At least 1/2 of the Committee Members to be Independent Directors.

CLAUSE 49 (IV) (B) – ROLE OF NOMINATION AND REMUNERATION COMMITTEE (NRC)

This clause list outs the various role of Nomination and Remuneration Committee and they are as follows:

Ø  Formulation and recommendation to board a policy relating to remuneration of the directors, key managerial personnel and other employees.

Ø  Recommendation to board the appointment or removal of Director, KMP and Senior level employees.

Ø  Formulation of evaluation criteria for Independent Director and the Board.

Ø  To disclose remuneration policy and evaluation criteria in annual report.

Question of Fact:

             

Whether formulation of criteria for evaluation of Independent Directors and the Board will be effective, since the composition of NRC consist of entirely non-executive directors and half of the committee being independent?

The SEBI shall lay down the draft policy ( as available for insider trading, code of conduct) and performance evaluation criteria for the listed entities, in order to make the criteria of evaluation to be more effective.

FAQ IN CLAUSE 49 (III) of Listing Agreement

Whether Chairman of NRC to be present in the Annual General meeting?

Yes, to answer the Shareholder Queries. However, it is up to the Chairman to decide who should answer the queries. 

Whether a Nomination & Remuneration Committee Chairman is to elected by the Board/committee?

Yes, The Chairman of NRC should be appointed by the Board.

Whether board has power to reject the recommendation given by the Nomination and Remuneration Committee?

Yes, however the board should give the reason for not accepting/rejecting the recommendation given by the Nomination and Remuneration Committee.

Whether Nomination and Remuneration Committee meeting can be held through circulation?

Yes

Whether Nomination and Remuneration Committee’s recommendation has to be taken up in the ensuing the Board Meeting/Audit Committee Meeting?

It is not necessary to take the Nomination and Remuneration Committee recommendations in the ensuing Board Meeting/Audit Committee Meeting; however the recommendation given by the Nomination and Remuneration Committee can be taken up in any Board meeting/Audit Committee Meeting.

Can an Executive Director be a member of Nomination and Remuneration Committee?

No. As per the revised Clause 49 of the Listing Agreement the composition of NRC shall be entirely consist of non-executive directors only.

Minimum number of Nomination and Remuneration Committee Meetings to be held during a Year?

Listing Agreement does not specify the minimum number of NRC meetings to be held as in case of Board and Audit Committee meeting.

What happens if there is no requisite quorum present for the NRC Meeting?

Then the recommendation for appointment and remuneration of the Director/KMP or Senior Employee shall be passed through circulation.

If the NRC recommends to the Board for any removal of director based on the performance evaluation, and what happens if the board is not satisfied with the evaluation process?

The Board shall request the NRC to make the performance evaluation once again. Based on the revised performance evaluation report, the Board shall decide upon whether to retain the person or not.

Whether an Executive Director(s), KMP or Key Employees of the Company can be appointed by the Board without the recommendation of NRC?

No.

Whether the Board has to declare the other employees category as envisaged in revised clause 49 of Listing Agreement?

Yes. The company shall place the organization chart with the Board and declare the personnel who can be categorized under other employees’ category.

BY

CS D HEM SENTHIL RAJ

CS K VINOTH