Audit Committee Disclosures

Audit Committee Disclosures

(A) Basis of related party transactions
(i) A statement in summary form of transactions with related parties in the ordinary course of business
shall be placed periodically before the audit committee.
(ii) Details of material individual transactions with related parties which are not in the normal course
of business shall be placed before the audit committee.
(iii) Details of material individual transactions with related parties or others, which are not on an arm’s
length basis should be placed before the audit committee, together with Management’s justification
for the same.
(B) Disclosure of Accounting Treatment
Where in the preparation of financial statements, a treatment different from that prescribed in an
Accounting Standard has been followed, the fact shall be disclosed in the financial statements,
together with the management’s explanation as to why it believes such alternative treatment is
more representative of the true and fair view of the underlying business transaction in the Corporate
Governance Report.
(C) Board Disclosures – Risk management
The company shall lay down procedures to inform Board members about the risk assessment and
minimization procedures. These procedures shall be periodically reviewed to ensure that executive
management controls risk through means of a properly defined framework.
(D) Proceeds from public issues, rights issues, preferential issues etc.
When money is raised through an issue (public issues, rights issues, preferential issues etc.), it shall disclose
to the Audit Committee, the uses / applications of funds by major category (capital expenditure, sales
and marketing, working capital, etc), on a quarterly basis as a part of their quarterly declaration of
financial results. Further, on an annual basis, the company shall prepare a statement of funds utilized
for purposes other than those stated in the offer document/prospectus/notice and place it before the
audit committee. Such disclosure shall be made only till such time that the full money raised through the
issue has been fully spent. This statement shall be certified by the statutory auditors of the company. The
audit committee shall make appropriate recommendations to the Board to take up steps in this matter.
(E) Remuneration of Directors
(i) All pecuniary relationship or transactions of the non-executive directors vis-à-vis the company shall
be disclosed in the Annual Report.
(ii) Further the following disclosures on the remuneration of directors shall be made in the section on
the corporate governance of the Annual Report:
(a) All elements of remuneration package of individual directors summarized under major groups,
such as salary, benefits, bonuses, stock options, pension etc.
(b) Details of fixed component and performance linked incentives, along with the performance
criteria.
(c) Service contracts, notice period, severance fees.
(d) Stock option details, if any – and whether issued at a discount as well as the period over which
accrued and over which exercisable.
(iii) The company shall publish its criteria of making payments to non-executive directors in its annual
report. Alternatively, this may be put up on the company’s website and reference drawn thereto
in the annual report.
(iv) The company shall disclose the number of shares and convertible instruments held by non-executive
directors in the annual report.
(v) Non-executive directors shall be required to disclose their shareholding (both own or held by /
for other persons on a beneficial basis) in the listed company in which they are proposed to be
appointed as directors, prior to their appointment. These details should be disclosed in the notice
to the general meeting called for appointment of such director.
(F) Management
(i) As part of the directors’ report or as an addition thereto, a Management Discussion and Analysis
report should form part of the Annual Report to the shareholders. This Management Discussion &
Analysis should include discussion on the following matters within the limits set by the company’s
competitive position:
(a) Industry structure and developments.
(b) Opportunities and Threats.
(c) Segment–wise or product-wise performance.
(d) Outlook
(e) Risks and concerns.
(f) Internal control systems and their adequacy.
(g) Discussion on financial performance with respect to operational performance.
(h) Material developments in Human Resources / Industrial Relations front, including number of
people employed.
(ii) Senior management shall make disclosures to the board relating to all material financial and
commercial transactions, where they have personal interest, that may have a potential conflict
with the interest of the company at large (for e.g. dealing in company shares, commercial dealings
with bodies, which have shareholding of management and their relatives etc.)
Explanation: For this purpose, the term “senior management” shall mean personnel of the company
who are members of its. core management team excluding the Board of Directors). This would
also include all members of management one level below the executive directors including all
functional heads.