Companies (Amendment) Act, 2000 by introduction of section 292A provides that every public company having paid up capital of not less than five crores of rupees shall constitute a committee of the Board known as Audit Committee which shall consist of (1) not less than three directors; and (2) such number of other directors as the Board may determine of which two thirds of the total number of members shall be directors, other than managing or whole time directors. Every Audit Committee shall act in accordance with the terms of reference to be specified in writing by the Board.
The members of the Audit Committee shall elect a Chairman from amongst themselves . The annual report of the company shall disclose the composition of the Audit Committee. The auditor’s internal auditors if any, the director in charge of finance shall attend and participate at meetings of the Audit Committee but shall not have the right to vote.
The Audit Committee should have discussions with auditors periodically about internal control systems the scope of audit including the observations of the auditors and review the half yearly and annual financial statements before submission to the Board and also ensure compliance of internal control system.
The Audit Committee shall have authority to investigate into any matter in relation to the items specified or referred to it by the board. The Audit Committee shall have full access to information contained in the records of the company and external professional’s advice, if necessary.
The recommendations of the Audit Committee or any matter relating to financial management, including the audit report shall be binding on the board. If the Board does not accept the recommendations of the Audit Committee, it shall record the reasons there of and communicate such reasons to the shareholders. The Chairman of the Audit committee shall attend the Annual General meeting of the company to provide any clarification on matters relating to audit.
If default is made in compliance of the above provisions, the company and every officer who is in default, shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to Rs 50,000 or with both.
Powers, Rights, Duties, Liabilities and disabilities of directors ‘
Powers: The Board of Directors derives their powers from:
1) The Companies Act;
2) Articles of Association
3) Board resolutions
4) Resolutions in general meetings;
5) Agreements or contracts with the company.
Subject to the provisions of the Act the Board of Directors of a company shall be entitled to exercise all such powers and do all such acts and things , as the company is authorized to exercise and do. The Board shall not exercise any power or thing which is required to be done by the company in a general meeting.
The Board of Directors shall exercise following powers on behalf of the company by means of resolutions passed at the meeting of the board;
1) the power to make calls on shareholders in respect of money unpaid on their shares;
2) the power to issue debentures;
3) the power to borrow money others wise than on debentures
4) the power to invest the funds of the company and
5) the power to make loans
By a resolution passed at a meeting the board may delegate to any committee of directors the managing director, the managers or any other principal officer of the company, the above powers on such conditions as the Board may prescribe. The resolution delegating to power to borrow money otherwise than on debentures shall specify the total make amount outstanding at any one time up to which money may be borrowed by the delegate.
Source: Business Law