Every listed company and every
company which accepts deposits from banks, or a company which has borrowed
money from banks and public financial institutions in excess of Rs.50 crores[1],
shall establish a vigil mechanism for directors and employees to report genuine
concerns.[2]
The vigil mechanism shall provide for adequate standards against victimization
of persons who use such mechanism and make provision for direct access to the
chairperson of the audit committee in appropriate or exceptional cases.[3]
Further, details of establishment of such mechanism shall be disclosed by the
company on its website, if any, and in the board’s report.[4]
Companies which are required to
constitute an audit committee shall oversee the vigil mechanism through the
audit committee. If any of the members of the audit committee are conflicted in
a given case, they should recuse themselves and the others on the committee
would deal with the matter on hand.[5]
In case of other companies, the
board of directors would nominate a director to play the role of audit
committee for the purpose of vigil mechanism to whom other directors and
employees may report their concerns.[6]
The vigil mechanism must provide
for adequate safeguards against victimization of employees and directors who
avail of the mechanism and also provide for direct access to the chairperson of
the audit committee or the director nominated to play the role of audit
committee, as the case may be.[7]
In case of repeated frivolous
complaints being filed by a director or employee, the audit committee or the
director nominated to play the role of audit committee may take suitable action
against the concerned director or employee including reprimand.[8]
[1]
Rule 7(1) of the Meetings of Board and its Powers Rules
[2]
Section 177(9) of the Companies Act
[3]
Section 177(10) of the Companies Act
[4]
Proviso to Section 177(10) of the Companies Act
[5]
Rule 7(2) of the Meetings of Board and its Powers Rules
[6]
Rule 7(3) of the Meetings of Board and its Powers Rules
[7]
Rule 7(4) of the Meetings of Board and its Powers Rules
[8]
Rule 7(5) of the Meetings of Board and its Powers Rules
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