The Companies Amendment Act, 2017 read with Notification S.O. 1833(E) dated 7th May 2018 amended law related to the audit committee. Certain transactions related to related parties shall be voidable unless ratified by the audit committee. In this post, we will discuss updated law related to approval of related parties in the audit committee.
Tag Archives: Audit Committee
Finally government tries to come out of Sahara Blues. Government earlier was in pressure to put corporate governance in place among private companies and tried well. Thereafter, industry lobby (read as vested interests among “promoters” and “professionals”) started pleaded mercy for all “otherwise honest players”.
Government initiated it journey with exemption notifications and now bring this amendment rules.
The Companies (Audit and Auditors) Second Amendment Rules, 2017 is interesting in more than one way. Statistically, this exemption will benefit only selected big players among private companies in India and their auditors.
Section 139(2) of the Companies Act, 2013 reads, “No listed company or a company belonging to such class or classes of companies as may be prescribed, shall appoint or re-appoint—
(a) an individual as auditor for more than one term of five consecutive years; and
(b) an audit firm as auditor for more than two terms of five consecutive years.”
Rule 5 of the Companies (Audit and Auditors) Rules 2014 before present amendments reads, “for the purposes of sub-section (2) of section 139, the class of companies shall mean the following classes of companies excluding one person companies and small companies:-
(a) all unlisted public companies having paid up share capital of rupees ten crore or more;
(b) all private limited companies having paid up share capital of rupees twenty crore or more;
(c) all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.”
Now, the Companies (Audit and Auditors) Second Amendment Rules, 2017, amend clause (b) of rule 5. The amendment rules reads, “in the Companies (Audit and Auditors) Rules, 2014, in rule 5, in clause (b), for the word “twenty”, the word “fifty” shall be substituted.
This amendment rules increase threshold limit for rotation of auditors for private companies by a good 150%.
As number of companies and auditors is not much, it may not affect stakeholders significantly but our commitment towards corporate governance.
In this post we will discuss, audit committees under the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 for the listed entities which got listed its specified securities on Stock Exchanges.
Section 177 of the Companies Act, 2013 as discussed earlier here prescribes audit committee for every listed and certain other companies. Regulation 18 of the SEBI (LODR) Regulations, 2015 supplement this requirement for listed companies.
We have discussed provisions under the Companies Act 2013 related to audit report, duties, power and penalties earlier here.
The auditor shall make a report to the members of the company on accounts examined by him on every financial statements and report financial statement give a true and fair view of the state of the company’s affairs at the end of its financial year and profit or loss and cash flow for the year and such other matters. [Section 143(2)]