Procedure for Conducting Nomination and Remuneration Committee Meeting

Naveen Khandelwal

Naveen Khandelwal

Published on: Dec 17, 2020

Khushboo Sharma

Updated on: Oct 27, 2023

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Introduction

Committee means a Committee of Directors mandatorily required to be constituted by the Board under the Companies Act. The Board of Directors of every Listed Public Company and the following classes of companies shall constitute a Nomination and Remuneration Committee

1. all public companies with a paid up capital of ten crore rupees or more
2. all public companies having turnover of one hundred crore rupees or more
3. all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding fifty crore rupees or more. [Section 178(1) and Rule 6 of the Companies (Meetings of Board and its Powers) Rules, 2014.]

Mandatory Requirements

1. Notice should be given in writing to every director of the Committee at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means. [Clause 1.3.1 of Secretarial Standard-1 (SS-1)]
2. The Notice should specify the day, date, time and full address of the venue of the Meeting. A Meeting may be convened at any time and place, on any day, excluding a National Holiday. [Clause 1.2 of Secretarial Standard-1 (SS-1)]
3. Quorum should be present throughout the Meeting. No business should be transacted when the Quorum is not so present. [Clause 3.1 of Secretarial Standard-1 (SS-1)]
4. The Quorum for Meetings of any Committee constituted by the Board shall be as specified by the Board. If no such Quorum is specified, the presence of all the members of any such Committee is necessary to form the Quorum. [Clause 3.5 of Secretarial Standard-1 (SS-1)]
5. The nomination and remuneration committee shall meet at least once in a year. [Regulation 19 of the SEBI(LODR) Regulation]
6. For the purpose of Nomination and Remuneration committee Meeting, a Director shall be treated as interested in a contract or arrangement entered into or proposed to be entered into by the company
   • with anybody corporate, if such Director, along with other Directors holds more than two percent of the paid-up share capital of that body corporate, or he is a promoter, or manager or chief executive officer of that body corporate
   • or with a firm or other entity, if such Director or his relative is a partner, owner or Member, as the case may be, of that firm or other entity. [Clause 3.2 of Secretarial Standard-1 (SS-1)]
7. Presence of Chairperson shall be required. The Chairperson of the Nomination and Remuneration Committee shall be an Independent Director.
8. Maintain the Attendance Register with details such as: name of the Committee; place of the Meeting; time of the Meeting; names and signatures of the Directors, the Company Secretary and also of persons attending the Meeting by invitation and their mode of presence, if participating through Electronic Mode.
9. Maintain the Minutes Book for Signing the minutes of Previous Committee Meeting by the Chairperson.

Following Procedure is to be followed

1. Calling of Nomination and Remuneration Committee Meeting
   • Company shall issue the Notice, Agenda and Notes to Agenda to every Director of the Committee at his address registered with the company not less than seven days before the Meeting, unless the Articles prescribe a longer period. In case the Company sends the Notice, Agenda and Notes to Agenda by speed post or by registered post, an additional two days shall be added for the service of Notice.
   • Notice, Agenda and Notes to Agenda are issued by the Company Secretary or where there is no Company Secretary, any Director or any other person authorized by the Board for the purpose.
   • Notice shall inform the directors regarding the option available to them to participate through video conferencing mode or other audio visual means, and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio visual means.
   • A director intending to participate through video conferencing or audio visual means shall communicate his intention to the Chairperson or the company secretary of the company sufficiently in advance so that company is able to make suitable arrangements in this behalf. [Rule 3(3) of the Companies (Meetings of Board and its Powers) Rules, 2014]
   • Notes on items of business which are in the nature of Unpublished Price Sensitive Information may be given at a shorter period of time than stated above, with the consent of a majority of the Directors, which shall include at least one Independent Director, if any. [Clause 1.3.7 of Secretarial Standard on meetings of Board of Directors)]
2. Convening of Nomination and Remuneration Committee Meeting
   Check the presence of Quorum for convening the meeting. Quorum shall be present not only at the time of commencement of the Meeting but also while transacting business.
   • Check the Leave of absence and the same shall be granted to a Director only when a request for such leave has been communicated to the Company Secretary or to the Chairperson or to any other person authorized by the Board to issue Notice of the Meeting.
   • A member of the Committee shall be appointed by the Board or elected by the Committee as Chairperson of the Committee and shall conduct the Meetings of the Committee. If no Chairperson has been so elected or if the elected Chairperson is unable to attend the Meeting, the Committee shall elect one of its members present to chair and conduct the Meeting of the Committee, unless otherwise provided in the Articles.
   • In case of listed entities, the quorum for the Nomination and Remuneration Committee Meeting shall be either two members or one third of the members of the Committee, whichever is greater, including atleast one independent director in attendance.
   • Every company shall maintain attendance register for the Committee Meetings and the Chairperson shall take a Roll Call at the commencement of the meeting and confirm the attendance of Directors participating through video conferencing.
   • The Chairperson shall request the Director participating through Electronic Mode to state his full name and location from where he is participating and shall record the same in the Minutes. The proceedings of such Meetings shall be recorded through any electronic recording mechanism and the details of the venue, date and time shall be mentioned.
   • Directors participating through Electronic Mode shall be deemed to have signed the attendance register, if their attendance is recorded in the attendance register and authenticated by the Company Secretary or where there is no Company Secretary, by the Chairperson or by any other Director present at the Meeting, if so authorized by the Chairperson and the fact of such participation is also recorded in the Minutes.
   • If the Chairperson is interested in an item of business, he shall entrust the conduct of the proceedings in respect of such item to any Non-Interested Director with the consent of the majority of Directors present and resume the chair after that item of business has been transacted. However, in case of a private company, the Chairperson may continue to chair and participate in the Meeting after disclosure of his interest.
   • The Chairperson shall use his second or casting vote in case of equality of votes.
   • Permission of Chairperson shall be taken with the consent of a majority of the Directors present in the Meeting for taking up any item not included in the Agenda. The decision taken in respect of any other item shall be final only on its ratification by a majority of the Directors of the company, unless such item was approved at the Meeting itself by a majority of Directors of the company.
   • Check that vote of thanks is given to the Chair at the conclusion of the Nomination and Remuneration Committee Meeting.
3. Preparation and Signing of Minutes
   [Refer the Procedure for Preparation and Signing of Minutes of Board/Committee Meeting].
4. Key Points:
   • In case of Listed Entities, the Nomination and Remuneration Committee’s Chairperson may be present at the annual general meeting, to answer the shareholders’ queries but it shall be up to the chairperson to decide who shall answer the queries.
   • The role of the Nomination and Remuneration Committee shall be as specified as in Part D of the Schedule II of the SEBI (LODR) Regulations which is as under:
     • formulation of the criteria for determining qualifications, positive attributes and independence of a director
     • recommend a policy relating to, the remuneration of the directors, key managerial personnel and other employees to the board of directors
     • evaluation of the balance of skills, knowledge and experience on the Board for every appointment of an independent director
     • prepare a description of the role and capabilities required by an independent director on the basis of evaluation of skills, knowledge and experience so done and the person recommended to the Board for appointment as an independent director shall have the capabilities identified in such description
     • for the purpose of identifying suitable candidates, the Committee may:
       • use the services of an external agencies, if required
       • consider candidates from a wide range of backgrounds, having due regard to diversity
       • consider the time commitments of the candidates
     • formulation of criteria for performance evaluation of the independent directors and the board of directors
     • devising a policy on the diversity of the board of directors
     • identifying qualified persons who can become directors and who may be appointed in the senior management in accordance with the criteria laid down, thereby recommending the board of directors on their appointment and removal
     • whether to extend or continue the term of appointment of the independent director, on the basis of performance evaluation report of the independent directors
     • recommending the board, about all the remuneration, in whatever form, payable to senior management.