INDIA Law and Practice Contributed by: C R Dua, Sanjeev Kaul, Abhinav Rastogi and Ashish Malkotia, Dua Associates
If a casual vacancy occurs in the position of an audi- tor, the board must fill it within 30 days. However, if a casual vacancy arises due to the resignation of an auditor, the appointment must also be approved by the company at a general meeting. The newly appoint- ed auditor will hold office until the conclusion of the next AGM. Removal of Auditors A company may remove an auditor from office before the expiry of its term through the shareholders pass- ing a special resolution at a general meeting only after obtaining the prior approval of the Central Govern- ment. The auditor concerned shall be given a reason- able opportunity to be heard. The company board is required to formulate a direc- tors’ report, which is attached to the audited annual financial statements for the shareholders’ consid- eration. Various matters pertaining to the company’s affairs are required to be included in said report, including various aspects of corporate governance such as the number of board meetings held and relat- ed party transactions. A listed company is also required to provide a corpo- rate governance report, containing a brief statement on: • the company’s philosophy on the code of govern- ance; • the composition and category of directors; • the attendance of each director; • the number of shares held by non-executive direc- tors; • a chart or a matrix setting out the skills, expertise and competence of each director; • various committees of the board, including their terms of reference, meetings held and the attend- ance of each committee member; and • remuneration of directors. 7. Corporate Governance Arrangements 7.1 Duty to Report
A listed company is also required to submit a quarterly compliance report on corporate governance in the prescribed format to the recognised stock exchange(s) within 21 days from the end of each quarter. There are also requirements for event-based reporting to be made by a listed company with the concerned stock exchanges – eg, regarding the outcome of board and shareholders’ meetings where certain specified agen- da items are transacted.
8. Controlling Company 8.1 Duties of a Controlling Company
The Act does not contain an explicit provision on the duties of a controlling (holding) company towards the other shareholders of the company it controls. The general rule is that the controlling shareholder should not cause the conduct of the company’s business and affairs to be undertaken in a manner that is prejudicial to the interests of the controlled company or any of its other shareholders. A shareholder may approach the Tribunal if the controlling company (majority shareholder(s)) acts in a manner that is oppressive to the minority shareholders (see 2.11 Challenging a Resolution ). 9. Insolvency 9.1 Rights of Shareholders If the Company Is Insolvent Under the Insolvency and Bankruptcy Code, 2016, the corporate debtor by itself (by passing a special resolu- tion of its members) may initiate its corporate insol- vency resolution process if it has committed a default in paying a debt that has become due and payable but not paid, by making an application to the adjudicating authority providing the name of the person proposed to be appointed as interim resolution professional. If the resolution process fails, the adjudicating authority may pass a winding-up order. Under the Act, shareholders of a company may also approach the Tribunal for the company’s winding- up by passing a special resolution. Upon liquidation (by whatever mode, whether by creditors, corporate debtor or the company itself under the supervision
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