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Board Resolution for Constitution of Audit Committee (Format)

board resolution for constitution of audit committeeAs required under section 177 of the Companies Act, 2013, an Audit Committee is required to be constituted by the Board of Directors of every listed public company and by the classes of companies covered under rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

The Audit Committee shall consist of a minimum of three directors with independent directors forming a majority. Majority of members of Audit Committee including its Chairperson shall be persons with ability to read and understand, the financial statement.

Following templates of board resolutions for formation of audit committee are for your reference.


SAMPLE #1
(Listed Company)

#. To constitute an Audit Committee

“RESOLVED THAT in accordance with the provisions of Section 177 of the Companies Act, 2013 and rules made thereunder, as amended from time to time, read with Regulation 18 of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015, and in accordance with Article ... of the Articles of Association of the company, the Board hereby constitutes a committee of the Board of Directors, named as “Audit Committee”.

FURTHER RESOLVED that the Audit Committee shall consist of the following Directors and Officers of the company:

Composition of Audit Committee

S.No.   Name              Designation      Position in Committee
 1.        Mr. ..............    ...................        ...................................
 2.        Ms. ..............    ...................        ...................................
 3.        Mrs. .............   ...................        ...................................

FURTHER RESOLVED that (Name of the Director), (Designation) be and is hereby nominated as the Chairperson of the Audit Committee and that (Name of the Company Secretary), (Designation) be and is hereby appointed as the Secretary of the Audit Committee.

FURTHER RESOLVED that the Audit Committee shall act in accordance with the provisions of the Companies Act, 2013, Articles of Association of the company and the 'terms of reference' specified hereunder:
 (i) the recommendation for appointment, remuneration and terms of appointment of auditors of the company;
 (ii) review and monitor the auditor’s independence and performance, and effectiveness of the audit process;
 (iii) examination of the financial statement and the auditors’ report thereon;
 (iv) approval or any subsequent modification of transactions of the company with related parties;
 (v) scrutiny of inter-corporate loans and investments;
 (vi) valuation of undertakings or assets of the company, wherever it is necessary;
 (vii) evaluation of internal financial controls and risk management systems;
 (viii) monitoring the end use of funds raised through public offers and related matters.”

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SAMPLE #2
(Unlisted Public Company)

#. Formation of an Audit Committee

“RESOLVED THAT pursuant to the provisions of Section 177 of the Companies Act, 2013 and rules made thereunder, including any modifications thereto for the time being in force, and in accordance with the Article ... of the Articles of Association of the company, an Audit Committee of the company be and is hereby constituted with the following members in the committee:

S.No.    Name              Designation
  1.        Dr. ..............    ...................
  2.        Mrs. ............    ...................
  3.        Ms. .............    ...................
  4.        Mr. .............    ...................

RESOLVED FURTHER THAT (Name of the Director), (Designation) be and is hereby nominated as the Chairman of the Audit Committee and that (Name of the Company Secretary), (Designation) is to act as the Secretary of the Audit Committee.

RESOLVED FURTHER THAT the Audit Committee shall act in accordance with the provisions of the Companies Act, 2013, Articles of Association of the company and the 'terms of reference' specified hereunder:
 (i) the recommendation for appointment, remuneration and terms of appointment of auditors of the company;
 (ii) review and monitor the auditor’s independence and performance, and effectiveness of the audit process;
 (iii) examination of the financial statement and the auditors’ report thereon;
 (iv) approval or any subsequent modification of transactions of the company with related parties;
 (v) scrutiny of inter-corporate loans and investments;
 (vi) valuation of undertakings or assets of the company, wherever it is necessary;
 (vii) evaluation of internal financial controls and risk management systems;
 (viii) monitoring the end use of funds raised through public offers and related matters.”



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NOTE: The resolution sample(s) here is only for reference, to help you with drafting. Do refer the exact provisions of the Act, relevant rules framed thereunder and any other applicable laws to be able to not to miss out anything important while drafting.

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