KLM Ltd. in its 64th Board meeting held on 30th June, 2019 has constituted Risk Management Committee with objective of mitigation of risk and recommendation of preventive measures comprising of two Independent Directors

CS Professional · Governance, Risk Management, Compliances and Ethics · PYQS · December 2019
KLM Ltd. in its 64th Board meeting held on 30th June, 2019 has constituted Risk Management Committee with objective of mitigation of risk and recommendation of preventive measures comprising of two Independent Directors and one Whole Time Director. In the first Meeting of the Committee held on 6th July, 2019, Whole Time Director could not be present and sought the leave of absence. The Board proposal about the constitution was silent with respect to Chairman of the Committee and quorum of the Meeting of Committee. The remaining two members held the Meeting and the Seniormost Director present in the Meeting was selected as Chairman of the Committee. The Committee also approved the policy for Systematic Risk Management. Whether, the decision of the Committee is valid in light of the approved Secretarial Standards as issued by the ICSI?

Answer & Explanation:

The Secretarial Standard 1 (SS-1) deals with the Meetings of the Board of Directors. Clause 3.5 of Secretarial Standard 1 (SS-1) which relates to the Meetings of Committees provides as under: 'Unless otherwise stipulated in the Act or the Articles or under any other law, 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'. In the given case of the company KLM Ltd, it is mentioned in the question itself that 'The Board proposal about the constitution was silent with respect to Chairman of the Committee and quorum of the Meeting of Committee'. Since the quorum was not specified, hence as per the clause 3.5 of SS-1, where no such quorum is specified, the presence of all the members of such committee is necessary to form the quorum. Therefore, the meeting was held by the Risk Management Committee (RMC) without the presence of adequate quorum and in view of this the decision taken by the RMC is also invalid.

Topics: Board Meetings

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