Corporate Governance

Auxilo Finserve Private Limited (Auxilo) is a private limited company which enjoys the privileges/exemptions under the Companies Act, 2013 as compared to the public limited and the listed companies. However, the Company's endeavour is to ensure utmost corporate governance and hence with this objective in mind, the company's promoters have requested corporate governance experts and dignataries to join the company's Board as the Independent Directors of the Company.

Following the principles and mandates laid down under the Companies Act, 2013, Auxilo's shareholders have appointed independent directors on its Board. The terms & conditions of appointment of Independent Director, hence, shall be as provided under the Companies Act, 2013 and Rules made there under.

Applicable provisions of the Companies Act, 2013 (Act)

1. Section 166 of the Act provides for the Duties of Directors of a Company
2. Schedule IV of the Act lays down the Code of conduct for the Independent Directors to follow.

The same has been laid down as the terms & conditions to be followed by the Independent Directors of Auxilo Finserve Private Limited.

Extract of the Act in relation to the above provisions is available herewith under Annexure A which in toto lays down the terms and conditions of the appointment of Independent Directors.

The independent Directors shall submit requisite disclosures to the Board of Directors confirming their independence and qualification to act as the Independent Director of the Company. They shall as per the relevant provisions of the Act disclose their association with the other entities.

The Company will be paying the sitting fees to the Independent Directors for attending and contributing to the Committee meetings and Board meetings which shall be subject to the limits set under the applicable laws.

Annexure A

EXTRACTS OF THE RELEVANT PROVISIONS OF THE COMPANIES ACT, 2013

SECTION 166 - DUTIES OF DIRECTORS

1. Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company.
2. A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.
3. A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
4. A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
5. A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
6. A director of a company shall not assign his office and any assignment so made shall be void.
7. If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

SCHEDULE – IV – CODE FOR INDEPENDENT DIRECTORS

The Code is a guide to professional conduct for independent directors. Adherence to these standards by independent directors and fulfillment of their responsibilities in a professional and faithful manner will promote confidence of the investment community, particularly minority shareholders, regulators and companies in the institution of independent directors.

I. Guidelines of professional conduct:

An independent director shall:

1. Uphold ethical standards of integrity and probity;
2. act objectively and constructively while exercising his duties;
3. exercise his responsibilities in a bona fide manner in the interest of the company;
4. Devote sufficient time and attention to his professional obligations for informed and balanced decision making;
5. Not allow any extraneous considerations that will vitiate his exercise of objective Independent judgment in the paramount interest of the company as a whole, while concurring in or dissenting from the collective judgment of the Board in its decision making;
6. Not abuse his position to the detriment of the company or its shareholders or for the purpose of gaining direct or indirect personal advantage or advantage for any associated person;
7. Refrain from any action that would lead to loss of his independence;
8. Where circumstances arise which make an independent director lose his Independence, the independent director must immediately inform the Board accordingly;
9. Assist the company in implementing the best corporate governance practices.

II. Role and functions:

The independent directors shall:

1. Help in bringing an independent judgment to bear on the Board's deliberations especially on issues of strategy, performance, risk management, resources, key appointments and standards of conduct;
2. Bring an objective view in the evaluation of the performance of board and management;
3. Scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance;
4. Satisfy themselves on the integrity of financial information and that financial controls and the systems of risk management are robust and defensible;
5. Safeguard the interests of all stakeholders, particularly the minority shareholders;
6. Balance the conflicting interest of the stakeholders;
7. Determine appropriate levels of remuneration of executive directors, key managerial personnel and senior management and have a prime role in appointing and where necessary recommend removal of executive directors, key managerial personnel and senior management;
8. Moderate and arbitrate in the interest of the company as a whole, in situations of conflict between management and shareholder's interest.

III. Duties:

The independent directors shall -

1. Undertake appropriate induction and regularly update and refresh their skills, knowledge and familiarity with the company;
2. Seek appropriate clarification or amplification of information and, where necessary, take and follow appropriate professional advice and opinion of outside experts at the expense of the company;
3. Strive to attend all meetings of the Board of Directors and of the Board committees of which he is a member;
4. Participate constructively and actively in the committees of the Board in which they are chairpersons or members;
5. Strive to attend the general meetings of the company;
6. Where they have concerns about the running of the company or a proposed action, ensure that these are addressed by the Board and, to the extent that they are not resolved, insist that their concerns are recorded in the minutes of the Board meeting;
7. Keep themselves well informed about the company and the external environment in which it operates;
8. Not to unfairly obstruct the functioning of an otherwise proper Board or committee of the Board;
9. Pay sufficient attention and ensure that adequate deliberations are held before approving related party transactions and assure themselves that the same are in the interest of the company;
10. Ascertain and ensure that the company has an adequate and functional vigil mechanism and to ensure that the interests of a person who uses such mechanism are not prejudicially affected on account of such use;
11. Report concerns about unethical behaviour, actual or suspected fraud or violation of the company's code of conduct or ethics policy;
12. Acting within his authority, assist in protecting the legitimate interests of the company, shareholders and its employees;
13. Not disclose confidential information, including commercial secrets, technologies, advertising and sales promotion plans, unpublished price sensitive information, unless such disclosure is expressly approved by the Board or required by law.

IV. Manner of appointment:

1. Appointment process of independent directors shall be independent of the company management; while selecting independent directors the Board shall ensure that there is appropriate balance of skills, experience and knowledge in the Board so as to enable the Board to discharge its functions and duties effectively.
2. The appointment of independent director(s) of the company shall be approved at the meeting of the shareholders.
3. The explanatory statement attached to the notice of the meeting for approving the appointment of independent director shall include a statement that in the opinion of the Board, the independent director proposed to be appointed fulfils the conditions specified in the Act and the rules made thereunder and that the proposed director is independent of the management.
4. The appointment of independent directors shall be formalised through a letter of appointment, which shall set out:
   1. The term of appointment;
   2. The expectation of the Board from the appointed director; the Board-level committee(s) in which the director is expected to serve and its tasks;
   3. The fiduciary duties that come with such an appointment along with accompanying liabilities;
   4. Provision for Directors and Officers (D and O) insurance, if any;
   5. The Code of Business Ethics that the company expects its directors and employees to follow;
   6. The list of actions that a director should not do while functioning as such in the company; and
   7. The remuneration, mentioning periodic fees, reimbursement of expenses for participation in the Boards and other meetings and profit related commission, if any.
5. The terms and conditions of appointment of independent directors shall be open for inspection at the registered office of the company by any member during normal business hours.
6. The terms and conditions of appointment of independent directors shall also be posted on the company's website.

V. Re-appointment:

The re-appointment of independent director shall be on the basis of report of performance evaluation.

VI. Resignation or removal:

1. The resignation or removal of an independent director shall be in the same manner as is provided in sections 168 and 169 of the Act.
2. An independent director who resigns or is removed from the Board of the company shall be replaced by a new independent director within a period of not more than one hundred and eighty days from the date of such resignation or removal, as the case may be.
3. Where the company fulfils the requirement of independent directors in its Board even without filling the vacancy created by such resignation or removal, as the case may be, the requirement of replacement by a new independent director shall not apply.

VII. Separate meetings:

1. The independent directors of the company shall hold at least one meeting in a year, without the attendance of non-independent directors and members of management;
2. All the independent directors of the company shall strive to be present at such meeting;
3. The meeting shall:
   1. Review the performance of non-independent directors and the Board as a whole;
   2. Review the performance of the Chairperson of the company, taking into account the views of executive directors and non-executive directors;
   3. Assess the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

VIII. Evaluation mechanism:

1. The performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated.
2. On the basis of the report of performance evaluation, it shall be determined whether to extend or continue the term of appointment of the independent director.

AUXILO FINSERVE PRIVATE LIMITED (Auxilo /Company) being a Non-deposit taking Non-Banking Financial Company (Category II) registered with Reserve Bank of India having customer interface is required to formulate its Internal guidelines on Corporate Governance.

The Company’s philosophy about Corporate Governance is all about adherence to the applicable laws, rules and regulations, adherence to the ethical standards for effective management of the Company’s business and discharging the social responsibility. The Company recognises its role as a corporate citizen and endeavours to adopt good practices and standards of corporate governance through transparency in business ethics, accountability to its customers, government and others.

OBJECTIVE OF GUIDELINES ON CORPORATE GOVERNANCE

Internal Guidelines on Corporate Governance is formulated pursuant to the Reserve Bank Directives - Non-Banking Financial Company –Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016. The guidelines aim for greater transparency, accountability and integrity in the company.

In pursuance of the aforesaid directions issued by the RBI, the internal Guidelines on Corporate Governance have been formed for consideration by the Board of Directors.

1. BOARD OF DIRECTORS – GOVERNANCE STRUCTURE

   The Board of Directors (Board) along with its Committees shall provide leadership and strategic guidance for the functioning of the Company. As a governing body of the Company, the Board is responsible to formulate the policies and procedures for the company to function and for guiding the management on the strategic issues crucial for the long-term development of the Company. The Company’s management shall function in accordance with the supervision, control and direction of the Board of Directors of the Company.
   
   Composition: The Board shall consist of an appropriate mix of executive and non-executive directors. The Composition of the Board shall be governed by the Articles of Association of the Company read with the applicable provisions of Companies Act, 2013 (the Act) and the rules framed thereunder.
   
   The Board Meetings shall be conducted in accordance with the applicable provisions of the Companies Act 2013. The Board shall periodically review the compliance status of all the applicable laws as well as steps taken by the company to rectify the instances of non-compliance, if any.

2. COMMITTEES OF THE BOARD

   The Board shall constitute a set of Committees with specific terms of reference, The Board may constitute Committees as necessary to obtain a focussed review of the issues and to ensure expedient resolution of diverse matters. The minutes of the meetings of all Committees of the Board shall be placed before the Board for noting in subsequent meeting.
   
   The Board shall constitute Audit committee, Nomination & Remuneration Committee and Risk Management Committee. Any additional committee may be constituted as deemed necessary by the Board. The Audit Committee and the Nomination & Remuneration Committee shall be formed in accordance with the applicable provisions of the Companies Act, 2013.The Audit Committee must ensure that an Information System Audit of the internal systems and processes is conducted at least once in two years to assess operational risks faced by the company. The Nomination and Remuneration Committee shall ensure 'fit and proper' status of proposed/ existing directors. Risk Management Committee shall manage the integrated risk.

3. FIT AND PROPER CRITERIA

   “Fit and Proper Criteria” refers to the system of undertaking due diligence of individuals before appointing them on the Board and also on a continuing basis by ascertaining their suitability for the post on basis of factors such as their qualifications, technical expertise, track record and integrity.
   
   In order to streamline and bring uniformity in the process of Due Diligence, while appointing Directors the following should be followed:

   1. To determine the sustainability of a person for appointment/continuing to hold appointment as a director on the Board will be based on the qualification, expertise, track records, integrity and other criteria as the Board may think fit from time to time.
   2. Every Individual proposed/existing Director shall give necessary information/ declaration in the format prescribed by the Reserve Bank of India under the applicable guidelines for the purpose of Due Diligence.
   3. The Company will undertake the process at the time of Appointment/Renewal of appointment of the Director on Board.
   4. The Nomination and Remuneration Committee of the Board of Directors of the Company shall scrutinize the aforesaid declaration received from the Individual.
   5. Based on the information received the Nomination and Remuneration Committee will be at the sole discretion for deciding on the acceptance or otherwise of the Directors.
   6. Every Director on Board shall submit a simple declaration as on 31st March every year as to the information already provide has not undergone any changes and where there are any changes requisite details of the changes.
   7. Every nominated/elected director shall execute the Deed of Covenants in the format prescribed by the Reserve Bank of India.

   The Company shall ensure to furnish to the Reserve Bank of India a quarterly statement on changes of directors, and a certificate from Managing Director of the company that the fit and proper criteria in selection of the directors has been followed.

   The statement will be submitted to the Regional Office of the Department of Non-Banking Supervision of the RBI where the company is registered within 15days of the close of respective quarter. The statement submitted by the company for quarter ending 31st March would be certified by the auditor.

4. DISCLOSURE AND TRANSPARENCY

   In order to practice the policy of Disclosure and Transparency, the following information shall be put to the Board of Directors at regular intervals in this regard:

   1. The progress made in putting in place a progressive risk management system and risk management policy and strategy followed by the Company;
   2. Conformity with Corporate Governance standards viz., in composition of various committees, their role and functions, periodicity of the meetings and compliance with coverage and review functions, etc.;
   3. Updates of the various committee’s meetings at from time to time;
   4. Disclosures in the Annual Financial Statements information as may be prescribed under the RBI Regulatory Framework from time to time.

5. ROTATION OF STATUTORY AUDITORS/AUDIT PARTNER(S)

   For the purpose of adopting best corporate practices and to strengthen the governance mechanism, the partner of the Statutory Auditors shall be subject to rotation and is required to rotate in every three years. Also, the Company shall not appoint the Statutory Auditor for a period of more than five consecutive years, if the Auditor is an individual and for a period of more than ten consecutive years if the Auditor is a Firm or Limited Liability Partnership.