The principles of corporate governance have become conventional wisdom with the realisation that it is a necessary tool for the economic health of a company and for society at large. Beyond a company’s direct web of relationships, the 'corporate conscience' has now taken centre stage wherein companies are differentiated on the basis of working conditions, environmental strategies and their response to community needs. The Indian regulatory framework has ensured that the interests of stakeholders are well protected, though ultimately, the prime responsibility of good governance lies within an organisation and not outside it. An effective corporate governance framework needs to be flexible to respond to changing market dynamics, yet it must be unwavering as regards its values and ethics. While designing and implementing governance processes, there is a need to ensure an effective mechanism of checks and balances with transparency and accountability as the hallmark.
Credila Financial Services Private Limited (The Company) has recognized its role as a corporate citizen and aims to adopt the best practices and the highest standards of Corporate Governance through transparency in business ethics, accountability to its customers, stakeholders, government and others. The Company’s activities are carried out in accordance with good corporate practices and the Company is constantly striving to better them and adopt the best practices.
The Corporate Governance philosophy has been strengthened with the implementation of the Code of Conduct applicable to the Company and its employees. This code is available on the Company’s website.
In order to enable NBFCs to adopt best practices and greater transparency in their operations, RBI has issued Master Circular No. DNBS (PD) CC No.390/03.10.001/2014‐15, on July 1, 2014, on Corporate Governance. In pursuance of the aforesaid Guidelines, the Company has framed the following internal Guidelines on Corporate Governance.
i. Size of the Board
The size of the Board of the Company is neither be too small nor too big. The Company has been able to strike a balance of executive and non‐executive Directors. The Board of Directors of the Company are consisting of Managing Directors as Executive Directors, Nominee Directors of Parent Company as Non‐Executive Directors and one Independent Director.
ii. Board Membership Criteria All directors are individuals of integrity and courage, with relevant skills and have wide experience to bring judgment to bear on the business of the company.
iii. Board renewal ‐ tenure of independent director
As the Boards need to be regularly refreshed with new expertise, energy and experience, Independent director is appointed for 5 years, w.e.f. April 16, 2014.
The Company will frame a Board Renewal Policy for Independent Directors to facilitate their independence.
Various committees of the Board are formally established with terms of reference, criteria for appointment, life span, role and function constitute an important element of the governance process and has been established with clearly agreed reporting procedures and a written scope of authority.
Committees of the Board are usually formed as a means of improving board effectiveness and efficiency in areas where more focused, specialized and technical discussions are required. The Board of Directors is ultimately responsible for the acts of the committees.
The following committees are formed for better functioning:
Audit Committee of the Company consist of an Independent Director as the Chairman of the Committee and one non‐executive director and Managing Director as the members of the Committee. Company Secretary will be the Secretary of the Committee. The Committee needs to meet once in every quarter.
Role of the Committee:
- Recommend appointment, re‐appointment or removal of Statutory Auditors and their remuneration, nature and scope of audit.
- Ensure adequacy of internal controls and compliances and recommend remedial measures.
- Oversee financial reporting process and disclosure of financial information.
- Review financial statements before submission to the Board.
- Act as the link between Statutory Auditors, Internal Auditors and Board of Directors.
- Review accounting policies.
- Review significant related party transactions.
- Review findings of internal investigations /fraud / irregularities, etc.
- Monitoring usage of proceeds from an issue on a quarterly basis/annual basis and make appropriate recommendation to the Board.
- Carry out additional functions as contained in the listing agreement or other regulatory requirements applicable to the company or in the terms of reference of the Audit Committee.
- Review adequacy of the Internal Audit function.
ALCO of the Company consist of Managing Director as the Chairman of the Committee and one Independent Director and Managerial officials of the Company as the members of the Committee. Company Secretary will be the Secretary of the Committee. The Committee needs to meet once in every quarter to oversee the implementation of the Asset Liability Management system and to periodically review its functioning.
NRC of the Company consist of Non‐Executive Director as the Chairman of the Committee and one Independent Director and other Non‐Executive Director as the members of the Committee. Company Secretary will be the Secretary of the Committee. The Committee needs to meet once in every quarter to identify the independent directors to be inducted to the Board, from time to time, on the basis of fit & proper criteria and to evaluate the performance of the Board.
Risk Management Committee of the Company consist of Managing Director as the Chairman of the Committee and one Independent Director and Managerial officials of the Company as the members of the Committee. Company Secretary will be the Secretary of the Committee. The Committee needs to meet once in every quarter to review the Risk Management process in the Company and the working of Risk Management Managers in the different areas of the Company.
CSR Committee of the Company consist of an Independent Director as the Chairman of the Committee and one non-executive director and Managing Director as the members of the Committee. Company Secretary will be the Secretary of the Committee. The Committee needs to meet once in every quarter to design the framework that will help the Company to execute its responsibility towards the society and to review it periodically and to make report of the same to the Board, on annual basis.
i. Size of the Board
Effective Board room performance of Directors is directly related to the time that they can devote. No Director of the Company is holding Directorship, in the Companies, more than prescribed in the Companies Act, 2013 and rules made thereunder, from time to time.
The corporate governance framework of the Company ensures that timely and accurate disclosures are made on all its material information, including the financial position, performance, ownership and governance of the company.
Disclosure includes, but not be limited to, material information on:
i. The financial and operating results of the company.
ii. Company Profile
iii. Corporate Governance Report
- Governance Structure and Policies
- Ownership and shareholder’s rights including changes in control
- Detailed information about the Board
- Risk Management Framework
- Existence of Internal Code of Conduct, Business Ethics and Whistle Blower Mechanism
- Particulars of Internal Auditors
- Secretarial Audit
- Commitment to external initiatives
iv. Sustainability Report
- Economic Performance
- Environmental Performance
- Social Performance
- Value Statements
- CSR Initiatives
v. Innovation Strategy / Research &
vi. Intangible Assets Reporting
Information should be prepared and disclosed in accordance with the standards of accounting ‐ financial and non‐financial.
vii. Related Party Transactions (RPTs)
viii. Shareholders Rights
Equity investors have certain rights. An equity share entitles
x. Ethics and Integrity
xi. The Responsibilities of the Board
The corporate governance framework ensures the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the stakeholders. Therefore, the Board members, jointly and severely, assumes following responsibilities:
- Board members act on a fully informed basis, in good faith with due diligence and care, and in the best interest of the company and all its stakeholders.
- Where board decisions may affect different shareholder groups differently, the board shall treat all shareholders fairly.
- The board shall apply high ethical standards. It will take into account the interests of all stakeholders.
- The board shall fulfil certain key functions, including:
- Reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets and business plans
- Setting performance objectives
- Monitoring and implementing the corporate performance
- Overseeing major capital expenditures, acquisitions and divestitures
- Monitoring the effectiveness of the company’s governance practices and making changes as needed.
- Selecting, compensating, monitoring and, when necessary, replacing key executives and overseeing succession planning.
- Aligning key executive and board remuneration with the long term interests of the company and its stakeholders.
- Ensuring a formal and transparent board nomination and election process.
- Monitoring and managing potential conflicts of interest of management, board members and shareholders, including misuse of corporate assets and abuse in related party transactions.
- Ensuring the integrity of the corporation's accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards.
- Overseeing the process of disclosure and communications.
- The board should be able to exercise objective independent judgement on corporate affairs.
- The mandate, composition and working procedures of committees of the Board should be well defined and disclosed by the board.
- Board members should commit themselves effectively to their responsibilities.
xii. Connected Lending:
The Company undertakes to comply with the instructions, on connected lending relationships, issued by RBI vide their Circular No. DNBS.PD/CC 94/03.10.042/2006‐07 dated May 8, 2007 and updated vide their Master Circular No. DNBS (PD) CC No. 390/03.10.001/2014‐15 dated July 1, 2014.
The Company will evolve an appropriate operating procedures and information systems for ascertaining the interest of their own Directors as well as the interest of the Directors of other companies for the purpose of implementing these instructions and for monitoring ongoing compliance therewith. The instructions are related to credit facilities to the Directors, loans and advances to relatives of the Directors or to the Directors of other companies and their relatives and other entities, timeframe for recovery of such loans, etc.
Credit facilities to the Directors
In order to obviate conflict of interest in the lending operations of the Company, it will not grant any loan, advance or non‐fund based facility or any other financial accommodation / facility to:
i. its directors or their relative
ii. to any firm in which any of its Directors is interested as Partner, Manager, Employee or Guarantor;
iii. any individual in respect of whom any of its Directors is a Guarantor;
iv. any company of which, or the subsidiary or the holding company of which, any of the Directors of the Company is a Director, Managing Agent, Manager, Employee or Guarantor or any firm in which he holds substantial interest;
v. any entity, whether incorporated or not, which uses as a part of its name or in connection with its business, the name of the Company or any such word as would show its association with the Company.
- Any existing arrangements may be allowed to continue up to the date when they are due. They should, however, not be renewed or extended any further.
- Company is required to submit information pertaining to loans and advances granted to their directors, relatives and other entities referred as above for each quarter end (i.e. as on 31st March, 30th June, 30th September and 31st December) in the prescribed to the Regional Office concerned of the Department of Non‐Banking Supervision within 15 days from the close of the respective quarter. If there is nothing to report, a nil statement may be submitted.
- Timeframe for recovery of loans
- In cases where the Company has already provided credit facilities to its directors as prohibited above, immediate steps will be initiated to recover the amounts of the loan or advance together with interest, if any, as soon as the loan or advance falls due for repayment in terms of the loan agreement.