Section 177 (9) of the Companies Act, 2013 pertains to the establishment of a vigil mechanism by every listed company and certain prescribed class of companies to enable its directors, employees and other stakeholders to report genuine concerns or grievances regarding any unethical behavior, fraud or violation of company's code of conduct.
Purpose: The purpose of this section is to promote a culture of ethical behavior, transparency and accountability in the corporate environment and to provide an opportunity for stakeholders to report any wrongdoing without fear of retaliation.
Applicability: This section is applicable to every listed company and prescribed class of companies. The prescribed class of companies includes companies with a paid-up share capital of Rs. 10 crore or more, or companies with a turnover of Rs. 100 crore or more, or companies which have, in aggregate, outstanding loans, debentures or deposits of Rs. 50 crore or more.
Timeline: The vigil mechanism is required to be established by the company's board of directors within 180 days from the date of notification of the relevant rules.
Exemption: There is no exemption provided under this section.
Penalty: Non-compliance with the provisions of this section may attract a penalty of up to Rs. 1 crore.
Due date: The vigil mechanism is required to be established within 180 days from the date of notification of the relevant rules.
Forms: There is no specific form required for establishing a vigil mechanism.
Reporting authority: The vigil mechanism is required to be overseen by the Audit Committee of the company, and any complaints received are required to be investigated by the committee or any other person or authority designated by the committee. The committee is also required to make a report to the board of directors regarding the functioning of the vigil mechanism.
