Whistle blower / Vigil Mechanism
What is vigil mechanism?
The term “whistle-blowing” originates from the practice of British policemen who blew their whistles whenever they observed commission of a crime. Whistle blowing means calling the attention of the top management to some wrongdoing occurring within an organization.
A whistle blower may be an employee, former employee or member of an organisation, a government agency, who have willingness to take corrective action on the misconduct.
As per Sec.177 of the Companies Act, 2013, certain companies have to establish Vigil/Whistle-blowing mechanism to report any unethical behavior or other concerns to the management.
What does the law say?
According to the Companies Act, 2013 & Rules, 2014
It is mandatory for:
- All the listed companies
- Companies which accept deposits from the public
- Companies which have borrowed money from Banks and PFI in excess of Rs.50 crores under section 177(9) read with Companies
(Meetings of Board and its Powers) Rules, 2014.
Companies which are required to constitute an audit committee shall operate the vigil mechanism through the audit committee and if any of the members of the committee have a conflict of interest in a given case, they should recuse themselves and the others on the committee would deal with the matter on hand.
For other companies, the Board of directors shall nominate a director to play the role of audit committee for the purpose of vigil mechanism to whom other directors and employees may report their concerns.
It provide adequate safeguards against victimization of employees and directors who avail of the Vigil mechanism and also provide for direct access to the chairperson of the Audit committee or the director nominated to play the role of audit committee, as the case may be, in exceptional cases.