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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards

Himalaya Steels Ltd, a listed company, has an employee who wishes to report suspected misreporting by a senior executive but fears retaliation. Which feature of the vigil mechanism supports board effectiveness in this situation under the Companies Act, 2013?

The vigil mechanism must give adequate safeguards against victimisation and provide direct access to the Audit Committee chairperson in appropriate or exceptional cases. It covers directors and employees, and its details must be disclosed on the website and in the Board's report.

  1. AIt must provide safeguards against victimisation and allow direct access to the Audit Committee chairperson in appropriate or exceptional casesCorrect
  2. BIt must route every complaint through the executive concerned first
  3. CIt protects only directors and not employees
  4. DIt need not be disclosed on the company website or in the Board's report

Explanation

Section 177(9) and (10) require a vigil mechanism for directors and employees, with adequate safeguards against victimisation and direct access to the Audit Committee chairperson in appropriate cases. Details must be disclosed on the website, if any, and in the Board's report. The other options contradict these provisions.

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