Of the 4 Directors on the Audit Committee of A Ltd 2 are illiterate and 2 are Chartered Accountants ...........

Companies Act-Phase (I & II) Board-powersandMeetings

Of the 4 Directors on the Audit Committee of A. Ltd. 2 are illiterate and 2 are Chartered Accountants. This is done so as to bring about inclusivity of opinions. Is the constitution valid under Companies Act?

Yes, atleast 50% are able to read and understand financial statements

Yes, as the education is no criteria for selecting Directors for Audit Committee

No, as majority are required to read and understand financial statements

No, as Companies Act requires all Audit Committee members to be financially literate

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Explanation:

According to Sec177. Audit Committee

(1) The Board of Directors of every listed company and such other class or classes of companies, as may be prescribed, shall constitute an Audit Committee.

(2) The Audit Committee shall consist of a minimum of three directors with independent directors forming a majority:

Provided that majority of members of Audit Committee including its Chairperson shall be persons with ability to read and understand, the financial statement.