IRFC COVER-final - Indian Railway Finance Corporation Ltd.

Compliance Certificate on Corporate GovernanceAs required under the Government Guidelines, the StatutoryAuditors of the Company have issued a certificate regardingcompliance of conditions of Corporate Governance by theCompany, which is annexed to this Report.Secretarial AuditIn terms of the Corporate Governance Voluntary Guidelines,Secretarial Audit of the Company was got conducted by anindependent practicing firm of Company Secretaries, M/sNavneet K. Arora & Co., New Delhi. The Secretarial AuditReport confirms that the Company has complied with allapplicable provisions of the corporate laws relevant to thesaid audit.Their Report was taken on record by the Board of Directorsin their Meeting held on 27th July, 2010.Corporate Governance Voluntary Guidelines issued byMinistry of Corporate Affairs - Items not adoptedThe Company has not been able to adopt the followingVoluntary Guidelines as the same are not relevant to itsfunctioning for the reasons explained against each item :-Guideline No.1. A.1(ii) regarding issuance of formal lettersof appointment to Non-Executive Directors (NED's) anddisclosing the same to the shareholders at the time ofratification of NED's appointment or re-appointment on theBoard of the Company - Being a 100% Government ownedCompany, appointment of Director is made by theGovernment itself. Thus, there is no case for ratification bythe Shareholders.Guideline Nos.1.A.3(i), (iii), (iv) and B.1.(i) regardingconstitution of Nomination Committee for search andselection of Non-executive and independent Directors :-Being a 100% Government owned Company, Directors ofIRFC are appointed by the Government. Thus, there is noneed for constitution of Nomination Committee in theCompany.Guideline No. 1.C.1 containing Guiding Principles relatedto Linking of Corporate and Individual Performance whiledetermining level and composition of remuneration payableto the Executive Directors and Key Executives - This clauseis not applicable to IRFC as Executive Directors and KeyExecutives are on pay scale(s) prescribed by theGovernment. Similarly, performance related incentives arealso granted in line with orders of the Government.Guideline No.1.C.1.2. and 1.C.1.3 about remuneration ofNon- executive Directors (NEDs) and structure ofcompensation to NEDs - These clauses are also notapplicable to IRFC as NEDs are not paid any remuneration,sitting fee, etc. in line with the Government Orders.Guideline Nos. C.2. (ii), (iii) and (iv) in regard todetermination of remuneration of Executive Directors andexecutive Chairman, etc. and informing the principles,criteria and the basis of remuneration policy of the Companyto the Shareholders. - These clauses are not applicable toIRFC as payment of remuneration to the Executive Directorsand employees of the Company is governed under theGovernment Rules and Guidelines.Guideline No. II . E (iii) related to attachment of 'ImpactAnalysis on Minority Shareholders' along with every agendaitem at the Board Meeting - This is not applicable to IRFCas its entire Paid-up Share Capital is held by the Governmentof India.Guideline No. III. C. i(third sub- clause) regardingrecommendations by the Audit Committee in relation to theappointment, reappointment, removal and terms ofengagement of the external auditor - This clause is notapplicable as appointment of the external auditor is madeby the Office of the Comptroller and Auditor General ofIndia.Guideline No. III. C. (ii) and (iii) in regard to monitoringand approval of Related Party Transactions by the AuditCommittee and disclosure of all such Transactions in theBoard's Report for that year - These clauses are notapplicable to IRFC as being a Government Company, thereare no related party transactions.Guideline No. IV.A related to role of Audit Committee inAppointment of the Auditors - This clause is not applicableas being a Government owned Company appointment of theAuditors is made by the Office of the Comptroller andAuditor General of India.Guideline Nos. IV .C. i (second sub -clause) and (ii)requiring rotation of Audit firm once every five years andcooling off period of three years for a partner of the Auditfirm before he can resume the same audit assignment. -These clauses are not applicable as the auditors are appointedby the Office of the Comptroller & Auditor General of Indiafor a period not exceeding four years. However, there hasbeen no incidence of any Audit Firms being continued for aspell of more than four years.24