Publication date: 12.07.2024
I am studying in the third year of the State University of Economics and Technology.I specialize in contractual, economic and corporate law, in particular, I provide consultations and write articles.
Introduction
Corporate control is a concept that encompasses the mechanisms and processes that ensure the effective management of a corporation in order to protect the interests of all interested parties, including shareholders, management, employees and other stakeholders. One of the effective means of corporate control, which can be implemented in joint-stock and other companies and cooperatives, is the audit commission.
Legal features of the audit commission in a joint-stock company:
The audit commission in a joint-stock company (JSC) is one of the key bodies of corporate governance. Its main purpose is to ensure independent control over the company's financial statements and its financial management. The main functions of the audit committee include:
- Audit and review of financial statements: The audit committee reviews annual and quarterly financial statements to ensure their reliability, compliance with legal requirements and accounting standards.
- Risk control: They evaluate the effectiveness of the company's internal control systems aimed at preventing fraud and errors in financial reporting.
- Independence and objectivity: Members of the audit commission are usually independent from the company's management and do not have a conflict of interest, which ensures their objectivity in the performance of their duties.
- Reporting to shareholders: The audit committee reports to shareholders at the general meeting of shareholders or through other reporting mechanisms, which ensures transparency of management and the fulfillment of the company's financial obligations.
- Recommendations for improvement: They can make recommendations for improving financial management and control, which contributes to the improvement of the effectiveness of corporate governance.
The audit committee plays a key role in ensuring internal control and confidence in the company's financial statements, which is important to investors and other stakeholders.
Forms of organization of the controlling body in the company:
in a corporate enterprise, the control body can have different forms of organization. Here are the main options:
- Composition: The audit committee usually consists of three or more members, who may be members of the supervisory board or independent experts.
- Functions: Audit of financial statements, monitoring of internal control, recommendations for improving financial management.
- Functions: An auditor is usually a legal entity or a natural person who has professional qualifications in the field of auditing and auditing.
- Independence: The auditor must be independent from the company's management and have no conflict of interest.
- Reporting: The auditor usually reports to the supervisory board or to the shareholders of the company regarding the results of the audit and other functions performed.
When choosing between a collegial body (audit commission) and a one-person body (auditor), companies can take into account the needs and specifics of their activities. Both options have their advantages and the responsibilities they carry in the field of corporate control and financial management. Along with this, the legislation imperatively emphasizes the fact that for some companies only one of the above-described forms of organization of the control body may be available, for example, only for joint-stock companies and cooperatives is the possibility of creating a one-person body (auditor) provided. If the number of JSC members exceeds 100 people, then the company can only have an audit commission as a collegial body.
Membership in the audit committee:
- Members of the commission: Members of the audit commission or auditor of a corporate enterprise must be members of this enterprise. Participants can be shareholders or other persons who have certain rights and obligations within the company, that is, they have a share in the state capital, or a certain package of shares. This requirement is usually due to the need for internal control and ensuring independence from the company's management, as well as taking into account the interests of all interested parties.
- The participants of the enterprise have a certain interest in the healthy financial condition of the company and are responsible for making decisions related to its activities. This rule also allows to ensure greater compliance of the interests of the members of the audit commission or the auditor with the general goals of the company and preserve their independence from external influences that may influence their decisions.
- Term of office: The term of office of members of the audit commission or the auditor is established in accordance with the company's internal documents (statutes, regulations on the audit commission, contract with the auditor, etc.) and may be different depending on the legislation of the country, the type of company and its management structure.
The main aspects that are usually taken into account when determining the term of office:
- Term of appointment: Often, members of the audit committee or the auditor are appointed for a specific term, such as one year, two years, or some other specified period.
- Term limits: The term of office of members of the audit commission or the auditor is usually set for the period until the date of the next annual general meeting of the company's shareholders. This means that the members of the audit committee or the auditor are elected for a term that ends on the day of the next annual general meeting of shareholders, where issues regarding the composition of the supervisory board, the audit committee and other key aspects of the company's management are usually discussed.
- Renewal of the term: After the term of office of a member of the audit committee or the auditor has expired, they may be re-elected or confirmed for a new term, if this is provided for by the relevant procedures of the company.
- Dismissal: There are cases when the members of the audit commission or the auditor may be dismissed before the end of the term of office for various reasons, such as non-performance of duties, conflict of interest or other negative circumstances.
- In each specific situation, it is important to take into account the specifics of the company, its legal context and internal rules for determining the term of office of members of the audit commission or the auditor.
Legal services in creating control bodies:
Lawyer services play a critical role in business in many ways, here are some of them:
- Legal analysis of the situation and business operations: The online assistance of a lawyer provide legal support in all aspects of the company's activities, including the conclusion of agreements, negotiations, conclusion and execution of contracts.
- Legislative control and regulatory compliance: The online lawyer advice is responsible for ensuring the company's compliance with all legal requirements and regulatory standards relevant to its operations. This includes law on corporate governance, taxation, employment and other areas.
- The cost of legal services depends on the complexity of corporate governance and the number of functional duties of a lawyer.
Types of legal services on risk and conflict management: Lawyers online help to identify potential risks for business and develop strategies for their management. In the event of disputes, the lawyer also resolves legal conflicts through a court proceedings, or in a pre-trial procedure.
Corporate control refers to a system of mechanisms, rules and processes that help ensure effective management and control over the company's activities. This includes both internal governance systems and external mechanisms that ensure compliance and protection of the interests of shareholders, investors and other stakeholders. Corporate control helps reduce risks, increases the effectiveness of management decisions and helps ensure the long-term stability and success of the company.
