Context:
Corporate Governance lapses in a large media company, led to the exits of some Directors, with others staying on while concerns continue to surface. Simultaneously, the Promoters were in the news for the wrong reasons. Was it a case of the Audit Committee doing too little too late?

• Two Directors (one Independent Director (ID) and one Non-ID) resigned from the Board of a media company on November 22, 2019, citing several instances of poor Corporate Governance in FY 18-19.
• Some of the concerns raised by them were as follows:
  1. The Board, at its meeting held on October 17, 2019, decided to conduct a special audit by EY for all subsidiaries and all transactions for treasury investments, all Related Party Transactions (RPTs), and advances and security deposits given for various activities. Owing to absence of minutes of that meeting and the Action Taken Report (ATR), it was not known whether any action was taken as per the discussions. The minutes of the meeting were not finalised till the date of the resignation of Directors on November 22, 2019.
  2. There was no action taken by the Company against a bank for squaring off loans of promoter related companies of the group against a matured Fixed Deposit of the Company.
  3. Advances given for film acquisition and aggregation amounting to Rs 2200 crore in FY 18-19 were highly unusual and presented yet another instance of poor controls.
  4. oThe Company did not take any action on the large outstandings from two group companies, for the content supplied by the Company.
  5. oThere was non-implementation of some decisions relating to treasury operations from the Board meeting held on October 17, 2019.
• Stock Exchanges sought clarification regarding the resignation of Directors. The Company gave the following clarification:
  1. The audit of the issues pertaining to RPTs and advances was underway by Auditors.
  2. The issue of squaring off Rs. 200 crores of the Company’s Fixed Deposits towards promoter loans, pertained to the wrongful revocation of bank guarantee. The issue stood resolved with the Company having secured the same from the promoter companies, and appropriate legal notices being sent to the bank at the relevant time.
  3. Information regarding advances given for film acquisition and aggregation had already been disclosed in its annual report and was clarified in various investor interactions.
  4. The outstanding from the two group companies had been secured by definitive plans and situation which was being strictly monitored, as instructed by the Board and was also discussed in various analyst calls.
  5. The Company was exploring options to withdraw Fixed Deposits in a phased manner, without effecting the long-term relationship with the banks.
• The Company also said that its Board of Directors had noted all of the issues raised by the resigning Directors. The issues had been duly discussed, deliberated and acted upon from time to time in the previous committee/ Board meetings in which the resigning Directors were also present.
• On November 24, 2019, another ID resigned stating that his resignation followed the sale of shares by the promoter group and the reconstitution of the Board.