Prompt Pack Board Committee Charter

Board Committee Charter

When to use this

Use this skill when drafting the formal charter (also called terms of reference) for a board-level committee. A charter defines the committee's mandate, membership, and operating procedures. It is adopted by the full board and is a foundational governance document.

Most governance codes and regulators in MENA and internationally require certain standing committees. The main committees addressed by this skill:

1. Audit Committee — financial reporting, internal audit, external auditor oversight
2. Remuneration/Compensation Committee — director and executive pay
3. Nomination/Governance Committee — board composition, succession, governance
4. Risk Committee — enterprise risk oversight (especially for financial institutions)

Prompt template

Draft a charter for [Company's] [Audit/Compensation/Nomination/Risk] Committee. Include purpose, composition requirements, independence standards, duties and responsibilities, meeting frequency, reporting obligations, and authority to retain advisors.

Use [[conversation-clarifying-questions]] to elicit [bracketed] inputs before drafting.

Required inputs

Document structure (all committee types)

1. Purpose and authority

• Committee name and the committee's core mandate (2–3 sentences)
• Delegation by the full board: the committee acts on behalf of and reports to the board; it does not have management authority
• Authority to retain independent advisors (counsel, consultants, experts) at the company's expense — this is a standard governance protection

2. Composition

2.1 Size

• Minimum and maximum number of members
• All members must be non-executive directors; majority or all must be independent (as defined)

2.2 Independence standards

Define "independent" by reference to the applicable governance code:

Flag that independence assessments must be disclosed in the annual governance report — see [[prompt-pack-annual-report-governance-section]].

2.3 Chairperson

• Appointed by the full board or elected by committee members
• Must be independent
• Audit Committee: the Chair should have financial literacy or expertise (required under most codes; UAE SCA requires at least one member with financial/accounting experience)
• Remuneration Committee: the Chair must be independent; the CEO may not chair

2.4 Membership changes

• Committee members are appointed annually by the full board
• Removal: by the full board only
• Vacancies: filled by the full board within [60/90] days

3. Duties and responsibilities

Audit Committee duties

Core responsibilities (universal across governance codes):

• Financial reporting: review the integrity of the company's financial statements; review significant accounting judgements and estimates; review the annual and interim reports before board approval
• Internal audit: oversee the internal audit function; approve the internal audit plan; ensure the internal audit function has adequate resources and independence
• External auditor: recommend appointment, re-appointment, or removal of the external auditor to the board/shareholders; review external auditor independence (ensure no prohibited non-audit services); approve the external audit scope and fees; review audit findings
• Internal controls: review the effectiveness of the company's internal controls over financial reporting; review management's reports on internal control
• Whistleblowing: oversee the company's whistleblowing mechanism; ensure employees can report concerns without fear of retaliation
• Related party transactions: review and approve related party transactions above defined thresholds

MENA-specific: in UAE (SCA Code) and KSA (CMA Code), the Audit Committee must include at least one member with financial expertise. The committee must report to shareholders at the AGM.

Remuneration/Compensation Committee duties

• Remuneration policy: design and recommend to the board the company's remuneration policy for directors and senior management
• Individual remuneration: approve or recommend the remuneration of each executive director and the CEO
• Incentive plans: design, oversee, and administer short-term (annual bonus) and long-term (equity incentive) plans
• Contractual terms: review contractual terms for new executive director appointments (notice periods, change of control provisions)
• Disclosure: oversee the remuneration report in the annual report

MENA-specific: success/conditional fees and performance-linked remuneration for board members are subject to shareholder approval in UAE (SCA Code); KSA prohibits variable board remuneration in some contexts — verify current rules.

Nomination/Governance Committee duties

• Board succession: identify and evaluate candidates for board membership; establish selection criteria; oversee the nomination process
• Skills and diversity: review the board skills matrix; identify gaps; recommend board diversity goals
• Independence assessment: make annual assessments of each director's independence; recommend to the full board
• Corporate governance: review the company's governance practices; recommend improvements; oversee compliance with the applicable governance code
• Board evaluation: oversee the annual board performance evaluation process

Risk Committee duties (for financial institutions and large corporates)

• Risk appetite framework: review and recommend to the board the company's risk appetite statement
• Risk oversight: oversee the enterprise risk management framework; review key risk reports; escalate emerging risks to the full board
• Risk function: oversee the Chief Risk Officer; ensure adequate resources and independence for the risk function
• Regulatory capital (for financial institutions): oversee regulatory capital adequacy and liquidity risk management

4. Meetings

• Frequency: Audit Committee: at least 4 times per year; others: at least 3 times per year (or as required)
• Quorum: majority of members; or as specified in the charter
• Agenda: Chair (with committee secretary) prepares agenda; members may add items
• Attendees: relevant management, external auditor (Audit Committee), and advisors may attend as invitees; committee may meet without management
• Minutes: comprehensive minutes maintained; reviewed and approved at the next meeting; filed in corporate records
• Written resolutions: permitted between meetings if urgency requires; same quorum/majority applies

5. Reporting

• To the board: present summary of each committee meeting's deliberations and recommendations to the next board meeting
• Formal recommendations: formal recommendations to the board (e.g., approval of financial statements, external auditor appointment) must be recorded in board minutes
• Annual report: each committee Chair provides a report of the committee's activities for the annual governance section — see [[prompt-pack-annual-report-governance-section]]
• Shareholders (Audit Committee): report to AGM on committee activities and auditor independence

6. Authority and resources

• Independent advisors: the committee has authority to retain, at the company's expense, independent counsel, financial advisors, auditors, or other specialists it deems necessary
• Access: committee members have unrestricted access to management and company records
• Budget: annual budget approved by the full board

7. Review of the charter

• Review annually for compliance with applicable governance code updates
• Recommend amendments to the full board for approval

Jurisdictional notes

UAE (SCA Code for listed companies)

• Audit Committee: mandatory; minimum 3 members; all non-executive; majority independent; at least one with financial expertise
• Remuneration Committee: mandatory; minimum 3 members; majority independent; CEO must not be a member
• Nomination Committee: mandatory; minimum 3 members; majority independent
• Risk Committee: recommended for financial institutions; regulated banks must comply with CBUAE corporate governance standards

KSA (CMA Corporate Governance Regulations)

• Audit Committee: mandatory for listed companies; minimum 3 members; majority independent; at least 2 with financial/accounting experience
• Remuneration and Nominations Committees: mandatory; composition requirements per CMA regulations
• Board member remuneration: shareholder approval required; limits on variable components

DIFC

• DIFC Companies Law requires an audit committee for public companies (listed or large private); specific independence and financial expertise requirements
• Financial institutions: DFSA Corporate Governance Module imposes additional committee requirements

Lebanon

• No mandatory committee regime for private companies; voluntary committees for good governance; banks regulated by Banque du Liban circulars have specific committee requirements

Common mistakes

• Charter silent on CEO attendance at committee meetings (for Audit and Remuneration, the CEO should not attend the compensation setting for themselves; state this explicitly)
• No reference to the applicable governance code — charter will quickly become outdated when the code is revised
• Independence criteria not defined — creates annual assessment disputes
• No authority to retain independent advisors — committees without this authority are hamstrung
• Charter not reviewed or updated after governance code amendment

Related skills

• [[prompt-pack-board-resolution]] — board resolution adopting or amending the committee charter
• [[prompt-pack-annual-report-governance-section]] — annual disclosure of committee activities
• [[kb-corporate-governance-mena]] — MENA governance code reference
• [[heuristic-always-state-jurisdiction-first]] — jurisdiction determines mandatory composition requirements