exv99w1
Exhibit 99.1
Sify Limited
Audit Committee Charter
This Audit Committee Charter was adopted by the Board of Directors (the “Board”) of Sify
Limited (the “Company”) on July 15, 2005.
I. Purpose
The purpose of the Audit Committee (the “Committee”) is to oversee the accounting and
financial reporting processes of the Company and the audits of the financial statements of the
Company.
In addition to the powers and responsibilities expressly delegated to the Committee in this
Charter, the Committee may exercise any other powers and carry out any other responsibilities
delegated to it by the Board from time to time consistent with the Company’s articles of
association. The powers and responsibilities delegated by the Board to the Committee in this
Charter or otherwise shall be exercised and carried out by the Committee as it deems appropriate
without requirement of Board approval, and any decision made by the Committee (including any
decision to exercise or refrain from exercising any of the powers delegated to the Committee
hereunder) shall be at the Committee’s sole discretion. While acting within the scope of the
powers and responsibilities delegated to it, the Committee shall have and may exercise all the
powers and authority of the Board. To the fullest extent permitted by law, the Committee shall
have the power to determine which matters are within the scope of the powers and responsibilities
delegated to it.
Notwithstanding the foregoing, the Committee’s responsibilities are limited to oversight.
Management of the Company is responsible for the preparation, presentation and integrity of the
Company’s financial statements as well as the Company’s financial reporting process, accounting
policies, internal audit function, internal accounting controls and disclosure controls and
procedures. The independent auditor is responsible for performing an audit of the Company’s annual
financial statements, expressing an opinion as to the conformity of such annual financial
statements with generally accepted accounting principles and reviewing the Company’s quarterly
financial statements. It is not the responsibility of the Committee to plan or conduct audits or
to determine that the Company’s financial statements and disclosure are complete and accurate and
in accordance with generally accepted accounting principles and applicable laws, rules and
regulations. Each member of the Committee shall be entitled to rely on the integrity of those
persons within the Company and of the professionals and experts (including the Company’s internal
auditor (or others responsible for the internal audit function, including contracted non-employee
or audit or accounting firms engaged to provide internal audit services) (the “internal auditor”)
and the Company’s independent auditor) from which the Committee receives information and, absent
actual knowledge to the contrary, the accuracy of the financial and other information provided to
the Committee by such persons, professionals or experts.
Further, auditing literature, particularly Statement of Accounting Standards No. 71, defines
the term “review” to include a particular set of required procedures to be undertaken by
independent auditors. The members of the Committee are not independent auditors, and the term
“review” as used in this Charter is not intended to have that meaning and should not be interpreted
to suggest that the Committee members can or should follow the procedures required of auditors
performing reviews of financial statements.
II. Membership
The Committee shall consist of at least three members of the Board; provided, that if at any
time there is a vacancy on the Committee and the remaining members meet all membership
requirements, then the Committee may consist of two members until the earlier of the Company’s next
Annual General Meeting or one year from the occurrence of the vacancy. Each Committee member must
be able to read and understand fundamental financial statements, including a company’s balance
sheet, income statement and cash flow statement. Members of the Committee are not required to be
engaged in the accounting and auditing profession and, consequently, some members may not be expert
in financial matters, or in matters involving auditing or accounting. However, at least one member
of the Committee shall have past employment experience in finance or accounting, requisite
professional certification in accounting, or any other comparable experience or background which
results in the individual’s financial sophistication, including being or having been a chief
executive officer, chief financial officer or other senior officer with financial oversight
responsibilities. In addition, either at least one member of the Committee shall be an “audit
committee financial expert” within the definition adopted by the United States Securities and
Exchange Commission (the “SEC”) or the Company shall disclose in its periodic reports required
pursuant to the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”) the
reasons why at least one member of the Committee is not an “audit committee financial expert.”
Subject to any available exemption, each Committee member shall satisfy the independence
requirements of the Nasdaq Stock Market and Rule 10A-3(b)(1) under the Exchange Act; provided, that
if a member of the Committee ceases to be independent for reasons outside the member’s reasonable
control, then the member may remain on the Committee until the earlier of the Company’s next Annual
General Meeting or one year from the occurrence of the event that caused the member to cease to be
independent.
The members of the Committee, including the Chair of the Committee, shall be appointed by the
Board. Committee members may be removed from the Committee, with or without cause, by the Board.
III. Meetings and Procedures
The Chair (or in his or her absence, a member designated by the Chair) shall preside at each
meeting of the Committee and set the agendas for Committee meetings. The Committee shall have the
authority to establish its own rules and procedures for notice and conduct of its meetings so long
as they are not inconsistent with any provisions of the Company’s articles of association that are
applicable to the Committee.
The Committee shall meet at least once during each fiscal quarter and more frequently as the
Committee deems desirable. The Committee shall meet separately, periodically, with management,
with the internal auditor and with the independent auditor.
All non-management directors that are not members of the Committee may attend and observe
meetings of the Committee, but shall not participate in any discussion or deliberation unless
invited to do so by the Committee, and in any event shall not be entitled to vote. The Committee
may, at its discretion, include in its meetings members of the Company’s management,
representatives of the independent auditor, the internal auditor, any other financial personnel
employed or retained by the Company or any other persons whose presence the Committee believes to
be necessary or appropriate. Notwithstanding the foregoing, the Committee may also exclude from
its meetings any persons it deems appropriate, including, but not limited to, any non-management
director that is not a member of the Committee.
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The Committee may retain any independent counsel, experts or advisors (accounting, financial
or otherwise) that the Committee believes to be necessary or appropriate. The Committee may also
utilize the services of the Company’s regular legal counsel or other advisors to the Company. The
Company shall provide for appropriate funding, as determined by the Committee, for payment of
compensation to the independent auditor for the purpose of rendering or issuing an audit report or
performing other audit, review or attest services, for payment of compensation to any advisors
employed by the Committee and for ordinary administrative expenses of the Committee that are
necessary or appropriate in carrying out its duties.
The Committee may conduct or authorize investigations into any matters within the scope of the
powers and responsibilities delegated to the Committee.
IV. Powers and Responsibilities
Interaction with the Independent Auditor
1. Appointment and Oversight. The Committee shall be directly responsible for
the appointment, compensation, retention and oversight of the work of the independent auditor
(including resolution of any disagreements between Company management and the independent auditor
regarding financial reporting) for the purpose of preparing or issuing an audit report or related
work or performing other audit, review or attest services for the Company, and the independent
auditor shall report directly to the Committee.
2. Pre-Approval of Services. Before the independent auditor is engaged by the
Company or its subsidiaries to render audit or non-audit services, the Committee shall pre-approve
the engagement. Committee pre-approval of audit and non-audit services will not be required if the
engagement for the services is entered into pursuant to pre-approval policies and procedures
established by the Committee regarding the Company’s engagement of the independent auditor,
provided the policies and procedures are detailed as to the particular service, the Committee is
informed of each service provided and such policies and procedures do not include delegation of the
Committee’s responsibilities under the Exchange Act to the Company’s management. The Committee may
delegate to one or more designated members of the Committee the authority to grant pre-approvals,
provided such approvals are presented to the Committee at a subsequent meeting. If the Committee
elects to establish pre-approval policies and procedures regarding non-audit services, the
Committee must be informed of each non-audit service provided by the independent auditor.
Committee pre-approval of non-audit services (other than review and attest services) also will not
be required if such services fall within available exceptions established by the SEC.
3. Independence of Independent Auditor. The Committee shall, at least annually,
review the independence and quality control procedures of the independent auditor and the
experience and qualifications of the independent auditor’s senior personnel that are providing
audit services to the Company. In conducting its review:
(i) The Committee shall obtain and review a report prepared by the independent auditor
describing (a) the auditing firm’s internal quality-control procedures and (b) any material issues
raised by the most recent internal quality-control review, or peer review, of the auditing firm, or
by any inquiry or investigation by governmental or professional authorities, within the preceding
five years, respecting one or more independent audits carried out by the auditing firm, and any
steps taken to deal with any such issues.
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(ii) The Committee shall ensure that the independent auditor prepare and deliver, at least
annually, a written statement delineating all relationships between the independent auditor and the
Company, consistent with Independence Standards Board Standard 1. The Committee shall actively
engage in a dialogue with the independent auditor with respect to any disclosed relationships or
services that, in the view of the Committee, may impact the objectivity and independence of the
independent auditor. If the Committee determines that further inquiry is advisable, the Committee
shall take appropriate action in response to the independent auditor’s report to satisfy itself of
the auditor’s independence.
(iii) The Committee shall confirm with the independent auditor that the independent auditor is
in compliance with the partner rotation requirements established by the SEC.
(iv) The Committee shall, if applicable, consider whether the independent auditor’s provision
of any permitted information technology services or other non-audit services to the Company is
compatible with maintaining the independence of the independent auditor.
Annual Financial Statements and Annual Audit
4. Meetings with Management, the Independent Auditor and the Internal Auditor.
(i) The Committee shall meet with management, the independent auditor and the internal auditor
in connection with each annual audit to discuss the scope of the audit, the procedures to be
followed and the staffing of the audit.
(ii) The Committee shall review and discuss with management and the independent auditor: (A)
major issues regarding accounting principles and financial statement presentations, including any
significant changes in the Company’s selection or application of accounting principles, and major
issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in
light of material control deficiencies; (B) any analyses prepared by management or the independent
auditor setting forth significant financial reporting issues and judgments made in connection with
the preparation of the Company’s financial statements, including analyses of the effects of
alternative GAAP methods on the Company’s financial statements; and (C) the effect of regulatory
and accounting initiatives, as well as off-balance sheet structures, on the Company’s financial
statements.
(iii) The Committee shall review and discuss the annual audited financial statements with
management and the independent auditor, including the Company’s disclosures under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
5. Separate Meetings with the Independent Auditor.
(i) The Committee shall review with the independent auditor any problems or difficulties the
independent auditor may have encountered during the course of the audit work, including any
restrictions on the scope of activities or access to required information or any significant
disagreements with management and management’s responses to such matters. Among the items that the
Committee should consider reviewing with the Independent Auditor are: (A) any accounting
adjustments that were noted or proposed by the auditor but were “passed” (as immaterial or
otherwise); (B) any communications between the audit team and the independent auditor’s national
office respecting auditing or accounting issues presented by the engagement; and (C) any
“management” or “internal control” letter issued, or proposed to be issued, by the independent
auditor to the Company. The Committee shall obtain from the independent auditor assurances that
Section 10A(b) of the Exchange Act has not been implicated.
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(ii) The Committee shall discuss with the independent auditor the report that such auditor is
required to make to the Committee regarding: (A) all accounting policies and practices to be used
that the independent auditor identifies as critical; (B) all alternative treatments within GAAP for
policies and practices related to material items that have been discussed among management and the
independent auditor, including the ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent auditor; and (C) all other material
written communications between the independent auditor and management of the Company, such as any
management letter, management representation letter, reports on observations and recommendations on
internal controls, independent auditor’s engagement letter, independent auditor’s independence
letter, schedule of unadjusted audit differences and a listing of adjustments and reclassifications
not recorded, if any.
(iii) The Committee shall discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61, “Communication with Audit Committees,” as then
in effect.
6. Recommendation to Include Financial Statements in Annual Report. The
Committee shall, based on the review and discussions in paragraphs 4(iii) and 5(iii) above, and
based on the disclosures received from the independent auditor regarding its independence and
discussions with the auditor regarding such independence pursuant to subparagraph 3(ii) above,
determine whether to recommend to the Board that the audited financial statements be included in
the Company’s Annual Report on Form 20-F for the fiscal year subject to the audit.
Quarterly Financial Statements
7. Meetings with Management and the Independent Auditor. The Committee shall
review and discuss the quarterly financial statements with management and the independent auditor,
including the Company’s disclosures under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
Internal Audit
8. Appointment. The Committee shall review the appointment and replacement of
the internal auditor.
9. Separate Meetings with the Internal Auditor. The Committee shall meet
periodically with the Company’s internal auditor to discuss the responsibilities, budget and
staffing of the Company’s internal audit function and any issues that the internal auditor
believes warrant audit committee attention. The Committee shall discuss with the internal auditor
and significant reports to management prepared by the internal auditor and any responses from
management.
Other Powers and Responsibilities
10. The Committee shall discuss with management and the independent auditor the
Company’s earnings press releases (with particular focus on any “pro forma” or “adjusted” non-GAAP
information), as well as financial information and earnings guidance provided to analysts and
rating agencies. The Committee’s discussion in this regard may be general in nature (i.e.,
discussion of the types of information to be disclosed and the type of presentation to be made) and
need not take place in advance of each earnings release or each instance in which the Company may
provide earnings guidance.
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11. The Committee shall review all related party transactions on an ongoing basis
and all such transactions must be approved by the Committee.
12. The Committee shall discuss with management and the independent auditor any
correspondence from or with regulators or governmental agencies, any employee complaints or any
published reports that raise material issues regarding the Company’s financial statements,
financial reporting process, accounting policies or internal audit function.
13. The Committee shall discuss with the Company’s internal counsel or outside
counsel any legal matters brought to the Committee’s attention that could reasonably be expected to
have a material impact on the Company’s financial statements.
14. The Committee shall request assurances from management, the independent
auditor and the Company’s internal auditors that the Company’s subsidiaries and affiliated
entities, if any, are in conformity with applicable legal requirements, including disclosure of
affiliated party transactions.
15. The Committee shall discuss with management the Company’s policies with
respect to risk assessment and risk management. The Committee shall discuss with management the
Company’s significant financial risk exposures and the actions management has taken to limit,
monitor or control such exposures.
16. The Committee shall establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal accounting controls
or auditing matters. The Committee shall also establish procedures for the confidential and
anonymous submission by employees regarding questionable accounting or auditing matters.
17. The Committee shall provide the Company with the report of the Committee with
respect to the audited financial statements required by Item 306 of United States Reg. S-K, for
inclusion in each of the Company’s annual proxy statements.
18. The Committee, through its Chair, shall report regularly to, and review with,
the Board any issues that arise with respect to the quality or integrity of the Company’s financial
statements, the Company’s compliance with legal or regulatory requirements, the performance and
independence of the Company’s independent auditor, the performance of the Company’s internal audit
function or any other matter the Committee determines is necessary or advisable to report to the
Board.
19. The Committee shall at least annually perform an evaluation of the
performance of the Committee and its members, including a review of the Committee’s compliance with
this Charter.
20. The Committee shall at least annually review and reassess this Charter and
submit any recommended changes to the Board for its consideration.
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