Reconstructing the financial statements and appointment of key managerial personnel, especially the chief financial officer (CFO), should top the agenda for the newly appointed board of Satyam Computer Services, experts say.

Further, the board will have to decide whether to appoint a new chief executive officer (CEO)/ managing director or continue with the interim CEO, and also whether to replace the current statutory auditors Price Waterhouse.

The minimum required strength is three directors and the government has done so. The board has all the power exercised under the Companies Act, said Ved Jain, president of Institute of Chartered Accountants of India (ICAI), which regulates chartered accounting profession in India.

Appointment of new auditors

While superseding the existing board of Satyam on Friday, the government did not specify under what section it took action.

But B Ravi, a company law expert, said the government is likely to have invoked Section 408- which gives powers to government to prevent oppression or mismanagement. This section has non-obstinate clause (meaning it over rides other section while being used), so nominee directors can remove the statutory auditor with a direction from the central government, he added.

However Ved Jain of ICAI, which has sent show cause notice to Price Waterhouse regarding the Satyam episode, said the auditor can be removed only in the extraordinary general body meeting of shareholders with a prior approval of the central government. He was referring to Section 224 (7) of Companies Act that deals with removal of auditors.

If the auditors have to be removed with the approval of shareholders it will take a months time as 21 days notice need to be given while convening the EGM.

With regard to nominee directors, they cannot be removed from their position for three years unless the government decides to remove, Ravi added. Normally board directors have to be elected by the shareholders on an annual basis.

Audit committee under listing agreement

Clause 49 of the listing agreement says every company has to mandatorily set up an audit committee and another one to look into the grievance of shareholders. It also requires one of the directors to be financially literate.