Environmental, Social and Governance (ESG) - Principles and Practice · Board Committees

Appointment of Committees and Committee of Directors

Updated 11 October 2026 · Fact-checked

Under section 378U of the Companies Act, 2013, the board of a Producer Company may constitute committees to help it work efficiently. The board cannot delegate any of its powers or the Chief Executive's powers to a committee. Committees work under the board's control and must place their minutes before the board at its next meeting.

Understand Appointment of Committees and Committee of Directors

A board is a small group that must handle many matters. To share the load, it forms committees. A committee studies a matter in detail, and the board then acts on its work.

The text you have for this topic is section 378U, which sits in the part of the Act dealing with Producer Companies. It says the Board may constitute as many committees as it thinks fit, for the purpose of assisting the Board in the efficient discharge of its functions. The key word is assisting. A committee supports the board. It does not replace it.

The section then sets firm limits. The board shall not delegate any of its powers to a committee. It also cannot assign the powers of the Chief Executive, appointed under section 378W, to a committee. A committee may, with the Board's approval, co-opt other persons as members. But the Chief Executive or a director of the Producer Company must be a member of every such committee.

A committee stays under the board's general superintendence, direction and control. The board decides for how long it functions and in what manner. The board also fixes the fee and allowances of members. Finally, the minutes of each committee meeting go before the board at its next meeting. This keeps the board informed and accountable.

Do not confuse this with the committees that the Act makes compulsory for other companies. The Audit Committee (section 177), the Nomination and Remuneration Committee and the Stakeholders Relationship Committee (section 178) have their own composition rules. Section 378U is the general enabling provision for a Producer Company's board. In your answer, always name the type of company the provision applies to.

Key rules to remember

Power to constitute committees (s. 378U(1)): Board may constitute such number of committees as it deems fit, to assist it in efficient discharge of its functions; The purpose is assistance. The number of committees is left to the board.
Limit on delegation (proviso to s. 378U(1)): Board shall not delegate any of its powers, or assign the powers of the Chief Executive, to any committee; The Chief Executive is the one appointed under section 378W. Quote this proviso in any delegation question.
Co-option (s. 378U(2)): Co-option allowed with Board approval; Chief Executive or a director must be a member; The number of co-opted persons is as the committee deems fit, but only after the Board approves.
Control of the Board (s. 378U(3)): Committee functions under Board's general superintendence, direction and control, for such duration and in such manner as the Board directs; The board sets the life and working method of the committee.
Fee and allowances (s. 378U(4)): Fee and allowances of members = as determined by the Board; The committee cannot fix its own fee.
Minutes (s. 378U(5)): Minutes of each committee meeting → placed before Board at its next meeting; This applies to each meeting, not once a year.
Contrast: Audit Committee composition (s. 177(2)): Minimum 3 directors; independent directors form a majority; Compulsory for every listed public company and prescribed classes. Do not apply this to a s. 378U committee.
Contrast: Nomination and Remuneration Committee (s. 178(1)): 3 or more non-executive directors; not less than one-half independent; The company's chairperson may be a member but shall not chair it.

How to solve Appointment of Committees and Committee of Directors questions

Use this order for any case question on committees and delegation. Write provision, facts, conclusion.

1Identify the company type. Section 378U applies to a Producer Company. If the facts involve a listed public company, check whether section 177 or 178 is the real issue.
2State the board's power: it may constitute committees to assist it in the efficient discharge of its functions.
3Test the delegation. Is the board handing over its own powers, or the Chief Executive's powers, to the committee? If yes, the proviso is breached.
4Test the membership. Is the Chief Executive or a director on the committee? Were any outsiders co-opted with Board approval?
5Test the control points: the board's direction on duration and manner, the fee and allowances fixed by the board, and the minutes placed before the board at its next meeting.
6Apply each point to the given facts and say what is valid and what is not.
7Conclude clearly and give a compliance fix, such as a board resolution, revised terms of reference or placing minutes at the next meeting.

Quickest way: Five-point check for section 378U

When to use it: Use it when a short case describes a board forming a committee and you have little time.

Purpose: is the committee only assisting the board?
Delegation: are any board or Chief Executive powers being handed over? If yes, it is not allowed.
Members: is the Chief Executive or a director included, and was co-option approved by the Board?
Control: has the board fixed duration, manner, fee and allowances?
Minutes: do they reach the board at its next meeting?

Common mistakes in Appointment of Committees and Committee of Directors

Saying the board can delegate any power to a committee under section 378U.
Students remember that committees do work for the board and assume this means delegation of powers.
Fix: Quote the proviso: the Board shall not delegate any of its powers to any committee. The committee assists and does not take over the board's powers.
Forgetting that the Chief Executive's powers also cannot be assigned to a committee.
Students read only the first half of the proviso.
Fix: Remember it as two limits in one proviso: board powers and Chief Executive powers.
Allowing a committee to co-opt members on its own.
The word 'co-opt' suggests the committee decides freely.
Fix: Co-option needs the approval of the Board. Also check that the Chief Executive or a director is a member.
Letting the committee fix its own fee or allowances.
Students assume a committee is self-governing.
Fix: Section 378U(4) says the fee and allowances are determined by the Board.
Placing committee minutes before the board only once a year or at the next annual meeting.
Students mix this rule with annual reporting duties.
Fix: Minutes of each meeting of the committee go before the Board at its next meeting.
Applying the Audit Committee or NRC composition rules to every committee.
Sections 177 and 178 are better known, so students apply them everywhere.
Fix: Those rules apply only to the committees named in those sections. A general committee under section 378U has only the membership rule stated in the section.

Worked examples

Example 1

The board of Kisan Agro Producer Company Limited forms a Finance Committee. It resolves that the committee will exercise all the powers of the Chief Executive for six months, while the Chief Executive is on leave. Is this valid?

Show the solution

Provision: section 378U(1) lets the Board constitute committees to assist it. The proviso says the Board shall not delegate any of its powers or assign the powers of the Chief Executive to any committee.
Facts: the board is assigning all the Chief Executive's powers to the Finance Committee.
Analysis: forming a Finance Committee is permitted. But assigning the Chief Executive's powers to it is exactly what the proviso prohibits. A leave period does not create an exception in the text.
Conclusion and fix: the part of the resolution assigning the Chief Executive's powers is not valid. The board should keep the Finance Committee for assisting work, such as reviewing budgets. The Chief Executive's functions during leave must be dealt with otherwise than by assigning them to a committee.

Answer: The resolution is invalid to the extent it assigns the Chief Executive's powers to the committee. The committee itself may be constituted, but only to assist the board.

Example 2

The Finance Committee of a Producer Company wants to co-opt two retired bankers as members and pay them a sitting fee of its own choice. Its minutes are sent to the board once a year. Advise on compliance.

Show the solution

Co-option: section 378U(2) allows it, but only with the approval of the Board. The committee must first obtain that approval.
Membership: the Chief Executive or a director of the Producer Company must be a member of the committee. Check this is satisfied.
Fee: under section 378U(4) the fee and allowances are determined by the Board. The committee cannot choose its own.
Minutes: section 378U(5) requires minutes of each meeting to be placed before the Board at its next meeting. Sending them once a year is not compliant.
Control: the committee works under the Board's general superintendence, direction and control, for such duration and in such manner as the Board directs.

Answer: The committee may co-opt the two bankers only after Board approval, and must include the Chief Executive or a director. The Board must fix the fee. Minutes of every meeting must go to the Board at its next meeting.

Exam tips

Begin every answer with the type of company. Section 378U is for a Producer Company, and examiners reward that precision.
Quote the proviso on delegation almost word for word. It is the most testable line in the section.
Use the structure provision, facts, analysis, conclusion. Add one practical drafting point, such as the wording of the board resolution that constitutes the committee.
If asked for a contrast with compulsory committees, give the section 177 and 178 composition rules briefly and correctly.
Do not quote a penalty or any section number that is not in the text you studied. State the rule in plain words instead.

Practice questions from Board Committees

Appointment of Committees and Committee of Directors in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Appointment of Committees and Committee of Directors: frequently asked questions

Can the board delegate its powers to a committee of directors?

Under section 378U of the Companies Act, 2013, the Board of a Producer Company shall not delegate any of its powers to a committee. It also cannot assign the Chief Executive's powers. Committees exist to assist the board.

Who must be a member of a committee under section 378U?

The Chief Executive appointed under section 378W, or a director of the Producer Company, must be a member. Other persons may be co-opted if the Board approves.

Who decides the fee of committee members?

The Board. Section 378U(4) says the fee and allowances payable to committee members are as determined by the Board.

What must happen to the minutes of a committee meeting?

The minutes of each meeting of the committee must be placed before the Board at its next meeting. This keeps the board informed of what the committee did.

Is section 378U the same as the Audit Committee rules?

No. Section 378U is a general enabling provision for committees of a Producer Company's board. The Audit Committee is governed by section 177, which has its own rules on composition and terms of reference.