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

Stakeholders Relationship Committee: Applicability, Composition and Functions

Updated 11 October 2026 · Fact-checked

The Stakeholders Relationship Committee is a Board committee under Section 178(5) and (6) of the Companies Act, 2013. A company with more than 1,000 security holders at any time in a financial year must form it. Its chairperson must be a non-executive director. It considers and resolves grievances of security holders.

Understand Stakeholders Relationship Committee

A company raises money from shareholders, debenture-holders and deposit-holders. When they have complaints, such as delayed transfer, missing dividend or non-receipt of notices, they need a proper forum. The Stakeholders Relationship Committee (SRC) is that forum inside the Board.

Section 178(5) sets the trigger. The Board of a company that has more than one thousand shareholders, debenture-holders, deposit-holders and any other security holders at any time during a financial year must constitute the committee. Note the count covers all security holders together, not only shareholders. It also does not depend on the company being listed.

On composition, the Act is short. The committee must have a chairperson who is a non-executive director, and such other members as the Board decides. The Act fixes no minimum number of members and does not require independent directors. Do not copy the rules of the Audit Committee or the Nomination and Remuneration Committee here.

The function is in Section 178(6): the committee considers and resolves the grievances of security holders of the company. Under Section 178(7), the chairperson of the committee, or another member he authorises, must attend the general meetings of the company.

There is a protection for the committee. Under the proviso to Section 178(8), if the committee, acting in good faith, is unable to resolve or consider a grievance, that is not a contravention of the section. The duty is to genuinely consider and try to resolve, not to guarantee a result.

Key rules to remember

Applicability: Security holders > 1,000 at any time during a financial year → constitute SRC; Section 178(5). Count shareholders, debenture-holders, deposit-holders and other security holders together.
Composition: Chairperson = non-executive director; other members = as decided by the Board; Section 178(5). The Act fixes no minimum size and no independent director requirement.
Function: Consider and resolve grievances of security holders; Section 178(6).
Attendance at general meetings: SRC chairperson (or member authorised by him) attends general meetings; Section 178(7). Applies to every committee under the section.
Penalty for contravention: Company: fine ₹1,00,000 to ₹5,00,000; each officer in default: penalty of ₹1,00,000; Section 178(8), as it reads in the supplied text, covers contravention of Section 177 and Section 178. Good-faith inability to resolve a grievance is not a contravention.

How to solve Stakeholders Relationship Committee questions

Most exam questions give a company's facts and ask whether an SRC is needed, how it should be formed, or what it must do. Use this order and write in provision, analysis, conclusion form.

1Identify the company's security holders: shareholders, debenture-holders, deposit-holders and others. Add them up.
2State the rule: Section 178(5) requires an SRC if the total exceeds 1,000 at any time during the financial year.
3Compare the facts with the threshold. Exactly 1,000 is not enough; it must be more than 1,000.
4Check composition: chairperson must be a non-executive director. Other members are for the Board to decide.
5State the function under Section 178(6): consider and resolve security holders' grievances.
6Add the compliance points: chairperson attends general meetings (Section 178(7)), and penalty under Section 178(8) for contravention.
7Write a clear conclusion that answers the exact question asked, and suggest a practical step such as a Board resolution, terms of reference and a grievance register.

Quickest way: Threshold, chair, function in 3 lines

When to use it: Use when the question is short and asks only whether an SRC is needed or who can chair it.

Write the total security holders and compare with more than 1,000.
If yes, write: chair must be a non-executive director, other members decided by the Board.
Close with: it considers and resolves security holders' grievances, and the chair attends general meetings.

Common mistakes in Stakeholders Relationship Committee

Counting only shareholders for the 1,000 threshold.
The committee's name suggests equity holders only.
Fix: Section 178(5) counts shareholders, debenture-holders, deposit-holders and any other security holders together.
Saying the committee is required only for listed companies.
Students confuse it with Audit and NRC, which apply to listed public companies and prescribed classes.
Fix: The SRC trigger in the Act is the number of security holders, not listing status.
Requiring independent directors as members.
Audit and NRC rules are copied across.
Fix: The Act only requires a non-executive chairperson. Other members are as the Board decides.
Treating 1,000 holders as enough to trigger the committee.
Careless reading of 'more than'.
Fix: The test is more than 1,000, so 1,001 triggers it and 1,000 does not.
Saying the company is penalised whenever a grievance stays unresolved.
The proviso to Section 178(8) is skipped.
Fix: Inability to resolve or consider a grievance in good faith is not a contravention. Failure to constitute the committee is.
Forgetting that the chairperson must attend general meetings.
Students focus only on composition and functions.
Fix: Add Section 178(7) to your answer on duties.

Worked examples

Example 1

Sundaram Textiles Ltd has 620 equity shareholders, 280 debenture-holders and 150 deposit-holders at some point during the financial year. Is it required to constitute a Stakeholders Relationship Committee?

Show the solution

Rule: under Section 178(5), a company with more than 1,000 shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year must constitute an SRC.
Total security holders = 620 + 280 + 150 = 1,050.
1,050 is more than 1,000, so the threshold is crossed.
The test is not limited to shareholders, so the debenture-holders and deposit-holders count.

Answer: Yes. Total security holders are 1,050, which exceeds 1,000, so the Board must constitute an SRC under Section 178(5).

Example 2

The Board of Kaveri Foods Ltd plans an SRC of three members, with the Managing Director as chairperson and two independent directors as members. Advise on the validity of this plan and state the committee's role.

Show the solution

Rule: Section 178(5) requires the chairperson to be a non-executive director. Other members are as the Board decides.
The Managing Director is an executive director, so he cannot chair the committee.
Having two independent directors as members is allowed, though the Act does not require them.
The Board should appoint a non-executive director as chairperson. The MD may be a member only if the Board so decides.
Role under Section 178(6): consider and resolve the grievances of security holders. The chairperson, or a member authorised by him, must attend general meetings under Section 178(7).
If the company fails to constitute the committee as required, Section 178(8) provides a fine on the company and a penalty on each officer in default.

Answer: The plan is invalid because the chairperson is an executive director. The Board should appoint a non-executive director as chair. The committee must consider and resolve security holders' grievances, and its chair must attend general meetings.

Exam tips

Write the section number 178(5) for applicability and 178(6) for function. Examiners reward exact references.
In case questions, add up all categories of security holders before applying the 1,000 test.
Always state that the chairperson must be a non-executive director, and that the Act fixes no minimum size.
Mention the good-faith proviso to Section 178(8) when a question asks about unresolved grievances.
Finish with a practical point: Board resolution, terms of reference, grievance register and reporting to the Board.

Practice questions from Board Committees

Stakeholders Relationship Committee in other exams

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

ACCA Applied KnowledgeStakeholder Influence and Managing Stakeholder Relationships

Stakeholders Relationship Committee: frequently asked questions

When must a company constitute a Stakeholders Relationship Committee?

When it has more than 1,000 shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year. Section 178(5) imposes this duty on the Board.

Who can be the chairperson of the Stakeholders Relationship Committee?

The chairperson must be a non-executive director. The Act leaves the choice of other members to the Board.

Does the Act require independent directors on the SRC?

No. Section 178(5) requires only a non-executive chairperson. The Board decides the other members.

What does the SRC do?

It considers and resolves the grievances of the company's security holders under Section 178(6). Its chairperson, or an authorised member, also attends general meetings.

Is a company penalised if the SRC cannot resolve a grievance?

Not if it acted in good faith. The proviso to Section 178(8) says inability to resolve or consider a grievance in good faith is not a contravention.