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CS Executive · Company Law and Practice · Meetings of Board and its Committees

Bharat Agro Ltd has 1,200 security holders (shareholders, debenture-holders and deposit-holders together) during the year. Which statement about its Stakeholders Relationship Committee is correct under section 178?

The Board must constitute a Stakeholders Relationship Committee, chaired by a non-executive director. Section 178(5) counts shareholders, debenture-holders, deposit-holders and other security holders together, and 1,200 exceeds one thousand. The section requires a non-executive chairperson, not an independent one.

  1. AThe Board must constitute it, with a non-executive director as chairpersonCorrect
  2. BIt is required only if the company is listed on a stock exchange
  3. CThe Board must constitute it, and an independent director must chair it
  4. DIt need not be constituted because shareholders alone are below 1,000

Explanation

Section 178(5) applies to a company with more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time in the year, counted together. The chairperson must be a non-executive director; the section does not require that person to be independent. So the 1,200 holders trigger the requirement.

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