CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Committees
Bharat Cement Ltd had 1,200 security holders (shareholders, debenture-holders and deposit-holders together) at one time during the financial year. Under section 178, which course is correct for its Board?
The Board must constitute a Stakeholders Relationship Committee chaired by a non-executive director. Section 178(5) applies when a company has more than one thousand security holders at any time during the year, and 1,200 exceeds that; the text requires a non-executive chairperson, not an independent one.
- ANo committee needed, as the threshold is based on shareholders only and must exceed 5,000
- BConstitute a Stakeholders Relationship Committee chaired by a non-executive directorCorrect
- CConstitute the committee with an independent director as chairperson, mandatorily
- DConstitute the committee chaired by the Managing Director to resolve grievances quickly
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 during a financial year. The committee must have a chairperson who is a non-executive director; the text does not require an independent director. The Managing Director, being executive, cannot chair it.
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