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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards

Himalaya Foods Ltd, a listed public company, has an NRC of four members: the non-executive chairperson of the company, two independent directors and one non-executive non-independent director. The Board proposes that the chairperson of the company also chair the NRC, since he is a member. Which statement is correct under section 178(1)?

The chairperson of the company may be a member of the NRC but shall not chair it. The proviso to section 178(1) applies whether the chairperson is executive or non-executive, so the Board's proposal to make him NRC chair is not allowed.

  1. AThe chairperson may chair the NRC because he is non-executive
  2. BThe chairperson may be a member but shall not chair the NRCCorrect
  3. CThe chairperson cannot even be a member of the NRC
  4. DThe chairperson may chair it only if he is an independent director

Explanation

The proviso to section 178(1) lets the chairperson of the company, whether executive or non-executive, be a member of the NRC but not chair it. The composition (four non-executive directors, two independent, which is one-half) otherwise satisfies the minimum of three and at least one-half independent.

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