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

Kaveri Agro Producer Company Ltd, a Producer Company, constitutes a committee of directors to assist the Board. Its Board resolves to allow this committee to exercise the powers of the Chief Executive in day-to-day operations. Under section 378U of the Companies Act, 2013, what is the position?

The assignment is not permitted. Section 378U(1) lets the Board constitute committees to assist it, but its proviso bars the Board from delegating any of its powers or assigning the Chief Executive's powers to any committee, and neither minutes nor membership overcomes that.

  1. APermitted, provided the committee minutes go to the Board at its next meeting
  2. BPermitted, if the Chief Executive is a member of that committee
  3. CNot permitted, as the Board cannot assign the powers of the Chief Executive to any committeeCorrect
  4. DPermitted, if the general meeting approves the delegation by ordinary resolution

Explanation

The proviso to section 378U(1) states that the Board shall not delegate any of its powers or assign the powers of the Chief Executive to any committee. Placing minutes before the Board or having the Chief Executive as a member does not cure this bar. No shareholder approval route exists in the text.

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