CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Committees
Kaveri Textiles Ltd, a listed company, constitutes a voluntary ESG and Sustainability Committee of the Board. The Board wants to know whether section 178 of the Companies Act, 2013 prescribes its composition. What is the correct position?
Section 178 covers only the Nomination and Remuneration Committee and the Stakeholders Relationship Committee. A voluntary ESG and Sustainability Committee is not prescribed by it, so the Board decides its composition and terms of reference.
- ASection 178 requires it to have three non-executive directors with half independent
- BSection 178 requires its chairperson to be a non-executive director
- CSection 178 does not deal with it; it covers only the Nomination and Remuneration Committee and the Stakeholders Relationship Committee, so the Board may decide the compositionCorrect
- DSection 178 requires it to be chaired by the company's chairperson
Explanation
Section 178 provides only for the Nomination and Remuneration Committee and the Stakeholders Relationship Committee. An ESG committee is a voluntary governance body, so the Board sets its composition and terms of reference. The three non-executive directors rule applies to the NRC, not to this committee.
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