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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Stakeholders Rights

Kaveri Textiles Ltd, a listed company, has 420 employees and 6 directors. Its board proposes to skip a vigil mechanism because 'no employee has ever complained'. Under the Companies Act, 2013, what is the position?

A listed company must establish a vigil mechanism for both directors and employees to report genuine concerns. The obligation arises from the company's listed status, not from any past complaints, so Kaveri Textiles cannot skip it. The 1,000 holder test applies to a different committee.

  1. AA listed company must establish a vigil mechanism for directors and employees to report genuine concerns, irrespective of past complaintsCorrect
  2. BA vigil mechanism is needed only if the company has more than 1,000 security holders
  3. CA vigil mechanism is needed only for employees and not for directors
  4. DA vigil mechanism becomes mandatory only after the first complaint is received

Explanation

Section 177(9) requires every listed company (and prescribed classes) to establish a vigil mechanism for directors and employees to report genuine concerns. The duty does not depend on complaint history. The 1,000 holder threshold relates to the Stakeholders Relationship Committee under section 178(5), not the vigil mechanism.

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