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

Kaveri Textiles Ltd, a listed public company, has a six-member Board and is reconstituting its NRC. Which composition satisfies section 178(1) of the Companies Act, 2013?

Three non-executive directors with two independent directors satisfies the rule. Section 178(1) requires at least three non-executive directors on the committee, and not less than one-half of them must be independent directors. The other options fail on size, independence ratio or executive membership.

  1. AThree non-executive directors, of whom one is independent
  2. BThree non-executive directors, of whom two are independentCorrect
  3. CTwo non-executive directors, both independent
  4. DFour directors, of whom two are executive and two independent

Explanation

The NRC must have three or more non-executive directors with not less than one-half independent. Three members with two independent satisfies both tests. One independent out of three is less than half; two members fall short of three; executive directors are not permitted.

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