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

Kaveri Textiles Ltd, a listed public company, proposes an NRC of six members: five non-executive directors, of whom two are independent, plus one executive director. The company secretary reviews it against Section 178(1). What is the position?

The composition is non-compliant. Section 178(1) requires the NRC to consist of three or more non-executive directors, not less than one-half of them independent. Including an executive director breaches the non-executive requirement, and two independents out of six is below one-half.

  1. ACompliant, since a majority are non-executive
  2. BNon-compliant: the committee must consist only of non-executive directors and at least one-half must be independentCorrect
  3. CCompliant, since at least two independent directors are present
  4. DNon-compliant only because the committee has more than three members

Explanation

Section 178(1) requires three or more non-executive directors, with not less than one-half independent. An executive director member breaches this, and two of six is also below one-half. Having a majority of non-executives is not enough.

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