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

Meera Pharma Ltd is constituting its Stakeholders Relationship Committee. The board proposes Mr. Anand, the managing director, as chairperson because he knows investors well. Which statement is correct under Section 178?

The proposal is not permissible. Section 178(5) requires the chairperson of the Stakeholders Relationship Committee to be a non-executive director, and a managing director is an executive director. The board may decide the other members freely, but the chair must be non-executive.

  1. APermissible, since the board decides all committee matters
  2. BPermissible if he is also an independent director
  3. CNot permissible, because the chairperson must be a non-executive directorCorrect
  4. DPermissible only if the company secretary acts as co-chair

Explanation

Section 178(5) states the committee shall consist of a chairperson who shall be a non-executive director, plus other members as decided by the Board. A managing director is an executive director, so he cannot chair it. The board's freedom extends only to the other members.

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