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CS Executive · Company Law and Practice · Meetings of Board and its Committees

Meridian Pharma Ltd had 1,400 security holders (shareholders, debenture-holders and deposit-holders together) at one point during the financial year. Under Section 178, what is the position regarding the Stakeholders Relationship Committee?

Because the company had more than one thousand security holders of all types at some time in the year, the Board must constitute a Stakeholders Relationship Committee. Its chairperson must be a non-executive director, and the text does not demand independence.

  1. AIt need not be formed because only shareholders are counted
  2. BThe Board must constitute it, with a non-executive director as chairpersonCorrect
  3. CThe Board must constitute it, with an independent director as chairperson mandatorily
  4. DIt is required only if there are more than five thousand holders

Explanation

Section 178(5) applies where a company has more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time in the year. The chairperson must be a non-executive director; the text does not require him to be independent.

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