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

Narmada Steel Ltd is a company with 800 security holders in total throughout the year and is not otherwise covered by a specific statutory prescription for the committee. The Board asks whether it must constitute a Stakeholders Relationship Committee under section 178(5) of the Companies Act, 2013. The correct view is:

The company need not constitute the committee under section 178(5), because the trigger is more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year. With only 800 holders, the threshold is not met.

  1. AYes, every company must constitute it regardless of holders
  2. BYes, since any company with more than 500 holders must do so
  3. CNo, the threshold is more than one thousand security holders at any time during a financial yearCorrect
  4. DNo, because only listed public companies can ever be required to do so

Explanation

Section 178(5) applies to a company with more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year. With 800 holders the threshold is not crossed. The 500 figure is not in the section.

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