CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Stakeholders Rights
Sagar Pharma Ltd, an unlisted public company, had 800 security holders for most of the year, but at one point in the financial year the total of shareholders, debenture-holders, deposit-holders and other security holders crossed 1,050 before falling back. Which statement is correct under Section 178(5)?
The board must constitute the committee. Section 178(5) applies where a company has more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year. The categories are counted together, listing is not required, and falling back later does not remove the obligation.
- ANo committee is needed because the count did not stay above one thousand at year end
- BThe committee is needed only if the company is listed
- CThe committee is needed only if shareholders alone exceed one thousand
- DThe board must constitute the committee because the threshold was crossed at any time during the yearCorrect
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. All holder categories are counted together, and listing is not a condition. Crossing 1,050 at one point triggers the duty.
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