CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Committees
Sundaram Textiles Ltd, an unlisted public company, has 1,400 shareholders and debenture-holders together at one point during the financial year. Its board has not formed a Stakeholders Relationship Committee, reasoning that only listed companies must do so. Under the Companies Act, 2013 text given, what is the position?
The board must constitute a Stakeholders Relationship 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 in a financial year, regardless of listing, and the company has 1,400 such holders.
- AThe board is right, because only listed companies need this committee
- BThe board must constitute the committee, since security holders exceed one thousand at any time during the yearCorrect
- CThe committee is needed only if deposit-holders alone exceed one thousand
- DThe committee is needed only if shareholders alone exceed five thousand
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. It is not limited to listed companies. The 1,400 holders therefore trigger the requirement, so the board's reasoning is wrong.
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