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

Sunrise Textiles Ltd, a public company, has 1,400 shareholders, debenture-holders and other security holders at some point in the financial year. Its board has not yet formed a committee for security holder grievances. Under Section 178 of the Companies Act, 2013, 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, counting all categories together, and it does not depend on listing.

  1. AThe board must constitute a Stakeholders Relationship Committee because security holders exceed one thousandCorrect
  2. BNo committee is needed unless the company is listed on a stock exchange
  3. CA committee is needed only if the security holders are all equity shareholders
  4. DA committee is needed only if more than five thousand security holders exist

Explanation

Section 178(5) requires the board of a company with more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year to constitute the committee. The count includes all categories of security holders, so the 1,400 figure triggers the requirement regardless of listing.

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