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Tara Motors Ltd had 1,200 security holders (shareholders, debenture-holders and deposit-holders together) at one time during the year. Its Stakeholders Relationship Committee failed in good faith to resolve one grievance. Which statement is correct under section 178 of the Companies Act, 2013?

With more than one thousand security holders at any time in the year, the company must constitute a Stakeholders Relationship Committee chaired by a non-executive director. Inability to resolve or consider a grievance in good faith does not constitute a contravention of section 178.

  1. AThe company must constitute the committee with a non-executive director as chairperson, and inability to resolve a grievance in good faith is not a contraventionCorrect
  2. BThe committee is not required because the limit is five thousand holders
  3. CThe committee must be chaired by an independent director and the failure is a contravention
  4. DThe committee need only be formed if all holders are shareholders

Explanation

Section 178(5) applies where there are more than one thousand security holders at any time in the year, and the chairperson must be a non-executive director. The proviso to sub-section (8) says inability to resolve or consider a grievance in good faith is not a contravention.

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