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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards

The NRC of Narmada Foods Ltd, a listed public company, has five members: three independent directors and two non-executive non-independent directors. The non-executive Chairperson of the company is proposed to be added as a sixth member and also made chair of the NRC to lead the evaluation exercise. Which statement is correct under section 178(1)?

The Chairperson of the company may be appointed a member of the NRC but shall not chair it. Section 178(1) applies this whether the chairperson is executive or non-executive, so he cannot lead the evaluation process as NRC chair.

  1. AThe Chairperson can be a member but cannot chair the NRCCorrect
  2. BThe Chairperson can be both a member and chair of the NRC
  3. CThe Chairperson cannot be a member as he is not independent
  4. DThe Chairperson can chair the NRC only if non-executive

Explanation

Section 178(1) permits the chairperson of the company, whether executive or non-executive, to be a member of the NRC but forbids him from chairing it. The chair-only-if-non-executive option is wrong because the bar applies in both cases. Composition of three or more non-executive directors with at least half independent is also still met.

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