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Veda Textiles Ltd has a net profit of Rs 7 crore in the immediately preceding financial year, so section 135(1) applies. The company is required to appoint independent directors. Its Board proposes a CSR Committee of three directors, all of them executive directors. Which statement is correct?

The composition is invalid. Section 135(1) requires the CSR Committee to have three or more directors, with at least one independent director. A company that must appoint independent directors cannot form the committee entirely of executive directors, though not every member needs to be independent.

  1. AThe composition is valid because three directors are enough
  2. BThe composition is invalid because at least one member must be an independent directorCorrect
  3. CThe composition is invalid because all members must be independent directors
  4. DThe composition is valid because the Board itself may decide the mix of directors

Explanation

Section 135(1) requires a CSR Committee of three or more directors, out of which at least one must be an independent director. Since Veda Textiles must appoint independent directors, the proviso does not relax this. A committee of only executive directors fails the independent director requirement. Requiring all members to be independent goes beyond the law.

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