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CMA Intermediate · Business Laws and Ethics · Directors - Role, Responsibilities, Qualification, Appointment, Removal, Remuneration and Powers

Which of the following companies must constitute a Stakeholders Relationship Committee under Section 178(5)?

A company must constitute a Stakeholders Relationship Committee if it has more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year. Exactly 1,000 is not enough, and employees or dividend history are irrelevant.

  1. AA company with 1,200 shareholders, debenture-holders, deposit-holders and other security holders at some time during the financial yearCorrect
  2. BA company with exactly 1,000 security holders throughout the year
  3. CA company with 800 shareholders but 300 employees
  4. DA company that has declared no dividend in the year

Explanation

The committee is required where the company has more than one thousand shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year. 1,200 exceeds the limit; exactly 1,000 does not, and employees are not security holders.

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