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Section 178

Nomination and Remuneration Committee and Stakeholders Relationship Committee

Regulation 19 , 20 of LODR

Section 178. Nomination and Remuneration Committee and Stakeholders Relationship Committee

(1)
The Board of Directors of every listed company every listed public company and such other class or classes of companies, as may be prescribed shall constitute the Nomination and Remuneration Committee consisting of three or more non-executive directors out of which not less than one-half shall be independent director:
Proviso

Provided that the chairperson of the company (whether executive or non-executive) may be appointed as a member of the Nomination and Remuneration Committee but shall not chair such Committee.

(2)
The Nomination and Remuneration Committee shall identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal and shall carry out evaluation of every director’s performance shall specify the manner for effective evaluation of performance of Board, its committees and individual directors to be carried out either by the Board, by the Nomination and Remuneration Committee or by an independent external agency and review its implementation and compliance.
(3)
The Nomination and Remuneration Committee shall formulate the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy, relating to the remuneration for the directors, key managerial personnel and other employees.
(4)
The Nomination and Remuneration Committee shall, while formulating the policy under sub-section ( 3 ) ensure that—
(a)
the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the company successfully;
(b)
relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and
(c)
remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals:
Proviso

Provided that such policy shall be placed on the website of the company, if any, and the salient features of the policy and changes therein, if any, along with the web address of the policy, if any, shall be disclosed in the Board's report.

Proviso

Provided that such policy shall be disclosed in the Board’s report.

(5)
The Board of Directors of a company which consists of more than one thousand shareholders, debenture-holders, deposit-holders and any other security holders at any time during a financial year shall constitute a Stakeholders Relationship Committee consisting of a chairperson who shall be a non-executive director and such other members as may be decided by the Board.
(6)
The Stakeholders Relationship Committee shall consider and resolve the grievances of security holders of the company.
(7)
The chairperson of each of the committees constituted under this section or, in his absence, any other member of the committee authorised by him in this behalf shall attend the general meetings of the company.
(8)
In case of any contravention of the provisions of section 177 and this section, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of one lakh rupees punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both:
Proviso

Provided that non-consideration of resolution of any grievance inability to resolve or consider any grievance by the Stakeholders Relationship Committee in good faith shall not constitute a contravention of this section.

Explanation

The expression ‘‘senior management’’ means personnel of the company who are members of its core management team excluding Board of Directors comprising all members of management one level below the executive directors, including the functional heads.

Notes, amendments & references (16)

This section is not applicable for specified IFSC Public Companies vide Exemption Notification to specified IFSC Public Companies, GSR 08 (E) dated 04.01.2017. To view the notification Click Here

Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018 Effective from 7th May,2018. To view commencement notification, Click Here

To view the notification of Companies Amendment Act,2017 Click Here

Section 178 shall not apply to section 8 companies. Refer notification no. G.S.R. 466(E) dated 5th June, 2015.

(The exceptions, modifications and adaptations provided above shall be applicable only to those companies covered under section 8 of the said act which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification, Click Here

Refer rule 6 of the Companies (Meetings of Board and its Powers) Rules,2014. Click Here

2 ) This sub-section shall not apply to Government company except with regard to appointment of senior management and other employees, vide notification no. G.S.R. 463(E) dated 5th June, 2015.

(The exceptions, modifications and adaptations provided above shall be applicable only to those Government Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018. Effective from 7th May,2018.To view commencement notification, Click Here

3 ) This sub-section shall not apply to Government company except with regard to appointment of ‘senior management’ and other employees, vide notification no. G.S.R. 463(E) dated 5th June, 2015.

4 ) This sub-section shall not apply to Government company except with regard to appointment of ‘senior management’ and other employees, vide notification no. G.S.R. 463(E) dated 5th June, 2015.

Provided that such policy shall be placed on the website of the company, if any, and the salient features of the policy and changes therein, if any, along with the web address of the policy, if any, shall be disclosed in the Board's report. Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018 , Effective from 7th May,2018

To view commencement notification, Click Here

Substituted vide Companies (Amendment) Act, 2020 dated 28.09.2020 with effect from 21.12.2020. To view the Act, Click Here . To view the commencement notification, Click Here .

Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018, Effective from 7th May,2018