valid as on 22/04/2024

Section 178. Nomination and Remuneration Committee and Stakeholders Relationship Committee
Effective from 01-04-2015

Regulation 19 , 20 of LODR

(1) The  of every  listed company   and such other class or  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 :

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.

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

 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 for the directors,  and other employees.

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:

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, -holders, deposit-holders and any other holders at any time during a  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  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:

Provided that non-consideration of resolution of 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.

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
2(10) Board of Directors, in relation to a company, means the collective body of the directors of the company
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(47) Independent director means an independent director referred to in sub-section (6) of section 149
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)

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
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)

To view the notification,Click Here

2(78) Remuneration means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income-tax Act, 1961 (43 of 1961)
2(51) Key Managerial Personnel, in relation to a company, means—

(i) the Chief Executive Officer or the managing director or the manager;

(ii) the company secretary;

(iii) the whole-time director;

(iv) the Chief Financial Officer;

(v) such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and

(vi) such other officer as may be prescribed;

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)

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
2(30) Debenture, includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not

Provided that— (a) the instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934; and

(b) such other instrument, as may be prescribed by the Central Government in consultation with Reserve Bank of India, issued by a company,

shall not be treated as debenture;

2(81) Securities means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)
2(41) Financial Year, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up:

Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary or associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:

Provided further that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause

Provided also that in case of a Specified IFSC public company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.

Provided also that in case of a Specified IFSC private company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.

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

11.1.4-Companies (Appointment and Qualification of Directors) Rules,2014

4. Number of Independent directors.—

The following class or classes of companies shall have at least two directors as independent directors

(i) the Public Companies having paid up share capital of ten crore rupees or more; or

(ii)the Public Companies having turnover of one hundred crore rupees or more; or

(iii)the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees.

Provided that in case a company covered under this rule is required to appoint a higher number of independent directors due to composition of its audit committee, such higher number of independent directors shall be applicable to it:

Provided further that any intermittent vacancy of an independent director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy, whichever is later:

Provided also that where a company ceases to fulfil any of three conditions laid down in sub-rule (1) for three consecutive years, it shall not be required to comply with these provisions until such time as it meets any of such conditions;

Explanation. For the purposes of this rule, it is here by clarified that, the paid up share capital or turnover or outstanding loans, debentures and deposits, as the case may be, as existing on the last date of latest audited financial statements shall be taken into account:

Provided that a company belonging to any class of companies for which a higher number of independent directors has been specified in the law for the time being in force shall comply with the requirements specified in such law.

The following classes of unlisted public company shall not be covered under sub-rule (1), namely:-

(a) a

(b) a wholly owned subsidiary; and

(c) a dormant company as defined under section 455 of the Act

This sub-rule is numbered vide Companies (Appointment and Qualification of Directors) Amendment Rules, 2017 dated 05.06.2017 . To view the notification,Click Here
Inserted  vide Companies (Appointment and Qualification of Directors) Amendment Rules, 2017 dated 05.06.2017 . To view the notification,Click Here
The term joint venture is clarified vide circular no. 9/2017 dated 5th September 2017. To view the circular,Click Here

12.1.6-Companies (Meetings of Board and its Powers) Rules,2014

6. Committees of the Board.-

The Board of directors of every listed company  and a company covered under rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 shall constitute an ‘Audit Committee’ and a ‘Nomination and Remuneration Committee of the Board.

 The Board of directors of every listed companies and the following classes of companies shall constitute an Audit Committee and a Nomination and Remuneration Committee of the Board

(i) all public companies with a paid up capital of ten crore rupees or more;

(ii) all public companies having turnover of one hundred crore rupees or more;

(iii) all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding fifty crore rupees or more.

Explanation.– The paid up share capital or turnover or outstanding loans, or borrowings or debentures or deposits, as the case may be, as existing on the date of last audited Financial Statements shall be taken into account for the purposes of this rule.

  that public companies covered under this rule which were not required to constitute Audit Committee under section 292A of the Companies Act, 1956 (1 of 1956) shall constitute their Audit Committee within one year from the commencement of these rules or appointment of independent directors by them, whichever is earlier:

that public companies covered under this rule shall constitute their Nomination and Remuneration Committee within one year from the commencement of these rules or appointment of independent directors by them, whichever is earlier.

 Omnibus approval for related party transactions on annual basis.-
All related party transactions shall require approval of the Audit Committee and the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to the following conditions, namely:-
(1) The Audit Committee shall, after obtaining approval of the Board of Directors, specify the criteria for making the omnibus approval which shall include the following, namely:-
(a) maximum value of the transactions, in aggregate, which can be allowed under the omnibus route in a year;
(b) the maximum value per transaction which can be allowed;
(c) extent and manner of disclosures to be made to the Audit Committee at the time of seeking omnibus approval;
(d) review, at such intervals as the Audit Committee may deem fit, related party
transaction entered into by the company pursuant to each of the omnibus approval made.

(e) transactions which cannot be subject to the omnibus approval by the Audit Committee.

(2) The Audit Committee shall consider the following factors while specifying the criteria for making omnibus approval, namely: –
(a) repetitiveness of the transactions (in past or in future);
(b) justification for the need of omnibus approval.
(3) The Audit Committee shall satisfy itself for transactions of repetitive nature and that the company.
(4) The omnibus approval shall contain or indicate the following: –
(a) name of the related parties:
(b) nature and duration of the transaction;
(c) maximum amount of transaction that can be entered into;
(d) the indicative base price or current contracted price and the formula for variation in the price, if any; and
(e) any other information relevant or important for the Audit Committee to take a decision on the proposed transaction:
Provided that where the need for related party transaction cannot be foreseen and aforesaid details are not available, audit committee may make omnibus approval for such transactions subject to their value not exceeding rupees one crore per transaction.
(5) Omnibus approval shall be valid for a period not exceeding one financial year and shall require fresh approval after the expiry of such financial year.
(6) Omnibus approval shall not be made for transactions  in respect of selling or disposing of the undertaking of the company .
(7) Any other conditions as the Audit Committee may deem fit.”

Substituted vide Companies (Meetings of Board and its Powers) Second Amendment Rules, 2017 . To view the notification,Click Here
Substituted vide Companies (Meetings of Board and its Powers) Amendment Rules, 2018 dated 07.05.2018 . To view the notification,Click Here
Substituted vide Companies (Meetings of Board and its Powers) Second Amendment Rules, 2017 . To view the notification,Click Here
Proviso inserted by notification no. G.S.R. 398(E) dated 12 June 2014. To view the notification,Click Here
Proviso inserted by notification no. G.S.R. 398(E) dated 12 June 2014. To view the notification,Click Here
Inserted vide Companies (Meetings of Board and its Powers) Second Amendment Rules, 2015 vide notification dated 14th December,2015. To view the notification,Click Here

Commencement Notification dated 07/05/2018


Commencement Notification under Companies (Amendment) Act, 2020 dated 21.12.2020


Companies (Amendment) Act, 2020 dated 28.09.2020


Companies (Meetings and Powers of Board) Amendment Rules, 2014 [GSR 398 E] dated 12/06/2014


Companies (Meetings of Board and its Powers) Amendment Rules, 2018 [GSR 429(E)] dated 07/05/2018


Companies (Meetings of Board and its Powers) Second Amendment Rules, 2015 [G.S.R. 971 (E)] dated 14/12/2015


Enforcement Notification S.O. 902(E) dated 26/03/2014


Exemption to Govt Companies G.S.R. 463(E) dated 05/06/2015


Exemption to Specified IFSC Public company [GSR 08(E)] dated 04/01/2017


Exemptions to Government Companies [Amendment to GSR 463(E)] dated 13/06/2017


Exemptions to Section 8 Companies [Amendment to GSR 466(E)] dated 13/06/2017


Exemptions to Section 8 companies [GSR 466 (E)] dated 05/06/2015


The Companies (Amendment) Act, 2017 (Effective from 03.01.2018)


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