1. Mandatory to constitute Nomination and Remuneration Committee [Section: 178(1)]
The Board of Directors of every listed public company and such other class or classes of companies, as may be prescribed (Rule-6) 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 directors:
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. Identification of persons for senior level [Section: 178(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 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. Recommend Remuneration Policy to Board [Section: 178(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. Criteria for formulating Remuneration Policy [Section: 178(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:
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.
5. Mandatory to constitute Stakeholders Relationship Committee [Section: 178(5)]
The Board of Directors of a company which consists of more than one thousand (in aggregate) 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. Functions of Stakeholders Relationship Committee [Section: 178(6)]
The Stakeholders Relationship Committee shall consider and resolve the grievances of security holders of the company.
7. Duty of Chairpersons [Section: 178(7)]
The chairperson of each of the committees constituted under this section or, in his absence, any other member of the committee authorized by him in this behalf shall attend the general meetings of the company.
8. What is not contravention [Section: 178(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 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.
(Also read: Section 173: Meetings of Board)
(Also read: Section 174: Quorum for Meetings of Board)
(Also read: Section 175: Passing of Resolution by Circulation)
(Also read: Section 176: Defects in appointment of directors not to invalidate actions taken)
(Also read: Section 177: Audit Committee)