Section 178 — Nomination and Remuneration Committee and Stakeholders Relationship

Committee.—(1) The Board of Directors of 3[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
directors:

1. The proviso ins. by Act 21 of 2015, s. 14 (w.e.f. 14-12-2015).
2. Ins. by Act 1 of 2018, s. 57 (w.e.f. 7-5-2018).
3. Subs. by Act 1 of 2018, s. 58, for “every listed company” (w.e.f. 7-5-2018).

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 1[shall s pecify 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 suffic ient 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:
2[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) The Board of Directors of a company which consists of more than one t housand shareholders,
debenture-holders, deposit-holders and any other security holders at anytime 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
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 3[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]:
Provided that 4[inability to resolve or consider any grievance ] by the Stakeholders Relationship
Committee in good faith shall not constitute a contravention of this section.