Section 178 - Nomination and Remuneration Committee
Section: Section 178
Purpose: To ensure that the process of appointment and remuneration of directors, key managerial personnel, and senior management personnel is transparent and in line with the company's objectives, and to safeguard the interest of stakeholders.
Applicability: The section applies to all listed companies and any other company which has a paid-up share capital of ten crore rupees or more or a turnover of one hundred crore rupees or more or outstanding loans, debentures and deposits of fifty crore rupees or more.
Timeline: The NRC should be constituted within 120 days from the date of its incorporation for a new company. For an existing company, it should be constituted within one year from the commencement of this section or within six months from the date of the company's first annual general meeting, whichever is later.
Exemption: Small companies, one person companies, and dormant companies are exempt from constituting an NRC.
Penalty: In case of non-compliance, the company and every officer of the company who is in default shall be liable to a penalty of up to five lakh rupees.
Due date: The NRC should meet at least once a year.
Forms: There are no specific forms prescribed for the NRC.
Reporting Authority: The NRC reports to the board of directors of the company.
Other details: The NRC should have at least three directors as members, out of which at least one director should be an independent director. The chairman of the NRC should also be an independent director. The NRC should formulate a policy for the selection and appointment of directors, key managerial personnel, and senior management personnel and recommend to the board a policy relating to the remuneration of these personnel.
