Constitution of Nomination and Remuneration Committee under Section 178 of Companies Act 2013

Constitution-Nomination-Remuneration-Committee-Section-178

Constitution of Nomination and Remuneration Committee under Section 178 of Companies Act 2013



Section 178 lays down the constitution, composition and the roles and responsibilities of the Nomination and Remuneration Committee.

Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014 provides that the Board of directors of every listed company and the following classes of companies shall constitute a Nomination and Remuneration Committee of the Board-


(a) all public companies with a paid up capital of ten crore rupees or more; (b) all public companies having turnover of one hundred crore rupees or more;

(c) all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs.50 crore or more.

Constitution of Committee

Nomination and Remuneration Committee shall consist of three or more non-executive directors out of which not less than one-half shall be independent directors. 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.

Functions of Committee

1.  The committee to 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.

2.     The committee to ensure that level and composition of remuneration is reasonable and sufficient, relationship of remuneration to performance is clear and meets performance benchmarks, and involves a balance between fixed and incentive pay.

3.      The committee to identify persons who may be appointed in senior management in accordance with the criteria laid down.

4.  The committee to carry out evaluation of every director’s performance and recommend to the board his/her appointment and removal based on the performance.

5.         The policy of the committee to be disclosed in the Board’s report.

Contravention :

In case of any contravention of the provisions of 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.
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