Stakeholders Relationship Committee: S.178(5)

The stakeholders relationship committee is the third committee section 178 of the Companies Act, 2013 creates, and the only one whose trigger has nothing to do with listing, capital or turnover. Section 178(5) counts security holders. A company crosses one thousand of them at any point in a financial year and the committee becomes mandatory.

Which companies must have a stakeholders relationship committee?

Section 178(5) applies to the Board of Directors of a company which consists of more than one thousand shareholders, debenture-holders, deposit-holders and any other security holders at any time during a financial year.

Three features of that trigger decide who is caught.

• It is one aggregate count, not four separate ones. The sub-section lists the four holder classes in a single conjunctive phrase, so a company with six hundred shareholders and five hundred debenture-holders is over the line.
• It is measured at any time during the financial year, not on a record date or at year-end. A count that peaks above one thousand and falls back still triggers the sub-section for that year.
• It says "a company", full stop. Unlike section 178(1) for the nomination and remuneration committee and section 177(1) for the audit committee, both of which turn on being a listed public company or a prescribed class, this sub-section is not limited by listing status.

How is the committee composed?

Section 178(5) requires the committee to consist of a chairperson who shall be a non-executive director, and such other members as may be decided by the Board.

That is a much lighter specification than either of its two siblings in the same chapter, and the contrast is the point:

So the Act fixes no minimum size for the stakeholders relationship committee and imposes no independence requirement on its members. The only hard composition rule is that its chairperson must be non-executive. Audit committee under section 177 and the nomination and remuneration committee cover the two stricter regimes.

What does the committee actually do?

Section 178(6) is one line: the Stakeholders Relationship Committee shall consider and resolve the grievances of security holders of the company.

The width is in the phrase "security holders". The function is not limited to shareholders, so debenture-holder and deposit-holder complaints sit with the same committee. For a listed company that overlaps with the machinery SEBI runs on the investor-facing side. SCORES 2.0 covers the complaint-redressal platform an aggrieved holder uses, and the SEBI ODR portal covers the dispute-resolution route that follows it. The company-side committee under section 178(6) and the regulator-side platforms are separate mechanisms addressing the same complaints.

Section 178(7) then puts the committee in front of the members once a year. The chairperson of each of the committees constituted under section 178, or in his absence any other member of the committee authorised by him in that behalf, shall attend the general meetings of the company. The duty is attached to the section rather than to one committee, so it binds the nomination and remuneration committee chairperson too.

What happens if a grievance is not resolved?

Section 178(8) attaches penalties to a contravention of section 177 and section 178. Its proviso then protects this committee specifically: inability to resolve or consider any grievance by the Stakeholders Relationship Committee in good faith shall not constitute a contravention of the section.

Two things about that proviso.

It was widened in 2018. The words above were substituted for "non-consideration of resolution of any grievance" by Act 1 of 2018, section 58, with effect from 7 May 2018. The earlier wording covered a failure to consider; the current wording covers an inability to resolve as well.

The protection is conditional on good faith. The proviso does not shield a committee that never considered the grievance at all, and section 178(6) states the obligation as "consider and resolve", so both limbs remain duties.

The penalty limb of section 178(8) itself carries a drafting oddity from the 2020 amendment. The nomination and remuneration committee page sets out what the consolidated text says, and why this page does not restate a resolved version of it.

Where the committee shows up in a filing

Section 178 itself creates no filing. It requires the committee and states its function, and stops there. For a listed company the practical trail is the corporate governance report, which is where committee details and investor-complaint information are reported. How to read a corporate governance report covers what that filing sets out, and it is the document to check before concluding anything about whether a stakeholders relationship committee is doing the work section 178(6) gives it.

Where this sits in the disclosure picture

• The nomination and remuneration committee covers the other committee section 178 constitutes, and the penalty sub-section they share.
• Audit committee under section 177 covers the committee with the strictest composition test of the three.
• SCORES 2.0 covers SEBI's investor complaint platform.
• The SEBI ODR portal covers online dispute resolution after a complaint is not settled.
• How to read a corporate governance report covers where complaint counts and committee details are disclosed.
• Independent director under section 149 covers the category the Act requires on the other two committees but not on this one.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.