The Board of Directors of X Ltd.—an unlisted company—having turnover of ₹250 as per the last audited financial statements approach for your advice for constitution, composition and functions and powers of the Nomination

The provisions of Section 178 of the Companies Act, 2013 and Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014 providing for the constitution, composition, functions and powers of the Nomination and Remuneration Committee are discussed below: As per Section 178 (1) of the Companies Act, 2013, the Board of Directors of every listed public company and such other classes of companies as may be prescribed shall constitute of the Nomination and Remuneration Committee (the Committee), consisting of three or more non-executive directors out of which not less than one half shall be independent directors. Further the chairperson of the company (whether executive or non-executive) may be appointed as member of Committee but shall not chair the committee. As per Section 178 (2) of the Companies Act, 2013, the Committee shall identify persons who are qualified to become directors and who may be appointed in senior management in accordance with criteria laid down and recommend to the Board for 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 Committee or by an independent external agency and review its implementation and compliance. As per Section 178 (3) of the Companies Act, 2013, the Committee shall formulate the criteria for determining qualifications, positive attributes ad independence of a director and recommend to the Board a policy relating to the remuneration for the directors, key managerial personnel and other employees. As per Section 178 (4) of the Companies Act, 2013, the Committee shall ensure the following while formulating the above policy. the level and composition of the remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the company successfully. relationship of remuneration to performance is clear and meets appropriate performance bench-marks. remuneration to directors, key managerial personnel and senior management involves a balance between fixed incentive pay reflecting short and long term performance objectives appropriate to the working of the company and its goals. The 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 of Directors' Report. As per Rule 6 of the Companies (Meetings of Board and its Powers) Rules, 2014, every listed public company and a company covered under Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 shall constitute an Audit Committee and the a 'Nomination and Remuneration Committee of the Board. According to Rule 4 (1) of the Companies (Appointment and Qualification of Directors) Rules, 2014, following classes of companies are provided therefore they shall constitute the Committee. all public companies with a paid up capital of ₹10 crores or more or all public companies having turnover of ₹100 crores or more or all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding ₹50 Crores or more. In the above Rule 4 (1) of the Companies (Appointment and Qualification of Directors) Rules the following provisions and explanations are provided, the paid up share capital or turnover or outstanding loans, or debentures or deposits, as the case may be, as existing on the date of last audited Financial Statements shall be taken into account for the purposes of this rule. Where a company ceases to fulfil any of the three conditions laid down above for three consecutive years, it shall not be required to comply with these provisions until such time as it meets any of such conditions. As per Rule 4(2) of the Companies (Appointment and Qualification of Directors) Rules, the following classes of unlisted public companies shall not be covered under Rule 4(1): a joint venture; a wholly owned subsidiary; a dormant company defined under Section 455 of the Act. Considering that the Turnover of X Ltd as per its last audited financial Statement is ₹250 only i.e. below the prescribed threshold/ limits discussed above, the Board of Directors of X Ltd. is not required to constitute Nomination & Remuneration Committee. Alternate Answer with Assumption of Turnover of ₹250 crore. The Board of Directors of X Ltd. will be advised to follow the above provisions of the Companies Act, 2013 and Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014 for constitution, composition and functions and powers of the Nomination and Remuneration Committee.