1. Legal Requirement under Companies Act, 2013

• Yes, as per Section 178 of the Companies Act, 2013, certain Public Limited Companies are mandatorily required to constitute a Nomination and Remuneration Committee (NRC).
  
• This requirement applies to:
  
  • All listed public companies
    
  • Public companies with a paid-up capital of ₹10 crore or more
    
  • Public companies having a turnover of ₹100 crore or more, or
    
  • Public companies with outstanding loans, borrowings, or debentures of ₹50 crore or more
    
• These thresholds are determined based on the latest audited financial statements.
  

2. Composition of the Committee

• The NRC must consist of three or more non-executive directors.
  
• At least half of the members must be independent directors.
  
• The chairperson of the committee should be an independent director.
  
• The company secretary typically acts as the secretary to the committee.
  
• The composition must be disclosed in the Board’s Report and on the company’s website, if applicable.
  

3. Functions and Responsibilities

• The committee is responsible for identifying suitable candidates for directorships and senior management roles.
  
• It formulates criteria for determining qualifications, positive attributes, and independence of directors.
  
• Recommends policies relating to the remuneration of directors, key managerial personnel (KMPs), and other employees.
  
• Ensures that remuneration is fair, performance-linked, and promotes long-term shareholder value.
  
• Evaluates individual directors and board performance.
  

4. Meetings and Reporting

• The NRC should meet at least once a year, though more frequent meetings are encouraged.
  
• Proceedings must be recorded in minutes, and decisions reported to the Board of Directors.
  
• The committee’s activities and key policy disclosures must be included in the corporate governance section of the annual report for listed companies.
  
• Listed companies must also disclose the remuneration policy and evaluation framework on their websites.
  

5. SEBI (LODR) Compliance for Listed Companies

• For listed public companies, the formation and functioning of the NRC are also governed by the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
  
• These regulations mandate that the NRC also reviews Board diversity, oversees succession planning, and ensures effective corporate governance practices.
  
• SEBI mandates detailed disclosures of director compensation, performance evaluation, and nomination practices.