Behind every well-governed company is a team that ensures the right people are in the right roles — and are fairly rewarded for it. That’s where the Nomination & Remuneration Committee (NRC) comes in. Tasked with identifying capable leaders, evaluating board performance, and framing transparent compensation policies, the NRC plays a key role in driving both accountability and alignment within an organization. In a time when stakeholders demand not just profitability but purpose, the NRC helps ensure leadership decisions are ethical, inclusive, and in tune with long-term strategic goals. Simply put, it’s not just about who leads — it’s about how they lead, and what they stand for.
The NRC plays a vital role in shaping the leadership and compensation strategy of a company. From recommending board appointments to framing performance evaluation and remuneration policies, the NRC ensures accountability, fairness, and transparency in key HR and governance decisions.
This blog breaks down a comprehensive compliance checklist to help you stay aligned with both the Companies Act and SEBI LODR Regulations, depending on whether you’re a listed or unlisted company.
Section A: NRC Compliance Checklist for Listed Companies
Applicable Laws:
- Section 178 of the Companies Act, 2013
- Regulation 19 read with Part D Para A of the Schedule II of the SEBI (LODR) Regulations, 2015
- Terms of Reference of NRC
1. Applicability
| Requirement | Status |
|---|---|
| Entity is listed on a recognized stock exchange | ☐ |
2. Composition
| Requirement | Compliance |
|---|---|
| Minimum 3 non-executive directors | ☐ |
| At least 2/3rd Independent Directors | ☐ |
| Chairperson of NRC is an Independent Director | ☐ |
| Chairperson of NRC may be present at AGM (best practice) | ☐ |
Chairperson of the Company, whether executive or non-executive, may be appointed as a member of the NRC but shall not chair such Committee.
3. Meetings
| Requirement | Compliance |
|---|---|
| NRC should meet at least once a year | ☐ |
| Quorum: 2 members or 1/3rd of total strength (whichever is greater), with at least 1 Independent Director | ☐ |
| Proper minutes recorded and approved | ☐ |
| Agenda circulated in advance | ☐ |
4. Roles & Responsibilities
| Core Function | Compliance |
|---|---|
| Identify and recommend persons for directorships (Board & KMPs) | ☐ |
| Formulate criteria for: | |
| – Board appointment | ☐ |
| – Performance evaluation | ☐ |
| – Remuneration policy | ☐ |
| Evaluate performance of Independent Directors & Board | ☐ |
| Devise policy for Board diversity | ☐ |
| Evaluation of skills, knowledge and experience before appointment of Independent Director | ☐ |
| Identification and recommendation for appointment of Director and Senior Management Personnel | ☐ |
| Recommend whether to extend or continue the term of appointment of the independent director | ☐ |
| Recommend remuneration payable to senior management | ☐ |
5. Disclosures
| Disclosure Area | Compliance |
|---|---|
| NRC policy uploaded on company website and salient features along with web address shall be disclosed in Board Report | ☐ |
| NRC details disclosed in Annual Report | ☐ |
| Disclosure of criteria for performance evaluation in Corporate Governance Report | ☐ |
| Remuneration of directors disclosed as per Section 197 & Schedule V | ☐ |
| Brief description of Terms of Reference along with composition and details of Meetings in Corporate Governance Report |
Section B: NRC Compliance Checklist for Unlisted Public Companies
Applicable Law:
- Section 178 of the Companies Act, 2013
1. Applicability
| Condition (Any One) | NRC Required? |
|---|---|
| Paid-up capital ≥ ₹10 crore | ☐ |
| Turnover ≥ ₹100 crore | ☐ |
| Borrowings (loans/debentures/deposits) ≥ ₹50 crore | ☐ |
If any one of the above is true, NRC is mandatory.
Exemption: Wholly owned subsidiary
2. Composition
| Requirement | Compliance |
|---|---|
| Minimum 3 non-executive directors | ☐ |
| 1/2 should be Independent Directors | ☐ |
Chairperson of the Company, whether executive or non-executive, may be appointed as a member of the NRC but shall not chair such Committee.
3. Meetings
| Requirement | Compliance |
|---|---|
| Meet as needed (Best practice: at least once a year) | ☐ |
| Maintain minutes and place before Board | ☐ |
4. Roles & Responsibilities
| Core Function | Compliance |
|---|---|
| Recommend appointment/removal of directors and senior management | ☐ |
| Frame criteria for evaluating director performance | ☐ |
| Formulate and implement a remuneration policy | ☐ |
5. Disclosures
| Disclosure Area | Compliance |
|---|---|
| Remuneration Policy and salient features along with web address shall be disclosed in Board’s Report | ☐ |
| Evaluation criteria disclosed in Board’s Report (if applicable) | ☐ |
FAQs
1. Can Executive Directors be members of the NRC?
No. The committee must consist of non-executive directors only but Chairperson of the Company, whether executive or non-executive, may be appointed as member of NRC.
2. Is there a minimum number of meetings the NRC must hold each year?
- SEBI LODR prescribes at least one meeting per year for listed entities.
- For unlisted companies, the Companies Act is silent, but best practice recommends annual meetings.
4. What is the role of the NRC in evaluating directors?
The NRC:
- Defines criteria for performance evaluation
- Conducts annual evaluations of:
- The Board as a whole
- Independent Directors
- Individual directors and committees
5. Is succession planning a legal responsibility of the NRC?
Yes. One of the key responsibilities of the NRC (especially in listed companies) is to oversee succession planning for:
- Board members
- Key managerial personnel (KMPs)
- Senior management
6. What if there are no Independent Directors available for the NRC?
If Independent Directors resign or vacate office:
- The vacancy must be filled within 3 months
- Failing to do so may lead to non-compliance with SEBI regulations and Companies Act
7. Does the NRC approve employee stock option plans (ESOPs)?
In listed companies, SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 require that Compensation Committees (often merged with NRC) administer ESOPs, subject to Board and shareholder approval.
8. How often should the NRC review the Remuneration Policy?
- At least once every 1–2 years, or whenever:
- There’s a change in SEBI/MCA guidelines
- The company experiences major structural or market changes
Summary
The Nomination & Remuneration Committee (NRC) is much more than a statutory requirement — it is a strategic governance tool that shapes the future leadership of an organization. Whether you’re a listed entity bound by SEBI’s detailed mandates or an unlisted public company meeting Companies Act thresholds, maintaining a well-structured and compliant NRC ensures transparency, meritocracy, and stakeholder trust.
From defining board composition to setting fair and performance-linked remuneration, the NRC plays a vital role in ensuring that the company is steered by the right people, with the right motivations, in the right direction. Adopting this checklist, backed by regulatory requirements and best practices, will help companies stay ahead in compliance — and in good governance.
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