Skip to content

CS Professional · Compliance Management, Audit and Due Diligence · Due Diligence

A director of Sunrise Foods Ltd approves an acquisition without reading the due diligence report and without questioning its assumptions, simply following the chairman's view. Which duty under section 166 of the Companies Act, 2013 is most directly breached?

The breached duty is the duty to exercise due and reasonable care, skill and diligence and independent judgment under section 166(3). By not reading the report and merely following the chairman, the director failed to apply care and to form his own judgment.

  1. ADuty not to assign his office
  2. BDuty to act in accordance with the articles
  3. CDuty to exercise due and reasonable care, skill and diligence and independent judgmentCorrect
  4. DDuty not to achieve undue gain for relatives

Explanation

Section 166(3) requires a director to exercise duties with due and reasonable care, skill and diligence and to exercise independent judgment. Ignoring the report and blindly following the chairman breaches both limbs. The other duties are not engaged on these facts.

Did you get it right without looking?

One question tells you little. A timed set on Due Diligence shows your real accuracy, how long you take and where you lose marks.

Practise Due DiligenceFree diagnostic mock

More Due Diligence questions