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CA Foundation · Business Laws · The Companies Act, 2013

Anand Beverages Ltd, a listed public company with paid-up share capital of Rs 50 crore, wants to appoint an independent director. Which of the following persons would qualify as an independent director under the Companies Act, 2013?

Ms. Nisha qualifies. An independent director must not be a promoter or related to promoters and must have no material pecuniary relationship with the company apart from remuneration as a director. The other three are disqualified because of recent KMP service, a relative who is KMP, or being a promoter of the holding company.

  1. AMs. Nisha, a former professor with no pecuniary relationship with the company apart from sitting fees, and whose relatives have none eitherCorrect
  2. BMr. Rakesh, who was a key managerial personnel of the company two years ago
  3. CMr. Dev, whose son is the Chief Financial Officer of the company
  4. DMr. Suresh, a promoter of the company's holding company

Explanation

An independent director must not be a promoter or related to promoters, must have no material pecuniary relationship (other than remuneration as director), and no relative who is KMP. Rakesh was KMP within the last three financial years, so he is disqualified. Dev's son is the CFO, a KMP, and Suresh is a promoter of the holding company, so both are disqualified.

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