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CMA Intermediate · Business Laws and Ethics · Directors - Role, Responsibilities, Qualification, Appointment, Removal, Remuneration and Powers

Arjun is a director in Company X, Company Y and Company Z. Company X fails to file financial statements for three continuous financial years, so Arjun incurs disqualification as a director of a defaulting company. What is the effect on his office?

Arjun vacates his office in Y and Z but continues as director in X. When a director is disqualified because his company defaulted in filing, office is vacated in all other companies, except the defaulting company itself, where he remains.

  1. AHe vacates office in X, Y and Z alike
  2. BHe vacates office in Y and Z but continues in X, the defaulting companyCorrect
  3. CHe continues in all three companies until the next general meeting
  4. DHe vacates office in X only and continues in Y and Z

Explanation

A director incurring a disqualification under the default provisions vacates office in all companies other than the defaulting company. Arjun therefore leaves Y and Z but continues in X. Option D reverses this position, and option A ignores the carve-out for the defaulting company.

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