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CS Executive · Company Law and Practice · Key Managerial Personnel and their Remuneration

At Sagar Pharma Ltd's notice of an extraordinary general meeting, the statement for an item fixing the CEO's pay was incomplete, and the CEO's relative benefited by Rs 4 lakh as a result. Which consequence follows under the Companies Act, 2013?

Where non-disclosure or insufficient disclosure in the statement gives a benefit to a KMP or their relatives, the KMP holds that benefit in trust for the company and must compensate the company to the extent of the benefit received, besides other action under law.

  1. AThe CEO holds the benefit in trust for the company and is liable to compensate the company to the extent of the benefitCorrect
  2. BThe benefit is forfeited to the Central Government
  3. CThe relative alone is liable and the CEO has no liability
  4. DThe resolution is automatically treated as an ordinary resolution

Explanation

Section 102(4) says the promoter, director, manager or other KMP shall hold such benefit in trust for the company and compensate the company to the extent of the benefit, including benefits accruing to relatives. Liability is not limited to the relative.

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