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

Before acquiring Sundaram Pharma Ltd., the acquirer's due diligence team finds that a director of the target, Mr. Rao, arranged for the company to buy land from a firm owned by his brother at an inflated price, and the firm paid Mr. Rao's relatives a commission. Which duty of directors under the Companies Act, 2013 is most directly breached, and what is the consequence stated for undue gain?

The breach is of the director's duty not to achieve undue gain or advantage for himself, relatives, partners or associates. If found guilty, the director must pay the company an amount equal to the gain, in addition to the fine for contravention of the duties section.

1. ADuty to act in accordance with the articles; the director is disqualified for five years
2. BDuty not to involve in conflicting interest situations only; no liability to repay the company arises
3. CDuty not to achieve undue gain for himself or relatives, partners or associates; if found guilty, he is liable to pay an amount equal to the gain to the companyCorrect
4. DDuty not to assign his office; the transaction becomes void