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CS Professional · Corporate Restructuring, Valuation and Insolvency · Process of M&A Transactions

During due diligence for an acquisition, the Board of Kaveri Pharma Ltd, a listed public company, asks its Audit Committee to review the target's inter-corporate loans and investments. Which provision of Section 177(4) of the Companies Act, 2013 supports this task?

The task is covered by scrutiny of inter-corporate loans and investments, which Section 177(4) lists in the Audit Committee's terms of reference. Related party approval is a separate function that applies only to related party transactions, which the facts do not mention.

  1. AApproval of transactions with related parties
  2. BScrutiny of inter-corporate loans and investmentsCorrect
  3. CExamination of the financial statement and auditors report
  4. DReview of the independence of auditors

Explanation

Section 177(4)(v) expressly provides for scrutiny of inter-corporate loans and investments as part of the Audit Committee's terms of reference. Related party approval under clause (iv) is a different matter and applies only if the loans involve related parties, which the facts do not state.

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