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

Kaveri Pharma Ltd is shortlisting a person from the data bank of independent directors for appointment. The CS tells the Board that the responsibility of exercising due diligence before selecting the person from the data bank lies with a particular party. Under the Companies Act, 2013, who bears it?

The company making the appointment bears the responsibility. Under section 150(1) proviso, a person may be selected from the data bank, but due diligence before selection rests with the appointing company, not with the data bank maintainer or the Government.

  1. AThe body maintaining the data bank
  2. BThe Central Government
  3. CThe company making the appointmentCorrect
  4. DThe person being selected

Explanation

The proviso to section 150(1) states that the responsibility of exercising due diligence before selecting a person from the data bank lies with the company making the appointment. The data bank only holds names, addresses and qualifications, so the maintaining body does not carry this duty.

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