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CS Executive · Setting Up of Business, Industrial and Labour Laws · Selection of Business Organization

Meridian Textiles Ltd wants to appoint an independent director and plans to pick a candidate from the data bank of independent directors. Under the Companies Act, 2013, who bears the responsibility of exercising due diligence before selecting a person from the data bank?

The company making the appointment is responsible for exercising due diligence. The data bank only lists names, addresses and qualifications of eligible and willing persons, so the hiring company must verify the candidate before selecting that person as an independent director.

  1. AThe body, institute or association maintaining the data bank
  2. BThe company making the appointmentCorrect
  3. CThe Central Government
  4. DThe Registrar of Companies

Explanation

Section 150(1) proviso 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 maintainer only holds names, addresses and qualifications of eligible and willing persons, so option A is wrong.

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