Skip to content

CMA Final · Corporate and Economic Laws · Board of Directors and Key Managerial Personnel

Mr Rao is the Chief Financial Officer of Sagar Foods Ltd and also holds a whole-time KMP office in an unrelated company, Tara Paints Ltd. Under Section 203(3), which statement is correct?

The arrangement is not permitted. A whole-time KMP cannot hold office in more than one company at once, except in a subsidiary. The only relaxation is that the KMP may be a director of another company with Board permission, under Section 203(3).

  1. AThe dual office is permitted because a CFO is exempt from the restriction
  2. BThe dual office is permitted if both companies pass a special resolution
  3. CThe dual office is not permitted, as a whole-time KMP cannot hold office in more than one company except its subsidiary, though he may be a director of another company with Board permissionCorrect
  4. DThe dual office is permitted for up to two companies without any condition

Explanation

Section 203(3) bars a whole-time KMP from holding office in more than one company at the same time, except in its subsidiary. The first proviso only lets the KMP be a director of another company with Board permission. The managing director exception covers only one other company's MD or manager, with unanimous consent of directors present, and does not apply to a CFO holding KMP office in an unrelated company.

Did you get it right without looking?

One question tells you little. A timed set on Board of Directors and Key Managerial Personnel shows your real accuracy, how long you take and where you lose marks.

Practise Board of Directors and Key Managerial PersonnelFree diagnostic mock

More Board of Directors and Key Managerial Personnel questions