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CMA Intermediate · Business Laws and Ethics · Directors - Role, Responsibilities, Qualification, Appointment, Removal, Remuneration and Powers

Regarding the selection and appointment of an independent director under section 150 of the Companies Act, 2013, which statement is correct?

An independent director's appointment must be approved by the company in general meeting, and the explanatory statement annexed to the notice must justify choosing the appointee. Due diligence on a data bank selection rests with the appointing company.

  1. AThe independent director may be selected from a data bank, and the responsibility of due diligence lies with the data bank maintainer
  2. BThe appointment must be approved by the company in general meeting, and the explanatory statement must give the justification for choosing the appointeeCorrect
  3. CThe appointment needs only a Board resolution and no general meeting approval
  4. DThe explanatory statement is needed only if the appointee is not from the data bank

Explanation

Section 150(2) requires the company in general meeting to approve the appointment, with an explanatory statement justifying the choice. Under the proviso to section 150(1), due diligence lies with the appointing company, not the data bank body, so the first option is wrong.

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