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CMA Final · Corporate and Economic Laws · Prevention of Oppression and Mismanagement

Rohan Textiles Ltd's managing director Mr Iyer resigned voluntarily, not in connection with any reconstruction or amalgamation, and then claimed compensation for loss of office. What is the position under the Act?

No compensation may be paid. Section 202(2)(b) prohibits payment where a managing director resigns from office otherwise than as a result of reconstruction or amalgamation. The three-year cap applies only to payments that are otherwise permitted, so it does not rescue this claim.

  1. AHe may be paid, capped at three years' average remuneration
  2. BHe may be paid if the Board approves by simple majority
  3. CHe may be paid only if he waits twelve months
  4. DNo payment may be made, as he resigned otherwise than on reconstruction or amalgamationCorrect

Explanation

Section 202(2)(b) bars payment where the director resigns otherwise than on reconstruction or amalgamation. The cap in section 202(3) applies only to permitted payments, so option A is wrong.

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