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CMA Intermediate · Business Laws and Ethics · Key Managerial Personnel

Section 194 of the Companies Act, 2013, which once prohibited forward dealings in securities of a company by a director or key managerial personnel, is now in what position?

Section 194, which prohibited forward dealings in company securities by directors and key managerial personnel, has been omitted by the Companies (Amendment) Act, 2017, effective 9 February 2018. The Companies Act, 2013 no longer contains that prohibition in this section.

  1. AIt has been omitted by the Companies (Amendment) Act, 2017, with effect from 9 February 2018Correct
  2. BIt applies only to directors and not to key managerial personnel
  3. CIt applies only to listed companies
  4. DIt continues unchanged but carries a reduced penalty

Explanation

The official text shows that Section 194, headed 'Prohibition on forward dealings in securities of company by director or key managerial personnel', was omitted by the Companies (Amendment) Act, 2017 (1 of 2018), s. 64, w.e.f. 9-2-2018. It therefore no longer operates in any form, so the other options wrongly suggest a surviving or narrowed version.

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