Skip to content

CS Professional · Compliance Management, Audit and Due Diligence · Compliance Framework

Shreeram Textiles Ltd. has to restate its financial statements for FY 2023-24 because of fraud in revenue recognition. The managing director, Mr. Iyer, received incentive pay based on the originally reported profit. Under Section 199, what must the company do?

The company must recover from the managing director the remuneration received in excess of what would have been payable on the restated financial statements. Recovery is limited to the excess, and does not depend on proof of personal guilt or involvement in preparing the accounts.

  1. ARecover from him the remuneration received in excess of what would have been payable on the restated statementsCorrect
  2. BRecover his entire remuneration for the year, including the amount he was properly entitled to
  3. CRecover nothing, because he is a director and not a person who prepared the accounts
  4. DRecover the excess only if the Tribunal first finds him personally guilty of the fraud

Explanation

Section 199 requires the company to recover the remuneration, including stock option, received in excess of what would have been payable as per the restated financial statements. Only the excess is recoverable, so recovery of the whole remuneration is wrong. The section does not make recovery depend on the director's personal guilt.

Did you get it right without looking?

One question tells you little. A timed set on Compliance Framework shows your real accuracy, how long you take and where you lose marks.

Practise Compliance FrameworkFree diagnostic mock

More Compliance Framework questions