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

Under section 202 of the Companies Act, 2013, in which of the following cases is payment of compensation for loss of office to a managing director prohibited?

Payment is prohibited where the director instigated, or took part directly or indirectly in bringing about, the termination of his own office, as section 202(2)(f) provides. Payment for services rendered in another capacity is not prohibited under section 202(4).

  1. AHe instigated or took part in bringing about the termination of his own officeCorrect
  2. BHe is removed before his term ends without any fault of his own
  3. CHe is retired because the company decided to restructure its management team
  4. DHe receives remuneration for services rendered in another capacity

Explanation

Section 202(2)(f) bars payment where the director has instigated or taken part directly or indirectly in bringing about termination of his office. Section 202(4) expressly says remuneration for services in another capacity is not prohibited, so the last option is not barred.

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