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

Under Section 202 of the Companies Act, 2013, Mr. Rao, a managing director of Kaveri Ltd, is removed from office. Which statement about compensation for loss of office is correct?

Section 202(1) allows a company to pay compensation for loss of office only to a managing director, whole-time director or manager. Other directors cannot receive it, and payment is barred in the specified cases such as voluntary resignation outside reconstruction or amalgamation.

  1. AThe company may pay compensation to a managing or whole-time director or manager, but not to any other directorCorrect
  2. BThe company may pay compensation to any director, including independent directors
  3. CNo compensation can ever be paid to a managing director
  4. DCompensation may be paid even if the director resigned voluntarily, otherwise than on reconstruction or amalgamation

Explanation

Section 202(1) permits payment for loss of office or retirement to a managing or whole-time director or manager, but not to any other director. Option D is wrong because 202(2)(b) bars payment where the director resigns otherwise than on reconstruction or amalgamation.

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