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CMA Intermediate · Business Laws and Ethics · Key Managerial Personnel

Under Section 203 of the Companies Act, 2013, what is the penalty on a company that defaults in complying with the section, and on each director and KMP in default (before any continuing-default penalty)?

The company is liable to a penalty of five lakh rupees, and every director and key managerial personnel in default is liable to fifty thousand rupees. If the default continues, a further Rs 1,000 per day applies after the first day, up to a maximum of five lakh rupees.

  1. ACompany: Rs 5 lakh; every director and KMP in default: Rs 50,000Correct
  2. BCompany: Rs 50,000; every director and KMP in default: Rs 5 lakh
  3. CCompany: Rs 1 lakh; every director and KMP in default: Rs 10,000
  4. DCompany: Rs 5 lakh; every director and KMP in default: Rs 1 lakh

Explanation

Section 203(5) imposes a penalty of five lakh rupees on the company and fifty thousand rupees on every director and KMP in default. For continuing default, a further Rs 1,000 per day applies after the first day, capped at five lakh rupees.

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