CA Intermediate · Corporate and Other Laws · Preliminary
Under the Companies Act, 2013, Sunrise Ltd has 12 directors. A person, Mr Kapoor, is not a director but the board of Sunrise has been accustomed to act on his directions, and he gives these directions in a professional capacity as an adviser. Another person, Mr Shah, gives similar directions to the board, but not in a professional capacity. Who is a 'shadow director'?
Only Mr Shah is a shadow director. The Companies Act, 2013 treats a person as a director if the board is accustomed to act on his directions, but excludes advice or directions given in a professional capacity, which protects Mr Kapoor.
- AOnly Mr Shah, because advice given in a professional capacity is excluded from the shadow director conceptCorrect
- BBoth Mr Kapoor and Mr Shah
- COnly Mr Kapoor, because he is regularly present
- DNeither, because the Act does not recognise shadow directors
Explanation
The definition of director includes a person in accordance with whose directions or instructions the board is accustomed to act. However, the proviso excludes advice, directions or instructions given in a professional capacity. Mr Kapoor falls within the exclusion, whereas Mr Shah does not, so only Mr Shah is a shadow director.
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