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CS Professional · Corporate Restructuring, Valuation and Insolvency · Process of M&A Transactions

Under the Companies Act, 2013, which statement correctly reflects a duty of a director relevant to the conduct of a target's board during M&A negotiations?

A director must act in good faith to promote the company's objects for the benefit of members as a whole and in the best interests of the company, employees, shareholders, community and environment. Assigning office is void, undue gains must be repaid, and independent judgment is mandatory.

  1. AA director must act in good faith to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, shareholders, the community and the environmentCorrect
  2. BA director may assign his office to a nominee if the deal requires it
  3. CA director may keep any undue gain from the transaction if disclosed
  4. DA director need not exercise independent judgment where a promoter negotiates the deal

Explanation

Section 166 requires directors to act in good faith for the benefit of members as a whole and in the best interests of the company, its employees, shareholders, community and environment. Assignment of office is void, undue gain must be paid to the company, and independent judgment is required.

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