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CS Professional · Compliance Management, Audit and Due Diligence · Due Diligence

Zenith Polymers Ltd proposes to appoint Ms. Radhika Menon, whose name appears in the notified data bank of independent directors, as an independent director. The board assumes that because the data bank lists her, it need not verify her credentials. Under the Companies Act, 2013, who bears the responsibility of exercising due diligence before selecting her from the data bank?

The company making the appointment is responsible. Under section 150, an independent director may be picked from the notified data bank, but the proviso places the duty of exercising due diligence before selection on the appointing company, not on the data bank body or the Government.

  1. AThe body maintaining the data bank
  2. BThe Central Government
  3. CThe company making the appointmentCorrect
  4. DThe Registrar of Companies

Explanation

Section 150(1) proviso states that the responsibility of exercising due diligence before selecting a person from the data bank as an independent director lies with the company making the appointment. The data bank maintainer only keeps and publishes the data, so the board's assumption is wrong.

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