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CS Executive · Company Law and Practice · Directors

Zenith Polymers Ltd wants to appoint an independent director and plans to pick a candidate from the data bank of independent directors maintained by the body notified by the Central Government. Who bears the responsibility of exercising due diligence before selecting a person from that data bank?

The company making the appointment is responsible for exercising due diligence. The data bank only holds names, addresses and qualifications of willing and eligible persons, so selecting from it does not shift the duty of verifying suitability away from the appointing company.

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

Explanation

The proviso to Section 150(1) places the responsibility of exercising due diligence before selecting a person from the data bank on the company making the appointment. The data bank body only maintains the data and puts it on its website. Hence the body maintaining it is not the responsible party.

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