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    Question

    Which of the following is incorrect about role of

    Independent Directors? A. They are expected to be independent from the management and act as the trustees of shareholders B. They need to exercise adequate oversight on the management of the risk of fraud and non-compliance with existing regulations C. They need to ensure that payments are made to all the creditors and employees of the company in a timely manner D. They need to ensure that the company pays dividend every year to all its shareholders including majority and minority shareholders, in a timely manner
    A Only B Correct Answer Incorrect Answer
    B Only C Correct Answer Incorrect Answer
    C A and B Correct Answer Incorrect Answer
    D C and D Correct Answer Incorrect Answer
    E B, C and D Correct Answer Incorrect Answer

    Solution

    Independent Directors (IDs) are the Directors in the Board of a company who are independent and free from any material business, day to-day operations or financial connection with the company. As per the new corporate governance norms to be implemented by companies, the Board of a company should have at least 50% as independent directors. A need has been felt to update the Act and make it globally compliant and more meaningful in the context of investor protection and customer interest. IDs are concerned with the overall oversight so that the company operates within the regulations, both in letter and spirit, in a transparent and fair manner. Payment to creditors and dividend payout are operational matters. Moreover, dividend payout every year is not compulsory.

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