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    Question

    Consider the following statements regarding the

    appointment of directors under Section 166 of the Companies Act, 2013: Statement 1: A director must exercise his duties with due care, diligence, skill, and expertise that a reasonably prudent person would exercise in similar circumstances. Statement 2: A director is personally liable for any breach of duty and the company cannot indemnify the director against such liability. Statement 3: A director owes his duties to the company as a whole, not to individual shareholders. Statement 4: A director must act in good faith and in the best interest of the company and for a proper purpose. Which statements are correct?
    A Statements 1, 3, and 4 only Correct Answer Incorrect Answer
    B Statements 1 and 2 only Correct Answer Incorrect Answer
    C Statements 2 and 4 only Correct Answer Incorrect Answer
    D Statements 1, 2, and 3 only Correct Answer Incorrect Answer
    E Statements 1, 2, 3, and 4 only Correct Answer Incorrect Answer

    Solution

    Section 166 of the Companies Act, 2013 prescribes the duties of directors. Statement 1 is correct—Section 166(1) requires a director to exercise due care, diligence, skill, and expertise. Statement 3 is correct—the duty is owed to the company, not individual shareholders. Statement 4 is correct—Section 166(2) requires acting in good faith and for a proper purpose. Statement 2 is incorrect because Section 167 provides for indemnification of directors against personal liability in certain circumstances, and the company can purchase directors' liability insurance. Statements 1, 3, and 4 are correct.

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