Assertion (A): For the proper exercise of the functions of a director, it is essential that he be disinterested, that is, be free from any conflicting interest.
Reason (R) : Conflict is injurious to mental and physical health.
Codes:
Director Disinterestedness: Assertion & Reason Analysis
This question examines the fiduciary duties of a company director, specifically the requirement to be 'disinterested'.
Evaluating Assertion (A)
Assertion (A) states that a director must be disinterested, meaning free from conflicting interests, for the proper exercise of their functions. This is a fundamental principle in corporate law.
- Directors owe fiduciary duties to the company, including the duty of loyalty and the duty to act in good faith in the company's best interests.
- To fulfill these duties, directors must avoid situations where their personal interests conflict, or appear to conflict, with the interests of the company. This ensures decisions are made impartially.
- Therefore, Assertion (A) is legally correct.
Evaluating Reason (R)
Reason (R) states that conflict is injurious to mental and physical health. While this statement may be factually true in a general sense, it does not explain the *legal* or *functional* necessity for a director to be disinterested in their corporate role.
- The legal requirement for disinterest stems from the nature of fiduciary duties and the need for unbiased decision-making, not primarily from the potential health impacts on the individual experiencing the conflict.
- Therefore, Reason (R) is factually correct but not the specific legal or functional reason behind Assertion (A).
Conclusion
Both Assertion (A) and Reason (R) are correct statements on their own. However, Reason (R) is a general statement about the effects of conflict and does not provide the specific legal or corporate governance basis for why directors must be disinterested. The correct legal reason relates to fiduciary duties and avoiding conflicts of interest.
Thus, both (A) and (R) are correct, but (R) is not the correct legal reason for (A).
Important Questions from Company law
- The problem of double taxation in international transactions can be reduced by:
i. Market agreement
ii. Multilateral agreement
iii. Bilateral agreement.
iv. Trade agreement - Under the Companies Act 2013, which of the following company is required to constitute a Corporate Cocial Responsibility Committee?
(a) company having networth of Rs. 500 crore or more
(b) company having turnover of Rs. 1000 crore or more
(c) company having net profit of 5 crore or more
(d) company having net profit of 2 crore or more during any financial year
Choose the most appropriate option : - Which one statement is correct from the following statements ?
- Which of the following statement (s) is/are incorrect? Answer using codes given below :
(a) In Attorney General v. Great Eastern Railway Co. the House of Lords observed that the doctrine of ultra vires as it was explained in the Ashbury case, should not be maintained.
(b) Section 13 (i) (c) of the Companies Act provides incidental objects which need not be stated in the memorandum.
(c) If incidental objects are not stated in the memorandum, they would not be allowed by the principle of reasonable construction
(d) The doctrine of indoor management operates to protect insiders against the company
Codes : - Read Assertion (A) and Reason (R) and answer using the codes given below :
Assertion (A): Shareholders are not, in the eye of law, part owners of a company. The company is something different from the totality of the shareholders.
Reason (R) : Shareholders are collective owners of the company.
Codes :
