The courts will need to refer to standards laid down by the various judgments delivered under the 1956 Act, when determining whether or not a breach of duty has occurred. Please contact customerservices@lexology.com.
Rotation of audit firms under the Companies Act, 2013 – a closer look, Companies Act 2013: greater emphasis on governance through the board and board processes, Independent directors- under the Companies Act, 2013, Officers in default - SEBI provides respite to independent directors, The duties and liabilities of directors of limited companies incorporated in the UK, Company directors' general duties under the English Companies Act 2006. Directors need to ensure that they take legal advice, in cases of doubt. Further, the 2013 Act proposes to set up a National Company Law Tribunal which is expected to provide speedier and more efficient remedy. 1. Directors need to ensure that they have obtained directors’ and officers’ liability insurance to provide them with some degree of comfort. A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment. “The content of this document do not necessarily reflect the views / position of Khaitan & Co but remain solely those of the author(s). Power up your legal research with modern workflow tools, AI conceptual search and premium content sets that leverage Lexology's archive of 900,000+ articles contributed by the world's leading law firms. (2) A director of a company shall act in good faith in order to promote the objects of thecompany for the benefit of … Apart from the duties mentioned above, which are applicable to all directors, independent directors are also additionally required to comply with code of conduct specified under Schedule IV of the 2013 Act. INTRODUCTION. Stipulation and elucidation of the duties and responsibilities of the directors of a company, especially the public limited companies, are welcome and great contribution of the new company law of India, the Companies Act of 2013, to better corporate governance and security, and the best possible growth and prosperity in the corporate world of India. Also, there is a new requirement under the 2013 Act to mandatorily appoint atleast one women director for certain categories of companies (being listed companies and certain categories of public unlisted companies). Some of these duties include: Regularly updating and refreshing the skills, knowledge and familiarity with the company. This article provides an insight on the duties and liabilities of the directors under the 2013 Act and the practical measures which may be adopted by them, for complying with these duties. Completing the CAPTCHA proves you are a human and gives you temporary access to the web property. •
Corporate failures in the recent past such as Satyam, Sahara, Kingfisher brought out the fact that the Companies Act, 1956 (“1956 Act”) which existed over a period of 50 years was ineffective at handling some of the present day challenges of a growing industry and interests of increasing classes of sophisticated stakeholders. A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company. It would be difficult for a nominee director to act where the instructions of his nominating shareholder run inconsistent with the interests of a class of stakeholders. The Schedule has stipulated 13 (thirteen) different duties to be performed by an independent director. The term ‘attributable through Board processes’ would normally be interpreted to mean that a director would be deemed to have knowledge of all matters that are taken at the board level. A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain of the company. Keeping well informed about the company and the external environment in which it operates. Duties of directors (1) Subject to the provisions of this Act, a director of a company shall act inaccordance with the articles of the company. Apart from monetary penalties, certain offences even attract imprisonment. However, till such a conclusion is drawn, the independent director suffers a lot of inconvenience and embarrassment. Becoming a company director has become a very serious business and should not be undertaken lightly or unadvisedly.
Thus, in such situations, would it be prudent for a director to act in the interest of employees ignoring the interests of the shareholders? A director of a company shall not assign his office and any assignment so made shall be void. If you would like to learn how Lexology can drive your content marketing strategy forward, please email enquiries@lexology.com. Rabindra Jhunjhunwala is a Partner at Khaitan & Co, Mumbai office. Even a slight laxity on their part may be a good reason to put them behind bars. Your IP: 88.208.193.166 These duties have been already laid down by the courts in several of its judgments under the 1956 Act. The term “officer who is in default” has been defined under Section 2 (60) of the 2013 Act as: “officer who is in default for the purposes of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely –, (vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the board or participation in such proceedings without objecting to the same, or where such contravention has taken place with his consent or connivance.”. The scope of duties under Section 166 is reliant on subjective tests and could be open to wide debate. The duties which have been listed in Section 166 are essentially codification of the existing equitable and common law principles of the fiduciary duties of directors.
Performance & security by Cloudflare, Please complete the security check to access. To view this article you need a PDF viewer such as Adobe Reader. The duties set out in this Section are not exhaustive. The 2013 Act provides for different categories of directors, including, whole time directors, managing directors, independent directors, nominee directors, alternate directors and women directors.