What Are the India Director Duties and Responsibilities?

Conferred with a wide range of authority and powers, directors are entrusted to manage corporate affairs and make sure the company sails smoothly. Directors are indisputably an essential foundation in building any successful company. Parallel to that, regulations and company policies are introduced to ensure the accountability and the actions of the director, as to curb mismanagement. Every country has its own set of unique laws on director duties and responsibilities, including India. Learn more on India director duties and responsibilities more below.

 

The Indian Law Says

The Companies Act 2013 replaced the older version of the same law, Companies Act 1965 (CA 1965). Before the new Act was introduced, CA 1956 had no clear outline on the statutory duties of directors, which meant directors were referred to under Section 219. The latter section was general, along with other applicable laws and had a grey area of directorial duties and limits.

 

New and Improved

For the very first time in India’s company laws, the Companies Act 2013 (CA 2013) had defined the duties of directors clearly in Section 166. India director duties and responsibilities in accordance with the CA 2013 are as follows:

• To act in good faith and for the best interest of the company.
• To work within given powers and not abuse it.
• To exercise skill, diligence and care.
• To practice independent judgement.
• To avoid conflicts of interest.
• To not use the company’s property, money or information for personal use.
• Must ensure all business affairs are conducted, complies to the legal requirements.

Under the Companies Act 2013, the law states companies are recognised as an ‘artificial person’, and therefore need human representation to manage it. The person(s) who are responsible for affairs management is termed as directors; in a case of more than one director, then they will be collectively known as Board of Directors.

Section 149(1) of the Act says that every public company requires at least three directors, two directors in a private company and one person in a one-person company. The law also states that a maximum of 15 directors can be hired. If a company wants more than 15 directors, a special resolution must be approved in the company’s general meeting.

Apart from that, directors are not only subjected to the Indian governmental laws; they also need to adhere to the company’s policies set by the shareholders, which may or may not limit their jurisdiction.

If a director breaches the duties and responsibilities, he or she will be held liable to the stakeholders and company, or both, for their actions. Conducting wilful negligence will result in facing hefty fines and prison term, which will be determined by the severity of their actions.

 

The Bottom Line

A competent director(s) is crucial to building a company. These figures are in charge of the workflow, well-being of the staff, business matters, and direct the company to accomplish its mission and goal under their leadership. India director duties and responsibilities are needed to ensure directors meet the standards set by the law and company. For the very first time in India’s company laws, the Companies Act 2013 (CA 2013) had defined the duties of directors clearly in Section 166. India director duties and responsibilities in accordance with the CA 2013 are as follows:

• To act in good faith and for the best interest of the company.
• To work within given powers and not abuse it.
• To exercise skill, diligence and care.
• To practice independent judgement.
• To avoid conflicts of interest.
• To not use the company’s property, money or information for personal use.
• Must ensure all business affairs are conducted, complies to the legal requirements.

Under the Companies Act 2013, the law states companies are recognised as an ‘artificial person’, and therefore need human representation to manage it. The person(s) who are responsible for affairs management is termed as directors; in a case of more than one director, then they will be collectively known as Board of Directors.

Section 149(1) of the Act says that every public company requires at least three directors, two directors in a private company and one person in a one-person company. The law also states that a maximum of 15 directors can be hired. If a company wants more than 15 directors, a special resolution must be approved in the company’s general meeting.

Apart from that, directors are not only subjected to the Indian governmental laws; they also need to adhere to the company’s policies set by the shareholders, which may or may not limit their jurisdiction.

If a director breaches the duties and responsibilities, he or she will be held liable to the stakeholders and company, or both, for their actions. Conducting wilful negligence will result in facing hefty fines and prison term, which will be determined by the severity of their actions.