Performance & security by Cloudflare, Please complete the security check to access. Accordingly, the courts will need to rely on ‘reasonability test’ and will need to consider the facts and circumstances of each case, whilst pronouncing judgment. The 2013 Act has ushered in a new era of corporate governance, by increasing the roles and responsibilities of the board, protecting shareholders' interests, bringing in a disclosure based regime and built in deterrence through self-regulation. Hence, it increases the role of the Company Secretary in the organization. Section 166 of the 2013 Act stipulates the following: Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of a company. The purpose of codification seems to provide all directors with access and to enable them to understand their basic duties easily. As provided under the 1956 Act, the definition of the term “officer in default” includes directors. (2) A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.
Some of these duties include: Regularly updating and refreshing the skills, knowledge and familiarity with the company. Companies Act 2013 is a revolution in corporate law development in India. To minimize risks, the board should consider seeking inputs from its different categories of stakeholders to identify what stakeholders believe may be an appropriate course of action. If you are at an office or shared network, you can ask the network administrator to run a scan across the network looking for misconfigured or infected devices. Thereafter, the burden of proof lies on the independent director to prove that he was diligent in the discharge of his duties and that he had acted in a bona fide manner. (2) A director of a company shall act in good faith in order to promote the objects of thecompany for the benefit of … The next generation search tool for finding the right lawyer for you. For example: The board needs to lay the financial statements for approval and adoption at the annual general meeting of the shareholders (Section 129); The directors are responsible for devising proper systems to ensure compliance with the provisions of all applicable laws and to ensure that such systems are adequate and are operating effectively (Section 134); Director needs to ensure that the company complies with obligations relating to corporate social responsibility provided under Section 135; The board is responsible for appointing first auditors (Section 139); A director needs to disclose his interest in a contract with the company (Section 184); A director is prohibited from engaging in forward dealing of securities (Section 194); The board is responsible for appointment of whole time key managerial personnel (Section 203); The directors are responsible for issuance of notice ad holding of board meetings and general meetings etc. The Act now codifies the common law position and makes a few notable additions (which do not alter the common law position significantly). “I have found the articles in Lexology/Newsstand to be closely related to the topics I am interested in. Also, since the 2013 Act also requires the director to take into account environmental and community concerns, will an interpretation that a director who is on the board of a tobacco company or cigarette manufacturing company is in breach of the provisions of the 2013 Act right from day one, hold good? 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. Strive to attend and participate actively in all meetings of the Board and the committees and general meetings.
The Schedule has stipulated 13 (thirteen) different duties to be performed by an independent director. Understand your clients’ strategies and the most pressing issues they are facing. Earlier, only the listed companies were required to get its annual returns signed by the company secretary. Cloudflare Ray ID: 5db825ecb904068e I would recommend it to other attorneys.”, © Copyright 2006 - 2020 Law Business Research. Directors need to ensure that they have obtained directors’ and officers’ liability insurance to provide them with some degree of comfort. On an average, the minimum amount of fine that is imposed under certain Sections is Rs 25,000 which in certain cases extends to Rs 25 crores or even more. The term “director” has been defined under Section 2 (34) of the 2013 Act to mean a director appointed to the board of a company. Under this concept, a group of shareholders (constituting a minimum of 100 shareholders or such minimum percentage of total shareholders as may be prescribed) can bring an action on behalf of all affected parties, against the company and/or its directors, for any fraudulent or wrongful act or omission of conduct on its/their part.
Section 149(12) of the 2013 Act, inter-alia, states that notwithstanding anything contained in this Act an independent director shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently. The provisions of this Section apply to all categories of directors, including independent directors. 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. Keeping well informed about the company and the external environment in which it operates. With the 2013 Act, there is an attempt to shift the focus for directors from looking solely at shareholders’ interests to taking account interests of other stakeholders as well. Further, this provision would also have a significant impact on nominee directors. For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com”. Not to disclose confidential information, including commercial secrets, technologies, unpublished price sensitive information, etc., unless such disclosure is expressly approved by the board or is required by law. Directors must ensure that any questions raised by them in a board meeting or any dissent expressed is properly recorded in the minutes of the meeting so as to provide prima facie evidence, in case the role of the director is questioned at any time.
Apart from the duties set out in Section 166, directors are also responsible for various obligations provided under other Sections of the 2013 Act. A director of a company shall not assign his office and any assignment so made shall be void. Keep a step ahead of your key competitors and benchmark against them. Although employees and creditors interests were recognized in matters pertaining to insolvency, but the law was settled that a director should primarily act in the best interests of all shareholders.