Roles and responsibilities of Directors as per Companies Act, 2013

Roles and responsibilities of directors as per Companies Act, 2013

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Created By Admin Last Updated Thu, 06-Aug-2020

Roles and responsibilities of Directors as per Companies Act, 2013

The Companies Act, 2013 ('CA 2013') has laid down the duties of directors in explicit terms in section 166. In summary, the general duties of directors under the CA 2013 are as follows:

·        to act in accordance with the articles of the company, in other words, to act within powers;

·        to act in good faith in order to promote the objects of the company for the benefit of its members as a whole;

·        to act in the best interest of the company, its employees, shareholders, community and for the protection of the environment;

·        to exercise due and reasonable care, skill and diligence and independent judgment;

·        to avoid direct or indirect conflicts of interest;

·        to avoid undue gain or advantage either to himself or relatives, partners or associates; and

·        not to assign his office to any other person;

A Director is part of a collective body of Directors called the Board, which is responsible for the superintendence, control, and direction of the affairs of the company.

Under common law rules and equitable principles, the director's duties are largely derived from the law of agency and trusts (i.e., set of contractual, quasi-contractual, and non-contractual fiduciary relationships with the Company).

Under the law of agency, duties of skill, care, and diligence are imposed on directors. On the other hand, the law of trust imposes fiduciary duties on directors. Accordingly, directors are the trustees of the company's money and property, and also act as agents in the transaction which they enter into on behalf of the company. Directors are liable as trustees for breach of trust if they misapplied the funds or committed a breach of bye-laws of the company.

A director is expected to perform his duties as a reasonably diligent person having the knowledge, skill, and experience.

A director, therefore, plays various roles in the company, may that be of an agent, an employee (when appointed on the rolls of the company), an officer, and/or a trustee of the Company.