Some of the important provisions relating to duties and responsibilities of directors under the companies act 20 new act are discussed in this article. If not, then he is liable for breach of fiduciary duties. The first thing the promoters must decide is the type of company proposed to be made. Interpretation of person in accordance with whose directions or instructions directors are accustomed to act 8. In such case directors are personally liable for the loss caused to the company. Companies act, 1956 bare acts law library advocatekhoj. Directors take the decision regarding the management of a company collectively in their meetings known as board meetings or at the meetings of their committees constituted for certain specific purposes.
Corporate governance directors duties and liabilities. Infopaksm corporate governance and directors duties guide. Appointment of debenture trustees and duties of debenture trustees 117c. Number of companies of which one person may be appointed. Highlights of the companies act 2016 uitm faculty of law. Roles and responsibilities of a director under companies act. Be it enacted by parliament in the sixth year of the republic of india as follows 1. This act may be cited as the companies act chapter 24. Although employees and creditors interests were recognized in. Even in english law, no general statutory definition of a. The 1956 act required that a public company can have one director elected by small shareholders. The director must not exhibit any power or do any act, which is not in accordance with the memorandum of association of the company or which violates the companies act, 1956. Part ixa of companies act, 1956 income tax department.
A director is a person appointed to perform the duties and functions of director of a company in accordance with the provisions of the companies act, 20. As per companies act provisions every director shall be appointed by the company in general meeting. The former company law of india, the companies act of 1956, was disgustingly deficient in this respect. Directors liability under the companies act, 1956 taxguru. As per section 266a and 266b of the companies act, 1956 director identification number din is a unique identification number issued to existing andor potential directors of any incorporated company. The principal duties and powers of company directors in addition, where a person is restricted in acting as a director, the company must comply with certain capital requirements before he or she can so act. Laws of brunei chapter 39 companies act enactment no. Companies act, 20 corresponding to section 2 of companies act, 1956 director refers to one who has been appointed as such by the board this definition is restrictive. Every company in compliance with the sections 224, 225 and 226 of the companies act, 1956 appoints an auditor in a general meeting. The companies act places a great variety of forms of companies at the disposal of businessmen.
Section 291 of companies act, 1956 provides for general powers of the. The companies act 1956 is administered by the government of india through the ministry of corporate affairs and the offices of registrar of companies, official liquidators, public trustee, company law board, director of inspection, etc. The courts have, in deciding the liability of directors, taken into consideration a directors position as a whole. Must disclose his interest in contracts of the company. Restrictions on appointment or advertisement of director. Power and duty to acquire shares of shareholders dissenting. A company functions through the medium of board of directors. Some of these liabilities are in contract, some are in tort, some are under the criminal law and others are statutory, i. As per section 291 of the companies act, the board of directors of a company shall be entitled to exercise all such powers and to do all such acts and things as the company is authorised to exercise and do. Duty to take up qualification shares within 2 months after his appointment. This article focuses on the rights, duties and obligations of directors.
Under the companies act of 1956, public companies and private companies are the ones which can be registered. Notice to be given to central government for applications under sections 391 and 394. What were the duties of directors in companies act 1956. Promoter is the person who originates the idea for formation of a company and gives the practical shape to that idea with the help of his own resources and with that of others. Duties of company with respect to issue of certificates. Useful notes on power of directors in a company section. Companies act, 1956 confers general power on the board of.
The indian government has decided to replace almost six decades old company law governing the companies in india, i. This somewhat unsatisfactory situation has been mended in the companies act, 20 the 20 act, which is rather explicit about directors duties somewhat similar to the codification of directors duties under the uk companies act of 2006, section 172. An act to consolidate and amend the law relating to companies and certain other associations. The general powers of the board of directors are specified in section 291 of the companies act, 1956. Section 2 10 of the companies act, 20 defined that board of directors or board, in relation to a company, means the collective.
However, certain powers have been reserved to be exercised by shareholders in general body meetings. The responsibilities and duties of a company director, pdf, 0. This companies act got amended a few times since then, the final amendment being the companies act 20. Section 2 34 of the act prescribed that director means a director appointed to the board of a company. Wherever there is a meeting, there will be an individual or individuals who will preside over all or parts of a meeting. Duties of directors 5 difficult decisions or expose the company to risk. Consequently, directors owe a duty of loyalty and care in performing their responsibilities on behalf of the company. Directors appointment, duties, rights, powers, liabilities. All about rights, duties and liabilities of a director.
Postindependence, in the year 1956, the committee under the chairmanship of h c bhaba recommended the companies act 1956 in the parliament, which came into effect from 1 st april 1956. Sec 1491 of companies act stipulates that the company should have a board of directors. Section 62 of the companies act, 1956 defines the expression. Md has to discharge statutory duties and responsibilities as given under the act. Duties and liability of directors an indian laws perspective by. Under 1956 act, there was no requirement to have independent directors. The powers of directors of a company are coextensive with the powers of the company. Under the 1956 act, a director s primary duties were to the company and its shareholders. Every auditor of a company has a right of access at all times to the books of accounts and vouchers of the company whether kept at the head office of the company or elsewhere.
According to the companies act states the board of directors in relation to. Roles and responsibilities of directors under companies act 20. What are my general duties under the companies act 2006. Jul 31, 2014 roles and responsibility, duties and liabilities of the directors under the new company act 20 1. Under the companies act of 20 the duties and responsibilities of the directors of a company have great contributions for better security and corporate governance for the prosperity and growth in the corporate world of india. Ica 20 defines director under sec 234 as a director. Although employees and creditors interests were recognized in matters pertaining to insolvency, but the law. Section 397 to 409 of the companies act, 1956 lays down provision in order to protect the rights of minority shareholders and safeguard their interest against the oppressive act of majority shareholders.
Roles and responsibilities of directors under companies. Chapter 4 role of promoter and regimes of directors 4. Rights of minority shareholders in india under the companies. Directors appointment, duties, rights, liabilities company law. Corporate affairs in india are regulated through the companies act, 1956, companies act 20 and related laws and regulations, which are administered by the ministry of corporate affairs mca. Exchange listed company manual nyse listing manual and the national. Decide the minimum subscription and issue prospectus. The powers and duties of an auditor for the purpose of carrying out audit in a company are laid down in section 227. A person cannot be held as promoter merely because he has signed at the foot of the memorandum or that he has provided money for the payment of formation expenses. Directors role and responsibilities under the light of new. Directors of a company appointment and legal relationship. The definition in companies act, 1956 was inclusive and could refer to anyone occupying the position of director by whatever name called.
The previous organization law of india, the companies act of 1956, was disgustingly insufficient in this. The responsibilities and duties of a company director burges salmon. The 20 act is the main legislation for corporate governance in india. Every producer company shall have internal audit of its accounts carried out, at such interval and in such manner as may be specified in articles, by a chartered accountant as defined in clause b of subsection 1 of section 2 of the institute of chartered accountants act, 1949 38 of 1949. The principal duties and powers of company directors. An act to consolidate and amend the laws in force in zimbabwe relating to the constitution, i n corporation, registration, management, administration and winding up of companies and other associations, and for other purposes incidental thereto. According to section 227 1 of the companies act, 1956, a company auditor has the following rights. This guide provides directors with a general overview of the key duties and obligations of the role. Since calculated risk taking and risk exposure form an integral part of any business, the act includes a number of provisions to ensure that directors are allowed to act reasonably without constant fear of personal exposure to liability claims.
The indian companies act 1956 ica 1956 was replaced by the new indian companies act 20 ica 20 about a year ago, which was notified in the official gazette on 30 august 20. Duties of directors under the indian companies act, 20. Board composition plays a major role in defining the way a business is influenced. On the other hand, the mca has also recently given the way to a new act called companies 2nd amendment act 2017 with effect from 26 january 2018. Director liability in india can be divided into two principal areas. Section 2 of the companies act, 1956, defines a director as any person, occupying the position of director, by whatever name called. Functions and duties of the chairperson of a board paul egan, solicitor thursday 26 january 2017 company secretarial the position of chairperson chairman chair exists apart from the law. Sep 12, 2011 on the issue as to when the resignation of a director needs to be accepted by the board of directors of the concerned company there is no clarity in the companies act, 1956 and generally the articles of association of the companies also do not contain any specific provision to that effect. A company is defined as a voluntary association of persons formed for the purpose of doing business, having a distinct name and limited liability. The position of md has a statutory recognition both under the companies act, 1956 and act. It is duty of director to follow the applicable provisions under various acts to the company. Form 32 required to be filed for appointment of a director under the companies act. The act contains provisions about companies, directors of the companies. India has learned a lot in recent years, and its laws have gradually evolved in this context.