RESPOSIBILITIES OF DIRECTOR UNDER THE COMPANIES ACT, 2013

   
  Introduction:-

Corporate Governance is needed to create a corporate culture or transparency, accountability and disclosure. It refers to compliance with all the moral ethical values, legal framework and voluntarily adopted practices. The term Governance is from "Gubernate" which means "to steer" while the term Corporate or Corporation is derived from Latin term "Copus" which means "a body". When combined corporate governance means a set of system procedures, policies, practices, standards put in place by a corporate to ensure that relationship with various stakeholders is maintained in transparent and honest manner.

Evidence of corporate governance was also found in the Kautilya's Arth Shashtra which is mentioned as below:-

·                   Raksha = Protection ( Against risk management)

·                   Vriddhi = Growth (Stakeholders Value Enhancement)

·                  Palana = Maintenance/ Compliance ( Compliance of Law in Letter and Spirit)

·    Yogakshema = Well Being (Corporate Social Responsibility)

    Definition of Director:-

Sec-2(34) of the Companies Act, 2013 defined the term "Director" means Director appointed to Board of the Company.

Sec-2(13) of the Companies Act 1956 defined the term "Director" as any person occupying the position of Director by whatever name called.

Who can be appointed as Director?

(1) Only an Individual who has Director Identification Number (DIN).

(2) Foreign National or NRI

(3) Major person

   v   Types of Director:-

Ø  WOMAN DIRECTOR: At least one women director for prescribed class or classes of companies. The woman directors  is been mentioned in section 149(1) of the companies act 2013

Ø  RESIDENT DIRECTOR: At least one director shall be a person who has stayed in India for at least 180 days in e previous calendar year. 

   Ø  APPOINTED BY VARIOUS PERSON:

Listed companies may have directors 1 directors elected by small shareholder, Appointment by tribunal, proportional representation etc.

Ø INDEPENDENT DIRECTOR :

Separate definition of independent directors is there under section 2 (47) of the companies act 2013.Listed company to have at least 1/3^rd of the total number of directors as independent directors No. of independent directors for an unlisted company and its subsidiaries will be prescribed by the central government.

Ø ALTERNET DIRECTOR: Can only be appointed in case director leaves india for period not less than 3 months.

Ø NOMINEE DIRECTOR: Subject to article, board can appoint nominee director by any institution in pursuance of any law or agreement has been specified in the law specifically.

Ø  ADDITIONAL DIRECTOR: subject to the article, the board may appoint any person , other thsn a person who fails to get appointed as director in general meeting, as a additional director.

   v  Maximum number of Directorships

     

      

COMPANIES ACT 1956	COMPANIES ACT 2013
According to 1956 act the maximum limit of directors in a company was 12 Approval of central government was necessary.	According to new companies act, 2013 the maximum limit of directors in a company has been increases from 12 to 15. Further to that can be made by passing the special resolution. Approval of central government has been dispensed off.

A company can become a director for only 15 companies	A company can become a director for only 20 companies instead of 15 Out of these 20 companies he cannot be directors of more than 10 public companies.
The amount to be deposited along with the notice of nomination to any person to the office of directors was Rs.500.	The amount to be deposited along with the notice of nomination to any person to the office of directors has been increased from Rs.500 to Rs. 100000 or such higher amount as may be prescribed.

  v  Other Important Provisions related to Directors:-

  

   

Sr no.	Sec./Rule	Particulars
(1)	Sec-149(4)	Appointment of Directors
(2)	Sec-149(7)	Statement of Independence
(3)	Sec-149(8)	Compliance with Schedule-IV
(4)	Sec-149(9)	Remuneration of Independent Directors
(5)	Sec-149(10) & (11)	Tenure of Independent Directors
(6)	Sec-149(12)	Liability of Independent Directors
(7)	Rule-4	Companies (Appointment and Qualification of Directors) Rules, 2014
(8)	Rule-5	Companies (Appointment and Qualification of Directors) Rules, 2014
(9)	----	ICSI Recommendations
(10)	Clause-49	Listing Agreement

           Duties of  Director:-

1.       A director shall act in according with the articles of the company.

2.       A director shall act in good faith in order to promote the objects of the company for the benefits of its members as a whole, and in the best interest of the company, its employee, the share holders, thr community and for the protection of environment.

3.    A director shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.

4.       A director shall not involve in situation in which he may have a direct or indirect interest that conflicts, or possibly may conflicts, with the interest of company.

5.   A director shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or association. 

    v  Responsibilities of  Director:-

    (1)         Not to disclose confidential information, including commercial secrets, technologies, advertising and sales promotion plans, unpublished price sensitive information, unless such disclosure is expressly approved by the board or required by law.

(2)         Acting within his authority, assist in protecting the legitimate interests of the company, shareholders and its employees.

(3)         Report concerns about unethical behavior, actual or suspected fraud or violation of the company's code of conduct or ethics policy.

(4)         Ascertain and ensure that the company has an adequate and functional vigil mechanism and to ensure that the interests of a person who uses such mechanism are not prejudicially affected on account of such use.

(5)         Pay sufficient attention and ensure that adequate deliberations are held before approving related party transactions and ensure themselves that the same are in the interest of the company.

(6)         Not to unfairly obstruct the functioning of an otherwise proper Board or committee of the Board.

(7)         Keep them-selves well informed about the company and the external environment in which it operates.

(8)         Where they have concerns about the running of the company or a proposed action, ensure these are addressed by the Board and to the extent that they are not resolved, insist that their concerns are recorded in the minute’s of the Board meeting.

(9)         Strive to attend the general meeting of the company.

(10)   Participate constructively and actively in the committees of the Board in which they are Chairpersons or members.

(11)   Strive to attend all the meetings of the Board of Directors and of the Board Committee of which he is a member.

(12)   Seek appropriate clarification or implification of information and where necessary take and follow appropriate professional advice and opinion of outside experts at the expense of the company.

(13)   Undertake the appropriate induction and regularly update and refresh their skills, knowledge and familiarity with the company.

(14)   Assist the Board and Company officers in better ensuring compliance with the implementation of the Governance Guidelines.

(15)   Serves as a liaison for consultation and communication with the shareholders.

  v  RESIGNATION OF DIRECTOR (SEC.168)

    

   •      A director may resign from his office by giving a notice in writing to the company and the board shall take note of same. The company shall intimate the registrar and shall also place the fact of registration in the report of the directors laid in the immediately following the general meeting by the company.

•      A director shall also forward a copy of his resignation to the registrar along with the detailed reason within 30 days of resignation.

•      The resignation shall take effect from the date on which the notice is received by the company or the date specified by the director in the notice, whichever is later.

The directors who have resigned shall be liable even after his resignation for the offences which occurred during his tenure.

      PENALTIES FOR CONTRAVENTIONS

   ·       The new Act craves to implicate every director, who is "aware" of any contravention. He need not even participate in any meetings of the board, but if the information as to a contravention is contained in any of the proceedings of the board received by him, he is deemed liable.

·       Without doubt he is liable, too, in case he participates in such proceedings without objecting to a contravention, or where such contravention has taken place with his consent or connivance. The intent of law here seems to entice an independent director to turn a whistleblower.

·       A mere awareness of a contravention makes a director liable to penal action, and it's ironical the law seems to turn a blind eye in protecting the whistleblower. Even though section 2(60) says "for the purpose of any provision in this Act", it is debatable whether it will ringfence the liability of a director to a contravention under company law.

·       The responsibility of a director under this umbrella law could in all possibility be cited in proceedings under several other laws (like FEMA) wherein a director's responsibility to comply is specifically enshrined.

·       In Iridium India Telecom Limited vs Motorola and others (2011), the Supreme Court observed that a corporation is virtually in the same position as an individual, and may be convicted of common law as well as statutory offences, including those requiring mens rea.

·       The court reiterated its earlier position in Standard Chartered Bank vs Directorate of Enforcement that a company is liable to be prosecuted and punished for criminal offences, even though the criminal act is committed through its agents.

·       The apex court, thus, recognises that a legal persona needs agents to conceive and execute malice. Now, the penal section oft-repeated in the new company law, ie, Section 447. The section seeks to imprison a guilty for a minimum of six months (three years, in case the fraud involves public interest) up to a maximum of 10 years.

Conclusion:-

The Board of Directors plays a pivotal role in ensuring the Good Governance. The contribution of the directors on the Board is critical to the way a corporate conducts itself.

Directors are known to bring an objective view in Board deliberations. They also ensure that there is no dominance of one individual or special interest group or the shifting of healthy debt. They act as guardians of the interest of all shareholders and stakeholders especially in the areas of potential conflict. A board composition is one of the most important determinants of Board effectiveness. The Board should have a mix of directors with a variety of experience and core competence if it is to be effective in setting policies and strategies and for judging the management's performance objectively.

[This article having efforts of me, my dear friend Chandni Ghelani, & my colleague Princy Mehta. Thank you guysss.]