Part i interpretation interpretation 21in this act, a articles means the articles of association of a company, as originally framed or as altered by special resolution, and includes, so far as they apply to the company, the regulations made. Appointment of debenture trustees and duties of debenture trustees. 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. This article has made an attempt to analyse and compare the duties of the directors of i ndian companies to comply with the indian laws and indemnity to them by companies under the ca1956 and the ca20. Duties of directors under the indian companies act, 20. 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. 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. All about rights, duties and liabilities of a director. It mandates that the board is entitled to exercise all such powers and. The companies act, 1956 prescribes specific procedures for incorporation and registration of companies. The companies act, 20 hereinafter as the act is certainly a very innovative and landmark legislation in respect of the duties and responsibilities of the directors. Section 291 of the companies act, 1956 confers general power on the board of directors. Sec 166 of companies act 20 wherein various elements have been stated like.
As per companies act provisions every director shall be appointed by the company in general meeting. Although a company is an independent juristic person, with a separate legal entity from its members, companies act through their directors and other officers. The principal duties and powers of company directorsduties of directors of insolvent companies 18 duties of directors of companies in voluntary windingup 18. Procedure of appointment of company directors in india companies act 1956. Directors appointment, duties, rights, liabilities company law. Consent of candidate for directorship to be filed with the company and consent to act as director to be filed with the registrar. Role of company secretary is to make sure to execute and implement the decisions take by the higher authorities like the board of directors of the company, chairman, ceos, etc.
A director is the member of the board of directors. Position of directors 38 it is very difficult to define the position of directors in a company as the companies act, 1956 is silent on this issue. Every company in compliance with the sections 224, 225 and 226 of the companies act, 1956 appoints an auditor in a general meeting. Generally director acts as agents of the company officers in certain matters trustees managing partners.
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. The 20 act introduces a new category of a company, one person company opc, which should have at least one director. Restrictions on appointment or advertisement of director 124. Chapter xiii of the companies act, 20 read with companies appointment and remuneration of managerial personnel rules, 2014.
Exemption from certain duties in case of shares registered in local or branch registers. Useful notes on power of directors in a company section. Promoters promotion of a company is concerned with taking the steps necessary for incorporation. 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. Wherever there is a meeting, there will be an individual or individuals who will preside over all or parts of a meeting.
The indian government has decided to replace almost six decades old company law governing the companies in india, i. Explore the companies act 20 and companies act 1956. Directors appointment, duties, rights, powers, liabilities bba. The following duties and liabilities have been imposed on the directors of companies under the companies act. This paper comments on the reform of the malaysian companies.
The following guidelines have been established by the companies act regarding the appointment of directors. Duties, director, companies, administration, corporate. The shareholders cannot control the way in which the board of directors act provided its actions are within the powers given to the board. Section 2 of the companies act, 1956, defines a director as any person, occupying the position of director, by whatever name called. However, before the duties and liabilities of independent directors are classified in detail it is significant to have a close scrutiny of the duties and liabilities of director in companies act, 1956. Director liability in india can be divided into two principal areas. Appointments of directors to be voted on individually.
Overview of directors duties under the companies act 2006. Director means a director appointed to the board of a company sec 234 according to the companies act states the board of directors in relation to a company refers to a collective body of the directors of the company. Directors chapter summary by rohit natani cs, net 9783110025 1 directors chapter summary by. Much of the act is substantially similar to the existing law but there are also. Rights of minority shareholders in india under the companies. Duties and liabilities of directors prepared by werksmans attorneys proceedings to recover any loss, damages or costs for which a person is or may be held liable in terms of section 77 of the act may not be commenced more than three years after the act or omission that gave rise to that liability. 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. The powers and duties of an auditor for the purpose of carrying out audit in a company are laid down in section 227. Thus it can be seen that the concept of director has undergone a change in the new companies act. The provisions relating to duties and responsibilities of directors are contained in the following sections of the new act. India has learned a lot in recent years, and its laws have gradually evolved in this context. 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. As per the new definition it refers to a collective body of the board. In the erstwhile companies act 1956, the definition was also not comprehensively laid down, stating in section 2 that a director includes any person occupying the position of director, by whatever name called.
The act contains provisions about companies, directors of the companies. If not, then he is liable for breach of fiduciary duties. Section 62 of the companies act, 1956 defines the expression. Directors are also under duties to act within their powers s. Chapter 4 role of promoter and regimes of directors. Companies act, 1956 bare acts law library advocatekhoj. 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. Procedure of appointment of company directors in india. Minutes of proceedings of meetings of company and of directors and managers. 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. General duties of directors under the companies act 2006 the 2006 act and fiduciary duties the fiduciary duties which directors owe to their respective companies have evolved over many years by a combination of case law and statute. Directors appointment, duties, rights, powers, liabilities.
The duties and responsibilities of the board of directors are as follows. It is duty of director to follow the applicable provisions under various acts to the company. Full text containing the act, companies act, 1956, with all the sections, schedules, short title, enactment date, and footnotes. The companies act, 1956 existing act contains 658 sections and xv schedules. Position, power and duty of director under companies act,20.
Roles and responsibilities of directors under companies. 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. Section 291 of companies act, 1956 provides for general powers of. 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 new act will replace the existing companies act, 1956. The definition in companies act, 1956 was inclusive and could refer to anyone occupying the position of director by whatever name called. 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. Section 291 of companies act, 1956 provides for general powers of the board of directors. The definition of board of directors is given in section 210 of companies act, 20 corresponding to section 26 of companies act, 1956. Corporate governance directors duties and liabilities.
This article focuses on the rights, duties and obligations of directors. Infopaksm corporate governance and directors duties guide. In this code, unless the context otherwise requires, the expressions defined in the first schedule hereto shall have the meanings assigned to them in that schedule. 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. Be it enacted by parliament in the sixth year of the republic of india as follows 1. The articles of association generally contains provisions as to their appointment, retirement rights duties and remuneration. Part ixa of companies act, 1956 income tax department. Section 12 duties of promoters 1 any person who is or has been engaged or interested in the formation of a. Duties and liability of directors an indian laws perspective by. Section 117b appointment of debenture trustees and duties of debenture trustees. Aspirants can also download the companies act 20 notes pdf from the link provided in the end of the article. This companies act got amended a few times since then, the final amendment being the companies act 20.
In this act, unless the context otherwise requires, 1 abridged prospectus means a memorandum containing such salient features of a prospectus as may be prescribed. Board of directors a company, though a legal entity in the eyes of law, is an artificial person, existing only in contemplation of law. The law in subsection 1 stipulates that a director shall act according to the article of association of the company. Appointment of directors to be voted on individually 127. Subject to the provisions of the 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. The general powers of the board of directors are specified in section 291 of the companies act, 1956. The former company law of india, the companies act of 1956, was disgustingly deficient in this respect. The guide explains how directors are appointed and removed, the composition and role of the board and board committees, as well as the standard of directors. In this guide for members of the board of directors we discuss the duties of directors, taking into account the requirements of the companies act, king iv and the jse listings requirements.
Roles and responsibilities of directors under companies act 20. Duties of directors 5 difficult decisions or expose the company to risk. In this article, you can read the salient features of the companies act 20 and its comparison with the older companies act 1956, for the ias exam. A person requires no formal qualifications to become a company director. Board of directors a company, though a legal entity in the eyes of law, is an artificial person, existing only in. 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 board of directors act as trustees to the property and welfare of the company.
Controls on appointment of regular directors whole time directors managing directors under the companies act, 20 jun 10, 2014. The companies act 1956 does not define the duties of directors although, the judiciary has attempted to define directors duties as fiduciary in nature emanating from the position they occupy as special trustees and agents of a company. In this article, we will discuss the existence of company secretary under the companies act, 20. A company has distinct name and limited liability, it is a juristic person having a separate legal entity different from its members who constitute it, capable of rights and duties of its own and endowed with a potential or perpetual succession. Duties of the directors in the twilight zone comparative analysis with uk and us sep 14, 2019. Procedures for incorporation and registration of companies.
The principal duties and powers of company directors. An act to consolidate and amend the law relating to companies and certain other associations. The powers of directors of a company are coextensive with the powers of the company. Register to be kept by registrar and inspection thereof. Trustee duties a guide for trustees trustees of a trust generally possess wide discretionary powers and authority. A fiduciary duty is defined as a duty of utmost good faith, trust, confidence and condor owed by a fiduciary to a beneficiary. Participation by directors in meetings of board committee of directors under the companies act, 1956 through electronic.
Rights and role of company secretary under companies act. Independent directors the importance of the term independent executive given in the companies act. The difference between companys act 1956 and companys act 20 outlined in a typicall manner. Companies act 20 vs companies act 1956 the companies act, 20 has been passed by lok sabha as well as rajya sabha and the president has given his consent to the same in august 20. The previous organization law of india, the companies act of 1956, was disgustingly insufficient in this. 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. Small companies where the directors are there is no true definition of a director. Increasing the maximum limit of directors would bring in more flexibility and enable companies to get. Interpretation of person in accordance with whose directions or instructions directors are accustomed to act 8. Duties of directors 1 subject to the provisions of this act, a director of a company shall act inaccordance with the articles of the company. In such case directors are personally liable for the loss caused to the company.
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. According to the provision of the companies act, 20, a man cant turn into an executive in excess of 20 companies rather than 15 as gave in the companies act 1956 and out of this 20, he cant be chief of in excess of 10 open companies. Although this does not mandate any specific laying down of the duties if that is so, it will be a desirable provision. This report is more inclined towards the position, power and duty which is. Laws of brunei chapter 39 companies act enactment no. Directors liability under the companies act, 1956 taxguru. The companies act requires a company to have at least one2 director. For the first time, duties of the directors are defined under the 20 act. Section 264 consent of candidate for directorship to be filed with the company and consent to act as director. Hence, the board must use the companys property for the longrun gain of the company, but not for their personal use. 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.
Section 166 of companies act, 20 duties of directors. Provisions as to undischarged bankrupts acting as directors. Chapter 7 directors duties directors and company law introduction while companies are treated by english law as being distinct legal persons, all of the activities of a company must necessarily be conducted through the medium of human beings. Appointment of debenture trustees and duties of debenture trustees 117c. The 20 act is the main legislation for corporate governance in india. A study of corporate governance under the companies act. In this regime, the roles and duties of the directors attained significant expansion. Section 2 10 of the companies act, 20 defined that board of directors or board, in relation to a company, means the collective. Pdf this paper comments on the reform of the malaysian companies act 1965 in 2007 relating to the role and duties of directors.
Only public companies can have their shares listed on the stock exchange but public companies are regulated much more strictly than private companies. Disqualification to act as director on conviction of certain offences 141d. Companies act 1963 act 179 section 1commencement spent. Chapter 4 role of promoter and regimes of directors 4. Consequently, directors owe a duty of loyalty and care in performing their responsibilities on behalf of the company. As per section 266a and 266b of the companies act, 1956 director identification. 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. Directors duties the companies act 2014 the act, for the first time, codifies directors duties, drawing together both existing statutory rules on transactions involving directors and also the various common law duties developed by the courts. Trustees owe their duties to the trust beneficiaries and in certain situations can be held accountable for their actions or failures to act. Directors role and responsibilities under the light of new.
1177 668 1249 177 120 1356 1146 97 526 188 212 398 53 1170 1220 1074 267 813 1263 951 10 1046 731 336 1178 1430 455 619 1323 585 1130 469 868 823 980 214 1446 1155 1328 885 987 390 473 873 1407 134