Directors under Company Law
Directors under Company Law
1. Who is a Director?
A director is a person appointed to manage and oversee the affairs of a company.
The board of directors collectively manages the company’s business and makes key decisions.
Directors act as agents of the company and owe fiduciary duties to it.
2. Types of Directors
| Type | Description |
|---|---|
| Executive Director | Works full-time in the company and is involved in day-to-day management. |
| Non-Executive Director | Does not engage in daily management but participates in board meetings. |
| Independent Director | A non-executive director free from any material relationship with the company, ensuring unbiased judgment (required in certain companies under Companies Act, 2013). |
| Nominee Director | Appointed to represent a particular stakeholder like a lender or investor. |
| Additional Director | Appointed by the board temporarily until the next AGM. |
| Alternate Director | Appointed to act for a director during their absence. |
| Women Director | Certain companies must appoint at least one woman director as per law. |
3. Appointment of Directors
Under the Companies Act, 2013:
Minimum number of directors depends on company type (e.g., private company: at least 1, public company: at least 3).
Directors can be appointed by shareholders in a general meeting or by the board (for additional directors).
Director must give consent and meet eligibility criteria (e.g., not disqualified).
4. Qualifications
Must be a natural person.
Age must be at least 18 years.
Must possess a Director Identification Number (DIN).
Should not be disqualified under Section 164 (e.g., insolvent, convicted of certain offenses).
5. Duties of Directors
As per Section 166, Companies Act, 2013, directors must:
Act in good faith to promote the company’s interests.
Exercise due care, skill, and diligence.
Avoid conflicts of interest.
Not misuse their position for personal gain.
Act within the powers given by the company.
Not achieve any undue gain or loss to the company.
6. Liabilities of Directors
Liable for acts done without authority.
Liable for breach of fiduciary duties.
Liable for statutory non-compliance.
Can be disqualified or penalized for fraud, negligence, or mismanagement.
7. Removal of Directors
Directors can be removed by shareholders by an ordinary resolution in a general meeting (Section 169).
Grounds include disqualification, resignation, or expiration of term.
Certain directors like independent directors have fixed tenure.
8. Role and Functions
Strategic planning and policy formulation.
Approving budgets and financial statements.
Overseeing management.
Ensuring compliance with laws and regulations.
Protecting interests of shareholders and stakeholders.
9. Meetings
Directors’ meetings are held regularly to make decisions.
Minutes must be recorded and maintained.
Quorum and voting as per Articles of Association or Companies Act.
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