Section 176 of the Companies Act, 2013
Section 176 of the Companies Act, 2013 – Defects in Appointment of Directors Not to Invalidate Acts
Bare Act Language (Simplified):
No act done by a person acting as a director shall be invalid just because:
There was a defect in his appointment, or
His appointment was later discovered to be invalid or disqualified, or
He was not qualified to be a director.
However, this applies only if the person was acting in good faith and the company was unaware of the defect at the time of the act.
Plain English Explanation:
Section 176 protects the validity of actions or decisions taken by directors, even if:
Their appointment turns out to be defective, or
They were later found to be disqualified or improperly appointed.
✅ But the condition is that the director must have acted in good faith, and the company must not have known of the defect at the time.
Example:
Suppose Mr. A was appointed as a director, and he signed a crucial agreement for the company. Later, it is found that his appointment paperwork was defective.
➡️ Under Section 176, the agreement remains valid and binding — it won't be invalidated just because of the technical defect in Mr. A’s appointment, as long as he acted in good faith.
Purpose:
To ensure that technical or procedural errors do not affect the functioning or decision-making of companies, and to protect third parties who deal with companies in good faith.
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