DUTIES AND RESPONSIBILITIES OF BOARD OF DIRECTORS AS PER THE INDIAN COMPANIES ACT

submitted to: PROF. J. K. SHARMA

submitted by: MBA SEM III GROUP 2

DIRECTORS
Section 2(13) of Companies Act states that directors include any person occupying the position of directors, by whatever name called. Section 252 requires that every public company shall have atleast three and every private company atleast two directors.

Directors as Agents

Directors as Trustees

Directors as Organs

As Agents

company being an artificial person, can act only through directors play the role of a negotiator appoint the auditor of the company

As Trustees

power to make calls

power to forfeit shares

power to issue further capital power to approve transfer of shares

As Organs

The organic theory of corporate life treats certain officials as organs of the company, for whose action the company is to be held liable just as a natural person for the action of his limbs. Directors represent the directing mind or will of the company and control what it does. The state of mind of these managers is the state of mind of the company and is treated by law as such.

MAJOR RESPONSIBILITIES OF BOARD OF DIRECTORS

Determine the organisations mission and purpose Select the executives Support the executive and review his/her performance Ensure effective organisational planning Ensure adequate resources

RESPONSIBILITIES contd

Manage resources effectively Determine and monitor the organisations programs and services Enhance the organization's public image Serve as a court of appeal Assess its own performance

DUTIES OF DIRECTORS
A.

DUTY OF GOOD FAITH Liability for Breach of Trust : Directors being fiduciary agents of the company, they are bound by the principle of good faith. Greatest good faith is expected in discharge of their duties. They should not exploit to their own use the business opportunities of the company. Even where the company is financially unable to make use of its opportunities, directors should not use it for themselves.

DUTIES OF DIRECTORS
A.

DUTY OF GOOD FAITH Misuse of corporate information : If a director makes any use of unpublished and confidential information belonging to the company and the company suffers a loss in consequence, it can ask the director to make good the loss.

DUTIES OF DIRECTORS
A.

DUTY OF GOOD FAITH Competition by Directors : A director commits no breach of duty if he competes with his company or holds some interest in a rival company or is a director in a competing company. But he should not make use of companys secrets or assets or any special skill for which he has been trained by the company.

B.

DUTY OF CARE Liability for negligence : A director has to perform his functions with reasonable care and skill. His duties will depend upon the nature of companys business and the manner in which the work of the company is distributed among the directors and other officials of the company. DUTY TO ATTEND BOARD MEETINGS Liability for Non-Attendance : Duties of directors are of an intermittent nature to be performed at periodical board meetings. A director is not even bound to attend all meetings.

C.

D.

E.

DUTY NOT TO DELEGATE Liability for Co-Directors defaults : A director should not delegate his functions to another person, but delegation of functions may be made to the extent to which it is authorised by the Act or the constitution of the company. DUTY TO DISCLOSE INTEREST Where a director is personally interested in the transaction of the company, he is required to disclose his interest to the board. If he is a member of the company or a firm with which the company has to deal, he should give a yearly notice to the board of his interest in that concern.

PERSONAL LIABILITY OF A DIRECTOR

To whom is the responsibility to be attributed in case of tortThe Company or The Director? The applicable principle states that . The Director of the company is not automatically to be identified with his company for the purpose of law of tort , however small the company may be and however powerful his control over its affairs. In every case where it is sought to make him liable for his companys tort, it is necessary to examine with care what part he played personally in regard to the act or acts complained of.

THANK YOU