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Introduction

The Companies Act, 2013, provides a comprehensive framework for the governance, responsibilities,
and liabilities of directors in a company. Directors play a crucial role in steering the organization, ensuring
compliance with legal obligations, and safeguarding the interests of stakeholders

.This article outlines key provisions related to directors, including their resignation process, remuneration
limits, conditions for holding office, disqualifications, and various liabilities under the law. It also
highlights the fiduciary duties directors owe to the company and the consequences of non-compliance.
Furthermore, the appointment of key managerial personnel and the criteria for holding an office of
profit are discussed in detail.

Understanding these provisions is essential for maintaining corporate governance, ensuring

Meaning of 'Director

A company is a corporate body. It is neither a body nor a mind of its own. It is an artificial being which is
run by living persons. Some human agency has to do business in the name of the company.

Every company consists a director or board of directors to run or administer the company Directors look
after the affairs of the establishment. Director is a person appointed or elected according to law
authorized to manage thecompany.

In Maynard v. Firemen's Fund, Inc.co. [91 Am Dec. 672) it was observed that "the Directors of a company
are the persons having the direction control. management or superintendence. The directors of a
corporation or company are its chosen representatives, and constitute the corporation to all purposes in
dealing with others.

Resignation

A director may resign from his office by giving a notice in writing to the company and the Board shall on
receipt of such notice take note of the same and the company shall intimate the Registrar in such
manner, within such time and in prescribed form and shall also place the fact of such resignation in the
report of directors laid in the immediately following general meeting by the company. A director shall
also forward a copy of his resignation along with detailed reasons for the resignation to the Registrar
within 30 days of resignation in prescribed manner.

The resignation of a director shall take effect from the date on which the notice is received by the
company or the date, if any, specified by the director in the notice, whichever is later. The director who
has resigned shall be liable even after his 4 resignation for the offences which occurred during his tenure.
Where all the directors of a company resign from their offices, or vacate their offices under Section 167,
the promoter or, in his absence, the Central Government shall appoint the required number of directors
who shall hold office till the directors are appointed by the company in general meeting.

In Prasant Chandra Sen v. Union of India, the Calcutta High Court held that a during the pleasure of the
President. managing director of a Government company also has a right to resign though appointed by
the President of India to hold office during the pleasure of the president

Vacation of office of Director (Sec. 167)

The office of a director shall become vacant, if

(a) he incurs any of the disqualifications specified in Section 164;

(b) he absents himself from all the meetings of the Board of Directors held during a period of 12 months
with or without seeking leave of absence of the Board:

(c) he acts in contravention of the provisions of Section 184 relating to entering into contracts or
arrangements in which he is directly or indirectly interested:

(d) he fails to disclose his interest in any contract or arrangement in which he is directly or indirectly
interested, in contravention of the provisions of Section 184;

(e) he becomes disqualified by an order of a court or the Tribunal,

(f) he is convicted by a court of any offence, whether involving moral turpitude or otherwise and
sentenced in respect thereof to imprisonment for not less than 6 months. The office shall be vacated by
the director even if he has filed an appeal against the order of such court;

(g) he is removed in pursuance of the provisions of this Act

(h) he, having been appointed a director by virtue of his holding any office or other employment in the
holding, subsidiary or associate company, ceases to hold such office or other employment in that
company 1

A private company, which is not subsidiary of a public company, may provide in its Articles that the
office of the director shall be vacated on any grounds in addition to those specified in Sec 167 1

Liabilities of Directors Towards the Company

Directors have a fiduciary relationship with the company. They are expected to act in the best interest of
the company and its stakeholders. Key liabilities of directors towards the Company under the Companies
Act, 2013 include:

Breach of Fiduciary Duty: Directors must act with honesty, integrity and in good faith. Breaching these
duties can lead to personal liability, especially if the company suffers a loss due to their actions.
Ultra Vires Acts: Actions taken beyond the scope of authority granted by the company’s memorandum
and articles of association can render directors personally liable.

Negligence: Directors are expected to perform their duties with due diligence. Failure to do so can result
in liability for any resulting damages to the company.

Malafide Acts: Engaging in dishonest or fraudulent activities can lead to directors being held liable for
any losses incurred by the company.

Liability to Third Parties

Directors may face liability for misrepresentations in prospectus, non-compliance during share allotment,
or involvement in fraudulent trading practices.

Liability for Acts of Other Directors

Directors may be held liable for the acts of their co-directors if they were aware of such actions and did
not act to prevent them. However, liability of directors under the Companies Act, 2013 is generally
limited to those who actively participate or consent to the wrongful acts.

Criminal Liability

The Act also outlines criminal liabilities for directors, which include:

Cheque Dishonour: Directors can be criminally liable for issuing cheques that are dishonoured.

Violation of Other Laws: Directors must ensure the company complies with all applicable laws. Ignorance
or negligence of laws like labour laws, environmental laws, etc., can lead to criminal charges.

Offences Under the Income Tax Act: Violations of tax laws can also result in criminal liability for
directors

Section 166 of the Companies Act, 2013 explains about the duties of Director i.e

1) Subject to the provisions of this Act, a director of a company shall act in accordance with the articles
of the Company.
2) A director of a company shall act in good faith in order to promote the objects of the company for the
benefit of its members as a whole, and in the best interest of the company, its employees, the
shareholders, the community and for the protection of environment.
3) A director of a company shall exercise his duties with due and reasonable care, skill and diligence and
shall exercise independent judgment.
4) A director of a company shall not involve in a situation in which he may have a direct or indirect
interest that conflicts, or possibly may conflict, with the interest of the company.
5) A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to
himself or to his relatives , partners, or associates and if such director is found guilty of making any
undue gain, he shall be liable to pay an amount equal to that gain to the company.
6) A director of a company shall not assign his office and any assignment so made shall be void.
7) If a director of the company contravenes the provisions of this section such director shall be
punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh
rupees.

The act cleary mentions that every director is to act in accordance with MOA & AOA and shall exercise
his duties with due and reasonable care.

Appointment of key managerial personnel (Sec. 203)

The section provides for mandatory appointment of following whole time key managerial personnel for
every listed company and every other company having a paid-up share capital of Rs. 5 crores or more:

(i) Managing director, or chief executive officer or manager and in their absence, a whole-time director;

(ii) Company secretary;

(iii) Chief financial officer.

Further, the section states that an individual cannot be appointed or reappointed as the Chairperson of
the company, as well as the managing director or chief executive officer of the company at the same
time except where the articles of such a company provide otherwise or the company does not carry
multiple businesses

Disqualifications Sec 196(3

No company shall appoint or continue the employment of any person as managing director, whole-time
director or manager who

(a) is below the age of twenty-one years or has attained the age of seventy years:

Appointment of a person aged seventy years may be made by passing a special resolution. The
explanatory statement must justify appointing such person.

(b) is an un-discharged insolvent or has at any time been adjudged as an insolvent; or

(c) has at any time suspended payment to his creditors or makes or has at any time made, a compromise
with them; or

(d) has at any time been convicted on account of any offence and sentenced for a period of more than
six months.

Conclusion

Directors play a crucial role in the governance and management of a company, and their responsibilities
are clearly defined under the Companies Act, 2013. The Act ensures that directors act in good faith, with
due diligence, and in the best interests of the company and its stakeholders. Provisions related to
resignation, remuneration, disqualifications, liabilities, and the appointment of key managerial personnel
establish a structured framework for corporate leadership and accountability.

The Act imposes strict fiduciary duties on directors to prevent conflicts of interest and ensure ethical
decision-making. Failure to comply with statutory obligations can lead to civil and criminal liabilities,
reinforcing the need for transparency and responsible corporate conduct.

By adhering to these legal provisions, directors can contribute to effective corporate governance,
financial stability, and long-term business sustainability. A clear understanding of these rules not only
protects the company from legal risks but also fosters trust among investors, employees, and other
stakeholders.