2022-08-30 14:43:20

Powers and Duties of Director

Introduction

Certain responsibilities and duties come with the post of Director of a Private Limited Company or Limited Company or One Person Company. Directors are unaware of the tasks and responsibilities many companies which are expected of them and only occupy the post as a namesake. As a result, organizations with strong and moral Boards of Directors will appear, beneficial to all the company’s stakeholders.

Directors have a fiduciary responsibility regarding the company. Therefore Director must use his or her authority for the profit of the firm or for the best interests of the company. A Director must also give the priority to the interest of the company over their own personal interest. Director works honestly but if the director does any work which is against the company’s best interest then it is a violation of the duty of the Director.

Director Meaning

According to section 2(13) of the Companies Act, 1956 “Any person exercising the position of Director, by whatever name is called Director”. Article of Associations covers the appointment, duties, rights, and salary of the director.

Part-time Director

Directors who do not take a direct part in the day-to-day management and administration of the company are called Part-time directors. Whole-time Directors are also known as functional directors and their position in the company is similar to an employee but it is not so in the case of part-time directors. But Part-Time Directors are non-executive directors. When it comes to the question of the powers, rights, duties, and responsibilities then there is not much difference between a whole-time director and a part-time director.

Rights of Directors in a Company

In order to create policies directors must have a vision that would yield high results. They must set the company’s goals for achieving a high level of success. They must be able to conduct the objectives of the company. Then there is some function and responsibilities of the Director. Below give some Rights of Directors:

Individual Rights of the Director
Inspection of books of accounts.
Right to receive board meeting notices.
Right to obtain circular resolution draft.
Right to a sitting fee.
Right to speak in General Meetings.
Inspection of board meeting minutes is a legal right.
He has also the right to record his dissent.
Right to vote and participate in the Board meetings.
The right to call board meetings.
Right to request an alternate director from the board of directors.

Collective Rights in a Company

Right to prohibit the transfer of shares
The right to choose a Chairman
Right to nominate a Managing Director
Investment approval authority.

Director’s Duty in a Company

The Board of Directors functions as the agent of the company. However, when acting for the Company, the Director must fulfill the responsibilities which are given following:

Directors do any Act in good faith of the company and in accordance with the Company’s Articles of Association.
To act in the best interests of the Company and its stakeholders in order to promote the objectives of the Company Act.
When performing obligations exercise due and reasonable care.
To make decisions independently.
Where his interests are at odds then do not get engaged in that situation with the Companies.
He is not able to delegate his duties to anyone else.
To avoid gaining an unfair profit.

Liability of the Director in a Company

The directors may be held jointly or collectively accountable for any and all conduct detrimental to the interests of the company. Although the Director and the Company are separate entities, the Director can be held liable on the Company’s behalf in the same circumstances which are given below:

SEBI can take legal action against directors who fail to make the required disclosures under the SEBI Regulations, 1997 and SEBI Regulations, 1992.
Share application cost refunds.
To take over the cost of the qualification shares.
In a Prospectus, Misrepresentation of the Civil Liabilities.
Any present or previous Director shall be liable to pay the tax shortfall as well as any penalties unless a Director or Former Director can establish that the non-recovery or non-payment of taxes is due to gross negligence or the violation of duty.
If the majority of the shareholders participate in “fraud on the minority” or discriminatory behavior of the directors and the corporation may be held accountable. As a result, this is a precious clause that Directors should be aware of and try to exploit as much as possible.
A Company is required to acquire insurance to protect itself from losses caused by its directors under the Companies Act. A Director may also obtain insurance to cover the damages they suffered owing to the liability of the company with the corporation charges.

Conclusion

It concluded that any person exercising the position of Director, by whatever name is called Director”. Article of Associations covers the appointment, duties, rights, and salary of the director. Directors have a fiduciary responsibility regarding the company. Therefore Director must use his or her authority for the profit of the firm or for the best interests of the company. A Director must also give the priority to the interest of the company over their own personal interest. Director works honestly and for the benefit of the company.