Duties Of Director Under Companies Act 2013 (Section 166)

What are the Duties of a Director?

This section describes the duties of a director i.e. the director should work in the best interest of the firm.

The following are the duties of a director:

1. Articles of Association (AoA) of the company should contain provisions regarding the duties and role of a director in the company. The provisions mentioned should be lawful and by CA, 2013.

2. The director of a company should act in good faith I.e. should act only for the benefit of the company and not with malicious intent. Such action should be taken to promote the objects of the organization or the privilege of its members as a whole, and in the best interests of the:

firm;

employees;

company;

shareholders; and

Community.

The action taken should also be beneficial for protecting the environment.

3. A director of a company should take due and reasonable care, skill, and diligence and exercise independent judgment while performing his duties.

4. A director should not involve in situations in which he may have an explicit or indirect interest that created conflicts or possibly may create a conflict, with the interest of the firm.

5. A director of a company should not obtain or attempt to achieve any undue earnings or benefit either to himself or to his relatives, friends, partners, or associates and if s/he is found guilty of making any unfair gain, he is liable to pay an equal amount to that gain received to the company.

6. A director of a company should not assign his duty, office, or any assignment, it would be void.

7. If a director of the firm doesn't comply with the provisions of this section s/he should be liable to pay a fine between ₹1,00,000 and ₹5,00,000.

Section 166 of the Companies Act 2013

(1) Subject to the provisions of this Act, a director of a company shall act by the articles of the company.

(2) A director of a company shall act in good faith to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community, and for the protection of the 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 a fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.