Duties of Directors Under Section 166 Of Companies Act 2013

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.

Classification of duties of directors

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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.

FAQs

1.What is Section 166 of Companies Act, 2013?

Ans. Every company shall in each year hold in addition to any other meetings a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it; and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the.

2.What are the duties of the directors under Companies Act, 2013?

Ans. Director shall perform in good faith in order to uplift the objects of the organization, for the profit of shareholders and for the well-being of the organization[11]. He shall follow his duties with proper care and exercises independent judgment[12]. He shall not perform any act which give rise to conflicts.

3.In which section directors duties are stated?

Ans. The duties of the directors have been provided under section 166 of the Companies Act, 2013 and applies to all types of directors including Independent directors.

4.What are the three legal duties of a board of directors?

Ans. Just as for any corporation, the board of directors of a nonprofit has three primary legal duties known as the “duty of care,” “duty of loyalty,” and “duty of obedience.”

6.How many directors duties are there?

ANS. seven general duties

A director has seven general duties:

Duty to exercise reasonable care, skill and diligence. Duty to avoid conflicts of interest. Duty not to accept benefits from third parties. Duty to declare an interest in a proposed transaction or arrangement.

7.What are the duties of directors of a company?

Ans. Duties of Director of a Company

• Duty to act in the best interests of the Company. …
• Duty NOT to misapply company assets. …
• Duty NOT to make secret profits. …
• Duty of confidentiality. …
• Duty to NOT permit conflict of interest. …
• Duty to attend meetings. …
• Duty NOT to exceed powers.