What are the various duties imposed on the directors by the ‘ompanies Act, 2013?
Ans. Duties of directors.- Directors of Companies possess immense in,wris and in order that they capitalise their strategic position in the ianpany to serve their own interest, their power must be regulated not only for the public good but also for the protection of the investors. The companies Act has clearly laid down certain duties upon directors. Such ‘buttes are Its follows:
( 1) Every director is to disclose at the earliest opportunity the nature of hit concern or interest in any contract or arrangement entered into or ‘unposed to be entered into by the company and coming up for sanction at lia. meeting. (Sec. 199). However, in a latest English case [Hely. Mitchinson v. Bray head Ltd., (1968) 30 Com. Cas. 129], where the ,provisions of Section 199 (1) of English Companies Act, 1948 were involved, it has been held that a ‘director’s failure to disclose his interest inertly rendered the contract voidable, and as avoidance was no longer imssible, the director could enforce them.
(2) Every director and managing director shall within twenty- days “I his appointment to, or, as the case may be, relinquishment of such ‘((ice, disclose to the company the particulars relating to the office in oilier body corporate which are required to be specified under sub-section ( I of Section 303, and if he fails to do so, he shall be punishable with fine which may extend to five hundred rupees.
(3) livery director of a company shall give notice to the company of such matters relating to himself as may be necessary for the purpose of rinibling the company to comply with the provisions regarding director’s Folding.
(4)The Board of Directors shall, at least twenty one days before the day on which the statutory meeting is held, forward a report called a Statutory report to every member of the company.
(5) The Board of Directors should hold the first annual general meeting within 18 months of its incorporation. Not more than 15 months shall elapse between the date of one annual general meeting of a company and that of the next year. .
(6) The Board shall, on the requisition of the members holding not less than one-tenth paid up capital of the company or one-tenth voting power, call an extraordinary general meeting of the company.
(7) The Board shall, at every annual general meeting of a company, lay before the company a balance-sheet and the profit and loss account of the company. Where books of account are seized by the police, the directors are not responsible for not placing the balance-sheet before the share holders. But where there is evidence to the effect that enough opportunities were given by the police to inspect and check the book of accounts and actually the officers examined the said books, they cannot be granted relief for being prosecuted for such default [Inter Coal Marketing Company of India (Pvt.) Ltd, (1967) 1 Cont. L.J. 237]
(8) The Board of Directors shall attach to balance-sheet a repent with respect to the affairs of the company and allied matters.
(9) A director of a public company or a subsidiary private company which is subsidiary of a public company is under a duty to disclose his date of birth to the company.
(10) It is the duty of directors present at the meeting of Board to sign the register of contracts maintained by the company containing the following description:
(a) the date of contract of arrangement;
(b) the names of the parties thereto;
(c) principal terms and conditions thereof;
(d) the date on which it was placed before the Board; and
(e) names of the directors voting for and against the contract or arrangement and names of those remaining neutral.
(11) Where a director is interested in any contract for the appointment of a manger, managing agent or secretaries and treasures, he inust disclose his interest and details thereof to the members of the company.
(12) It is also the duty of directors of a company which is being wound up to submit to the liquidator a statement showing the correct position of the company’s assets and liabilities.
(13.) Fiduciary Duties and obligations of Directors The duties of good faith and honesty arising out of the fiduciary relationship between the director and his company arc analogous to those of a trustee. The law imposes these duties upon the directors so that they are not allowed to “capitalise their strategic position in the company to serve their own interestv.I The Australian Uniform Companies Act has incorporated statutory provisions containing an explicit reference to the fiduciary obligations of directors towards their companies. Section 124 of I I n i limn Companies Act states:
“( 1 ) A director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office.
( 2) An officer (including a director) shall not make use of any inlormidion acquired by virtue of his position as an officer (director) to god. directly or indirectly any improper advantage for himself or to cause deli mien, to the company.”
However, since codification of duties of directors may give rise to technical difficulties and practical problems in the day to day working of the company the framers of the English as also the Indian Companies Act Avoided inclusion of fiduciary relationship of directors in the Act. Instead it mom al statement of the basic principles underlying this relationship wan preferred in the interest of directors and others concerned with viimpany management, The Sachar Committee in its report had however observed that the statutory prescription of a general statement of duties was neither helpful nor desirable, much less necessary.