1. Role and responsibilities of Directors
In view of the fiduciary position held by
directors, explicit provisions prescribing directors duties have been added to
the new Act. These include keeping away from situations in which they have
conflicting interest with that of the company, duty to make good in monetary
terms any undue gain/advantage on the part of the directors etc., similar to
what was there in the old Act. There are also certain general duties, such as
acting in good faith for the benefit of the company and to ensure that the
company is filing its financials, annual return and payment of debentures in
time. These amendments, though not substantial, have tried to shift the onus on
the director for the loss/liability suffered by the company due to their lack
of discipline by increasing the penalty and clearly codifying the role and
duties.
·
Section 188 of the act restricts directors
from buying, selling, leasing or disposing of any property, appointment of an
agent and appointment in place of profit in the company or associate/subsidiary
and, in all such cases, they are mandated to make a disclosure for these
transactions. In case of non-disclosure by a director, he will indemnify the
company against any loss incurred by it. The Act has codified and set high
standards for a director's duty and liability towards the company.
·
Under section 134 every Directors report (except for One Person Company) shall provide various types of additional
information like number of meetings of the Board, Company’s policy on
directors’ appointment and
remuneration explanations or comments by the Board on every qualification,
reservation or adverse remark or disclaimer made by the Company Secretary in
his secretarial audit report, particulars of loans, guarantees or investments
etc.
·
The Directors responsibility statement under
section 134(5) shall now also provide for laying down of “internal controls” and compliance of “all applicable laws”.
Section 164 that describes the disqualifications
for appointment of a director has focused on corporate compliance. A director
will not be re-appointed, or appointed in other company, if any of the
companies in which he is a director has failed to file its annual returns or financial statements for three continuous years.