Indian Companies Act 2013: Director's Duties & Board of Directors

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the minimum requirement for the number of independent directors on the board of a listed public company in India?

At least one-third of the total number of directors must be independent directors.

Within what time period must a listed public company in India appoint a woman director if it meets certain criteria?

Within one year from the commencement of the Companies Act 2013.

What types of committees are listed public companies in India required to constitute under the Companies Act 2013?

Audit committee, nomination and remuneration committee, stakeholder relationship committee.

Can the Board of Directors of a company in India delegate powers and responsibilities to the committees or any other person?

Yes, the Board can delegate powers and responsibilities to these committees or any other person, provided that those tasks do not require approval at a board meeting. Signup and view all the answers

What is the main purpose of the provisions in the Indian Companies Act 2013 regarding the duties of directors and the role and composition of the Board of Directors?

To ensure effective corporate governance and protect the interests of all stakeholders involved in the management of a company. Signup and view all the answers

What are the four key duties a director must fulfill under the Indian Companies Act 2013?

<ol> <li>Exercise duties with due and reasonable care, skill, and diligence, and exercise independent judgment. 2. Not involve in situations where there might be a direct or indirect conflict of interest with the company. 3. Not seek or attain undue gain or advantage for themselves, their partners, associates, or family members. 4. Not delegate any function of the board to themselves unless specifically authorized by a Board resolution.</li> </ol> Signup and view all the answers

How does the Indian Companies Act 2013 define the role of the Board of Directors?

The Indian Companies Act 2013 defines the role of the Board of Directors as having supreme executive authority over a company's management and affairs. The Board of Directors acts collectively and individually, but their actions cannot bind the company unless specifically authorized by a Board resolution. Signup and view all the answers

Explain the fiduciary duties directors have towards shareholders under the Indian Companies Act 2013.

The Indian Companies Act 2013 emphasizes that directors are not only agents of the company but also have fiduciary duties towards shareholders. This means directors must act in the best interests of the shareholders and the company as a whole. Signup and view all the answers

What criminal penalties can directors face for breaching their duties under the Indian Companies Act 2013?

The Companies Act imposes criminal penalties on directors who breach their duties outlined in the Act. Signup and view all the answers

Why is it important for directors to understand and fulfill their duties under the Indian Companies Act 2013?

It is important for directors to understand and fulfill their duties under the Indian Companies Act 2013 in order to ensure the company operates efficiently and ethically. Signup and view all the answers

Study Notes

Indian Companies Act 2013

Director's Duties

Under the Indian Companies Act 2013, a director is expected to act in accordance with the company's articles, exercise good faith and promote the company's objectives for the benefit of all stakeholders. Specifically, a director must:

Exercise duties with due and reasonable care, skill, and diligence, and exercise independent judgment(3).
Not involve in situations where there might be a direct or indirect conflict of interest with the company(4).
Not seek or attain undue gain or advantage for themselves, their partners, associates, or family members(5).
Not delegate any function of the board to themselves unless specifically authorized by a Board resolution(6).

The Companies Act also imposes criminal penalties on directors who breach these duties(7). It's important for directors to understand and fulfill these duties to ensure the company operates efficiently and ethically.

Board of Directors

The Indian Companies Act 2013 defines the role of the Board of Directors as having supreme executive authority over a company's management and affairs. The Act emphasizes that directors are not only agents of the company but also have fiduciary duties towards shareholders. The Board of Directors acts collectively and individually, but their actions cannot bind the company unless specifically authorized by a Board resolution.

Composition and Selection of Directors

The Companies Act 2013 requires every listed public company to have at least one-third of the total number of directors as independent directors, with the Central Government prescribing specific limits for this. It also specifies that companies must appoint a woman director within one year from its commencement if it falls under certain criteria.

Committees and Delegation of Powers

Under the Indian Companies Act 2013, listed public companies are required to constitute committees such as an audit committee, nomination and remuneration committee, stakeholder relationship committee, etc., to assist the Board in managing various aspects of the company's operations. The Board can delegate powers and responsibilities to these committees or any other person provided that those tasks do not require approval at a board meeting.

In conclusion, the Indian Companies Act 2013 outlines the duties of directors and establishes the role and composition of the Board of Directors. These provisions aim to ensure effective corporate governance and protect the interests of all stakeholders involved in the management of a company.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz covers the duties expected from directors under the Indian Companies Act 2013, including exercising care, avoiding conflicts of interest, and not seeking undue gain. It also explores the role and composition of the Board of Directors, emphasizing their fiduciary duties towards shareholders and the delegation of powers through committees.