What You Should Know As A Company Director?

What You Should Know As A Company Director

The Supreme Administrative authority to control and manage the affairs of the every Company is vested in the Board of Directors. The main responsibility of Board of directors is to oversee the management and to protect the short-term & long-term interests of the stakeholders and of company as well.

The Board of Directors is entrusted with the responsibility to act and make decisions in the best interests of the Company. It comprises individual directors and only individuals are qualified to become the director of the company subject to the satisfaction of other eligibility criteria.

In this Blog, we will discuss the eligibility criteria, role & responsibilities of director of the Company and other concepts related thereto.

 

Who is a Director of the Company?

As per Section 2(34) of the Companies Act, 2013, a Director is a person who is appointed by the shareholders of the company to the Board of Directors in order to perform the functions and duties of a company director in accordance with provisions of the Act.

 

How many directors can a company have?

According to Section 149(1) of the Companies Act, 2013, every company shall have

  • minimum 1 and maximum 15 directors in case of One Person Company,
  • minimum 2 and maximum 15 directors in case of Private Limited Company
  • minimum 3 directors and maximum 15  in case of Public Company

to incorporate the company and after incorporation to manage the affairs of the company.

 

Limit on No. of Directorships – Section 165 of the Companies Act, 2013

A person can become a company director including alternate directorship in maximum 20 Companies in case of Private Limited Companies and maximum 10 in case of Public Companies. However, this limit can be amended by the company itself by passing a special resolution thereto.

Moreover, if a person becomes the company director in contravention of this prescribed limit then such person shall be punishable with fine which shall not be less than Rs. 5,000 but it may extend up-to Rs. 25,000 per day till the time contravention continues.

 

Eligibility criterion to become a director of Company

  • Only natural persons are eligible to become a director
  • The person must not be disqualified to become a director that is-
    • Shall have paid its income tax returns of previous years
    • Must be competent to enter into contracts (that is Major + Sound Mind)
    • Must not be an undischarged insolvent or has been adjudged as an insolvent
    • Must not be sentenced to imprisonment for any period not any fine is imposed under any Indian Criminal Law
    • Must not been convicted under the Conservation of Foreign and Prevention of Smuggling Activities Act, 1974
  • Atleast one of the directors shall be a resident of India and other directors can be a foreigner or NRI.
  • A company shall have atleast one woman director when its paid-up share capital is Rs.100 Crore or more or its turnover is of 300 Crore or more.

 

Roles of Directors in a Company

Acts as an Agent of the company

The first role of Company Director is to act as an agent of the company. Since the company is a juristic person therefore it needs natural persons who can act as an agent of the company to run and manage the affairs of the company. Company Director plays the same role on behalf and welfare of the company and its shareholders.

Acts as an Employee of the company

The second role of Company Director is to act as an employee of the company. Whole-time director of the company acts as an employee of the company because he/she manages the day-day activities and affairs of the company.

Acts as an Officer of the company

Directors are considered as the main officer of the company and thus they shall be responsible for various activities under various Indian Statutes. It means, if the company’s affairs are managed in contravention of Indian laws like Companies Act then the officers of the company that is the directors shall be responsible for the same.

Acts as Trustee of the company

The last role of Company Director is to act as a trustee of the company. Directors of the company are also treated as trustees of the company as they are entrusted with the company’s affairs, money and property.

 

Responsibilities of Directors of a Company

Following are the responsibilities of Company director:

  1. Director shall always act in accordance with Memorandum of Association and Article of Association of Company.
  2. Director shall always act to promote the object and welfare of the company and must act in the good faith and best interests of the company and its stakeholders.
  3. Director must exercise all of his duties and responsibilities with utmost due care and diligence.
  4. Director must not achieve or attempt to achieve in any way any undue advantage or gain of the company in order to give wrongful gain to himself or any of his relatives.

 

Liabilities of Directors

As discussed, a director is majorly responsible for the affairs and management of the company therefore the director shall be liable for his acts or conduct done in contravention of provisions of Companies Act, 2013 or any other law dealing with the same. The director’s liability extends towards the company and stakeholder.

 

Conclusion

Consequently, a Director is required to manage, control and direct the affairs of the company to the best interest of the company and stakeholders. We hope all of your doubts related to Director of the company are answered. In case of any further query, feel free to contact Your Trustworthy Advisors Manthan Experts by just dialing at +91-9643-969-969.

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Knowledge Source:

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