POWER AND DUTIES OF DIRECTORS IN PRIVATE AND PUBLIC LIMITED COMPANIES
In spite of fact that company is legal entity having separate identity from shareholders and capable of exercising all its functions, but unlike natural human being, private and public limited companies has to act through some agency comprising of some natural persons who can be shareholders or persons elected by shareholder. These elected persons are known as Directors. Director holds prominent position in organisation. Directors are collectively known as “the Board of Directors” or the “Board”.
Directors derive their power normally from board resolution. Some of the power has been delineated under section 179 of the Act, which are as follows:
- to make calls on shareholders in respect of money unpaid on their shares;
- to authorise buy-back of securities;
- to issue securities, including debentures, whether in or outside India;
- to borrow monies;
- to invest the funds of the company;
- to grant loans or give guarantee or provide security in respect of loans;
- to approve financial statement and the Board’s report;
- to diversify the business of the company;
- to approve amalgamation, merger or reconstruction;
- to take over a company or acquire a controlling or substantial stake in another company.
Duties of Directors in Private and Public Limited Companies:
Duties of directors are fiduciary in nature which is derived from the normal principle that a director must be loyal to the company.
Some the primary duties enumerated under the Companies Act, 2013 under section 166:
- Director has to act according to articles of association of the company.
- Director shall act in good faith and in the interest of the company and other stakeholders.
- Director shall observe due and reasonable care, skills and diligence and exercise independent judgement while performing their duties.
- Director shall avoid situation of conflict of interest, other disclose the same to the board.
If a director of the company contravenes any of these duties, such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.