Power and Duties of Directors

Preface: This post was originally published in 2022 and has been updated on September 12, 2025, to provide you with the most current and accurate information.

In spite of the fact that a company is a legal entity having a separate identity from its shareholders and capable of exercising all its functions, unlike natural human beings, public and private limited companies have to act through an agency comprising natural persons who can be shareholders or persons elected by the shareholders. These elected persons are known as Directors. A Director holds a prominent position in the organisation. Directors are collectively known as 'the Board of Directors' or 'the Board'. 

In this blog post, we shall explain the Powers and Duties of Directors in India, according to the Companies Act 2013. If you are planning to become a company director, going through this blog post will give you an idea about your powers and duties.

Role of Director in Corporate Governance

The directors are senior executives of the company. Their role involves making sure the company is run in a transparent and accountable manner, and that all the business operations and decisions are compliant with legal as well as ethical standards to ensure corporate governance. 

For instance, company directors create policies, oversee management decisions and protect the shareholders’ and stakeholders’ interests. The role of directors is truly a quintessential one. This is why every company registered under Companies Act 2013 is mandatorily required to appoint directors.

Power of Directors in Companies

Normally, the directors derive their powers via the board resolution. The powers of directors have been outlined under Section 179 of the Companies Act. Mentioned below are some of the most common powers of directors in Indian companies:

• 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;

• Any other matter that may be prescribed.

Also Read: Types of Directors in Pvt Ltd Company or Public Ltd Company

Duties of Directors in Companies

Duties of directors are fiduciary in nature and stem from the general principle that a director must be loyal to the company. Some the primary duties enumerated under the Companies Act, 2013 under section 166, are as follows:

• The director has to act according to articles of association of the company.

• The director shall act in good faith and in the interest of the company and other stakeholders.

• The director shall observe due and reasonable care, skills and diligence and exercise independent judgement while performing their duties.

• He shall not assign his office and any assignment so made shall be void.

• The director shall avoid situation of conflict of interest or otherwise 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.

Conclusion

The powers and duties of directors include approving mergers/amalgamation, investing funds of the company, acting as per articles of association, acting in good faith and interest of company and its stakeholders, etc. Needless to say, the directors play an irreplaceable role when it comes to ensuring corporate governance practices and achieving business growth. Want to register a private limited company in India? Connect with Registrationwala for assistance in the private limited company registration process!

Frequently Asked Questions (FAQs)

Q1. Which Act outlines duties of directors in India?

A. The Companies Act, under Section 166, outlines the duties of directors in India.

Q2. What are the different types of directors in a company?

A. Executive directors, non-executive directors, independent directors, nominee directors and managing directors are some of the different types of directors in a company.

Q3. Which section of Companies Act 2013 outlines powers of directors?

A. Section 179 of the Companies Act 2013 outlines the powers of directors.

Q4. What happens when a director fails to perform his duties as per Section 166 of Companies Act?

A. If a director fails to perform his duties as per Section 166 of Companies Act, he may face a penalty of Rs. 1-5 lakhs.

Q5. What happens when a director misappropriates funds?

A. If a director engages in misappropriation of funds, then he/she shall be personally liable for such an act. He/she may be removed from the company and can also face civil or criminal proceedings.

Q6. Is it mandatory for an Indian company to appoint a director?

A. Yes, it is mandatory for an Indian company to appoint a director. This is a mandatory requirement under the Companies Act 2013.

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.