All the directors of various companies registered under the RoC of India should abide by some compulsory obligations. The fact is that directors of many start-ups fail to educate themselves about their duties which may result in making make irreversible mistakes.
Many would forget to educate themselves on this matter post online registration of private limited company in India, but any director of the company, whether private or public company, OPC (one-person company), should be cognizant of his/her duties before becoming one. None of what follows would be game-changing. After all, you should know as a director that you are obliged to act in the company’s best interests. However, here are some of the duties of the directors as given below;
Best interest – every time, the director should act in the company’s best interests, especially above personal interests. Even a director acting lawfully and honestly but not in the company’s best interest is in breach of the duty.
The reasonable and legitimate use of the assets – a director is in charge of the assets company. It is the signatory in case of the transfer of any assets of the company. The director should not take advantage of this power for his/her personal motive or interest.
Keeping the confidential to themselves – as a director, you are obliged to access all the crucial information about the finances and operations of the company. This information must remain confidential and not be shared with anyone unless it is to the company’s advantage.
Participating and attending the meeting – a director should attend as many board meetings as possible. Any director absent for more than three meetings in a calendar year would be automatically cancelled from the board.
Not to exceed powers – the MOA (memorandum of association) of the company defines what a company can do. In contrast, the AoA (articles of association) states the powers offered to its directors. The director should make sure that it stays within the boundaries of both.
It is crucial that as a director of any company, you are obliged to keep all the information about it confidential. If your company is listed on any of the stock exchanges in India, then confidentiality assumes more importance. You might be charged for insider trading as well for unethical omission and actions barred by law.
Now, let us look into some of the requirements to become a private limited company director.
For an individual to become a director in a private limited company, such an individual is obliged to obtain DIN (director identification number) that can be acquired for any individual over the age of 18 years. Also, a DSC (digital signature certificate) is required. The director is not allowed to have any criminal record. He/she should not have been detained any time before his/her official appointment as a director.
Director’s appointment is not only significant for managerial prerequisites, but for procedural necessity as well that has to be satisfied by each organization. Only a person can be appointed as a director at the time of company incorporation. It includes a firm, corporation, association or other bodies with artificial legal personality are not allowed to be appointed as directors.
As to residency requirements of a director, there is nothing in the companies act, 2013 that denies the appointment of any person who is a foreigner or NRI as a director of the company.
The manner in which the director will be appointed.
In a private limited company, AoA can recommend the way of appointment of any of the executives. In the event that AoA is silent, the director should be chosen by the shareholders. The companies act, 2013 likewise permits the articles to accommodate the appointment of 2/3rd of the directors as indicated by the principle of proportional representation, if so, received by the organization being referred to.
Apart from that, the companies act 2013 is a very creative and excellent enactment concerning the duties and obligations of the organization’s executives. To be particular, both the general class of chiefs, the executives having the financial association with the organization, and the free chiefs, have been aptly thought to be under this enactment for executives. It looks to make the corporate administration in the country somewhat responsible, practical, helpful and straightforward to all partners and experts through this enactment over the duties and obligations of the chiefs in Indian organizations.