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What points to check if you are Director in India

Director precautions before appointment and after appointment 9971504105

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Governing Section: For the first time, the role  of directors have been laid down in Section 166 of companies act, 2013.

 

Director precautions before appointment and after appointment 9971504105
Director precautions before appointment and after appointment 9971504105

The general applicability’s of directors given under companies act, 2013 are given as Mentioned herein:

  • to act in accordance with the articles of the company, in other words, to act within powers;
  • to act in good faith in order to promote the objects of the company for the benefit of its members as a whole;
  • to act in the best interest of the company, its employees, shareholders, community and for the protection of environment;
  • to exercise due and reasonable care, skill and diligence and independent judgment;
  • to avoid direct or indirect conflicts of interest;
  • to avoid undue gain or advantage either to himself or relatives, partners or associates; and
  • not to assign his office to any other person;

For any kind of Director related issue or help contact us on 9971504105 or drop us email on startupscratch@gmail.com

Director precautions before appointment and after appointment 9971504105
Director precautions before appointment and after appointment 9971504105

 

Liabilities of Directors:

Directors come under the definition of ‘Officers’ of the company. New concept of officer in default has been introduced in companies act, 2013 and the definition of officer in default includes:

  • every whole-time director;
  • every Key Managerial Personnel (‘KMP‘);
  • if no KMP then such director(s) as specified by the Board in its behalf or all directors, if no director is so specified;
  • any person who is charged with any responsibility by the board or any KMP, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent any default;
  • any person in accordance with whose advice, directions or instructions the Board of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity; and
  • every director, in respect of a contravention of any of the provisions of the Comapny Act 2013, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance.

For any kind of Director related issue or help contact us on 9971504105 or drop us email on startupscratch@gmail.com

Safeguards – Adopt a Precautionary Approach

To safeguard their interest and avoid undue liability, it is advisable that directors adopt a precautionary approach. A few of the safeguards that can be considered and implemented are as follows:

 

Director precautions before appointment and after appointment 9971504105
Director precautions before appointment and after appointment 9971504105
  • To attend meetings regularly;
  • To be inquisitive and peruse agendas for unusual items and seek additional information in writing, if necessary;
  • To ensure that disagreements/dissenting views are recorded in the minutes;
  • To act honestly and with reasonable justifications;
  • To report concerns about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy;
  • To seek professional advice, establish audit committees, engage external agencies, if situation demands;
  • To engage external agencies for addressing whistle blowing issues. The Company may consider appointing an external agency for whistle blowing reporting;
  • To provide requisite disclosures of interests/conflicts, consider excusing oneself from participation in proceedings in cases of conflict;
  • For ongoing and day to day compliances, have a competent compliance team and establish committees (for regular internal audits etc.); and
  • To include indemnity provisions in the letter of appointment and seek Directors & Officers Liability insurance from the company to protect against malicious actions.

For any kind of Director related issue or help contact us on 9971504105 or drop us email on startupscratch@gmail.com

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