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Navdeep Kaur
| Updated: 01 Apr, 2020 | Category: Event Based Compliances

Duties of Directors and Number of Directorships

Duties of Directors

A Company is a separate legal entity formed as per the provisions of the Companies Act, 2013. And all affairs of the company are to be performed by Board of Directors which acts as governing body of the company. The company as an artificial body cannot act by its own so act through its directors. Controlling authority in order to manage the affairs of the company is termed as director and all are collectively known as Board of Directors. Duties of Directors play a vital role in order to structure the company and known as brain of the company.

Definition of term ‘Director’ and ‘Board of Director’:

The term ‘Director’ and ‘Board of Director’ is defined under Section 2 (34) and Section 2 (10) of the companies act, 2013 as:

(34) “Director” means a director appointed to the Board of a company;

(10) “Board of Directors” or “Board”, in relation to a company, means the collective body of the directors of the company;

So, Directors are the company’s representative who is accountable to the stakeholders of the company in order to manage affairs of the company. A company runs through Shareholders and Board of Director. Shareholders are actual owners of the company. Whereas Directors are in charge of company’s management. They are general act as agents of the company as appointed by shareholders. There are certain duties and obligations of directors that he has to follow in order to run company smoothly and are accountable for any wrongdoing of the company.

What are the eligibility criteria to be a director of the company?

There are no specific criteria or qualification mentioned to be appointed as director but there are certain expectations which have been mentioned who cannot act as director:

  • If a person is of unsound mind
  • If he is an insolvent
  • If he is disqualified by a court of law or authority to act as director
  • If he is convicted by a court for any offence committed by him and still not discharged
  • If convicted for any offence of the company related to transactions
  • If he is minor

What is the procedure of appointment of a director:

  • A director is to be appointed by shareholders of the company as per the provisions of the companies act, 2013. TO be appointed as director he must be having a valid DIN number as per Section 152 of the companies act, 2013. For DIN, it is important to have DSC (Digital Signature Certificate) of director. The company where he is proposed to be a director shall make an application before the Ministry of Corporate Affairs (MCA) for appointment of director. Shareholders shall appoint the nominated person as a director of the company.
  • Documents required for making an appointment:
  1. Form DIR-2: Director’s consent to be nominated as director in the company
  2. Form DIR-8: Intimation and declaration by director undertaking that he is not disqualified from appointing as a director as per the provisions of Section 164(2) of the companies act, 2013
  3. Disclosure about director’s interest in any other company or about its directorship in other companies
  4. Board of director’s copy of resolution authorizing appointment of additional director
  5. Letter of appointment of the director
  • Submission of required documents along with application of appointment of director as digitally signed by the applicant.
  • Declaration form and consent form as DIR8 and DIR2 respectively to be submitted while making an application
  • After filing an application of appointment of a director, Form DIR-12 is required to be filed with MCA within 30days of appointment.

Provisions regarding number of directorship in a company:

An individual cannot be appointed as a director of more than 20 companies. However, in public company limit is 10 that include holding or subsidiary company out of 20 companies mentioned above.

What are various duties and responsibilities that director has been assigned as per companies act, 2013?

Obligations and Duties of directors have been defined under Section 166 of the companies act, 2013[1], as mentioned below:

  • Holding of Annual General Meeting:

A director of a company or sometimes a shareholder is required to conduct an AGM, i.e. Annual General Meeting every year. AGM is required to be conducted within 6 months from the date of financial year closure, and it is required to be conducted during working days at the place where the registered office of the company is based or within city where the registered office is based. 21 days prior notice is required to be provided before meeting along with Agenda and Minutes of the meeting.

  • Maintenance of books of accounts of the company:

Company is required to maintain financial records, account books, vouchers etc. of the company of each financial year in electronic mode. And that record is to be maintained at the registered office of the company but can be kept anywhere else in the country after getting approval from Board of directors. In such a scenario, intimation is to be given to ROC within 7 days of such activity or resolution.

  • Conduct Board Meetings:

It is prime responsibility of a director of the company to ensure to conduct board meeting on a regular interval. Directors of the company are required to be at least 4 times in every financial calendar year with a maximum gap of period of 120 days between any two meetings. Further, every quarter one meeting is to be conducted, and that can hold anywhere and anytime. Quorum is at least 1/3rd of total directors or 2 directors, whichever is more. 7 days prior notice is required to be given.

The discussions of the meeting need to be drafted and recorded in the form of “Minutes of Board Meeting” and maintained at the Registered Office of the Company. It is also required to disclose the number of meetings held during each financial year in Directors Report.

  • Annual filling of the company and maintenance of records:

Directors have obligation to ensure timely filing of certain information of the company with ROC as per guidelines provided under companies act, 2013. Every company is required to file financial statements of the company, auditor’s report, director’s report etc. along with different form within 30 days from the date of annual general meeting of the company. Further annual returns are to be filed within 60 days from date of last AGM with ROC. Further directors are also liable to maintain a record of financial reports and auditor report of each financial year that consist of balance sheet, profit and loss, cash flow etc. So in order to do the same an auditor of the company is required to be appointed within 30 days from the date of incorporation of the company.

Conclusion

Here we have given only a glimpse of certain duties of the company. Apart from that companies act has assigned director with different other powers and duties which include certain disclosures that director needs to make by giving declaration about his interest in companies, further displaying companies identity by disclosing certain required details to be shared about company or any charge or obligations thereon. However, shareholders are actual owners of the company, but without directors, it is difficult to run the management of the company.

Read our article:Power and Duties of Auditors and Auditing Standards

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Navdeep Kaur

Navdeep is working as legal counsel in Enterslice group companies having more than 4 years of experience. She has expertise in legal, corporate and regulatory matters.

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