India: Roles And Responsibilities Of A Director Under Companies Act, 2013 – Pitfalls And Safeguards

Last Updated: 18 July 2016
Article by Seema Jhingan, Neha Yadav and Saniya Kothari

Co-authored by Mr. Anupam Sharan, Director, American Express

1. Duties and Responsibilities of Directors.

1.1. The erstwhile Companies Act, 1956 ('CA 1956') contained no statement of statutory duties of directors, and acts of directors were usually reviewed in the context of their powers in terms of section 291 of the CA 1956 (which dealt with general powers of the board) and other applicable laws, and their established roles under common law as laid down in several judicial precedents1.

1.2. The Companies Act, 2013 ('CA 2013') for the first time has laid down the duties of directors in unequivocal terms in section 166. In summary, the general duties of directors under the CA 2013 are as follows:

  • 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;

1.3. A Director is part of a collective body of Directors called the Board, which is responsible for the superintendence, control and direction of the affairs of the company. Under common law rules and equitable principles, director's duties are largely derived from the law of agency and trusts (i.e., set of contractual, quasi-contractual and non-contractual fiduciary relationships with the Company). Under the law of agency, duties of skill, care and diligence are imposed on directors. On the other hand, law of trusts impose fiduciary duties on directors. Accordingly, directors are the trustees of the company's money and property, and also act as agents in the transaction which they enter into on behalf of the company. Directors are liable as trustees for breach of trust, if they misapplied the funds or committed breach of byelaws of the company. A director is expected to perform his duties as a reasonably diligent person having the knowledge, skill and experience both of as person carrying out that director's function and of that person himself. A director, therefore plays various roles in the company, may that be of an agent, an employee (when appointed on the rolls of the company), an officer and/or a trustee of the Company. 

2. Liabilities of Directors under CA 2013.

2.1. Under CA 2013, directors may be held liable as "officers" of the company. The word "officer" has been defined to include, inter-alia, directors of the company. CA 2013 contains the concept of an 'officer who is in default' for the purposes of affixing liability on such person in respect of any contravention of the provisions of the CA 2013 by the company. The ambit of 'officer who is in default' is quite wide and includes, inter alia:

  • 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 CA13, 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.

2.2. A director can also be made liable for fraud. "Fraud" in relation to affairs of a company includes "any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful".

2.3. Limited Liability of Independent director and non-executive directors: CA 2013, however, limits the liability of an independent director or of non-executive directors (not being a promoter or KMP), who are to be held liable, only in respect of such acts of omission or commission by a company, which (i) occurs with his knowledge, attributable through board processes, and (ii) with their consent or connivance or where they had not acted diligently.

3. Nature of Contraventions under CA 2013 – Compoundable vs. Non-Compoundable.

3.1. Compoundable Offences: Many of the contraventions under CA 2013 are in the nature of non-compliances (such as failure to file annual return, contravention of provisions with respect to related party transactions, acceptance of deposits, giving of loans to directors etc. by the company) which attract either fines (or in some cases are punishable with fines or imprisonment or both). Such offences can be remedied or compounded, subject to relevant provisions in the Act, by paying late fees/penalties/fines as applicable.

3.2. Non-Compoundable Offences: There are, however, a few serious contraventions which are punishable with imprisonment only or with imprisonment and with fines (such as offences of fraud) where officers of the company who are in default or persons concerned with formation of the company or the management of its affairs become liable and cannot be remedied/compounded merely by depositing fines/penalties. These liabilities can be imposed on the directors if they are in default (including non-executive directors) regardless of the fact that they are the executive directors of the company or not.

4. Liability under certain other legislations.

4.1. Be Being designated as a director in a company, also has a cascading effect with respect to exposure of the director to liabilities under various other legislations. From a brief study of a few other legislations, we note that the duties and liability thereof, for non-compliances by a company typically vests with the person in charge of the conduct of business/management of the company.

4.2. Other directors/officers (whether executive or non-executive) of the company can also be held liable in certain cases:

  • where the offence has been committed with the consent/connivance of, or is attributable to, any neglect on the part of such director; or
  • such director has been designated by the company (as notified to the concerned authority) to be in charge of the management of the company and responsible for compliances (as occupier/owner) under certain legislations which allow for such nomination, failing which all directors of the company.

4.3. As the liability under such legislations would typically fall on persons who are in charge of, and responsible to, the company for the conduct of the business of the company, as a safeguard, companies often designate (and notify the relevant government authorities) a specific person to be in charge for compliances of relevant unit/factory with respect to certain legislations, (such as designating such person as an occupier or manager for compliances under the Factories Act, 1948).

5. Safeguards – Adopt a Precautionary Approach.

5.1. 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:

  • 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 whistleblowing issues. The Company may consider appointing an external agency for whistleblowing 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.


1. Please refer to Chapter – XI – Appointment and Qualification of Director (Section 149 to 172); Chapter – XII – Meeting of Board and its powers (Section 173 to 195) and Chapter - XIII - Appointment and Remuneration of Managerial Personnel (Section 196 to 205) of CA 2013 in this regard.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Seema Jhingan
Neha Yadav
Saniya Kothari
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions