Directors - Powers & Duties of Directors Explained

A Company is an artificial person and hence, is not capable to work on its own. As a consequence there is a need to appoint director in every Company. A Director is the person appointed to the Board of a Company. Director is responsible for management of the Company of which he is a director. Board of Directors refers to the collective body of directors who are in charge of smooth running of business.

Who can be a Director?

Managing a Business is not an easy task. Therefore there are eligibility criteria for a person to become a Director.

• Only an Individual person can become a Director of the Company. A person other than individual is not eligible to become a director.
• Furthermore, a minor individual cannot become director of Company as he is not eligible to obtain DIN as well as cannot file a valid consent to act as director.
• At least one director of Company should be Resident of India.
• Moreover the person acting as Director should be :-
  • of sound mind
  • capable to enter into a contract
  • not an insolvent person.
    

  Powers and Duties of a Director

  The Companies Act 2013 defines the powers and duties that a Director should take care of while acting on behalf of the Company. Sections 179 and 166 of Companies Act 2013 prescribes the powers and duties of a Company Director respectively.

  Powers of Directors

  According to Companies Act 2013, the Board of Directors of a Company has the following powers in the Company.

  • Power to make calls in respect of money unpaid on shares
  • Call meetings on suo moto basis.
  • Issue shares, debentures, or any other instruments in respect of the Company.
  • Borrow and invest funds for the Company
  • Approve Financial Statements and Board Report
  • Approve bonus to employees
  • Declare dividend in the Company
  • Power to grant loans or give guarantee in respect of loans
  • Authorize buy back of securities
  • Approve Amalgamation/Merger/ Takeover
  • Diversify the business of the Company

  Duties of Directors

  Board of Directors acts as agent of the Company. However while acting for Company, Director needs to take care of his duties which are as follows:-

  • To act in good faith
  • Act in accordance with the Articles of Association of the Company
  • To act so as to promote the objects of the Company
  • Act in best interest of the Company and its stakeholders
  • Exercise duties with due and reasonable care
  • To exercise independent judgement
  • Not to get involved in a situation where his interest conflicts with the interest of the Company
  • He cannot assign his office to any other person.
  • Not to achieve undue gain or advantage

  FAQs

  How can I obtain DIN if I wish to incorporate a company and become its director?

  If you wish to incorporate a Company and become director of that Company, you can apply for DIN with SPICe+ as MCA has introduced this new integrated form for incorporation of Company with other services including allotment of DIN.

  Can a Company become a Director of another Company?

  A Company cannot become the director of another Company. Only an individual can become a director of a Company.

  If one wants to incorporate a Private Limited Company with Four Directors, can all the four directors get DIN through SPICe+ Form?

  No, all the four directors cannot obtain DIN through Form SPICe+ in this case as this form allows obtaining DIN for a maximum of three directors only. One of the Directors of the proposed Company will need to file Form DIR-3 with MCA for obtaining DIN before the incorporation of the Company.