Power and Duties of the Directors under the Companies Act,2013

Abstract

Section 2(34) of the Companies Act,2013 defines “Director” as-

“Director” means a director appointed to the Board of a company”.

In order to ascertain whether a person is a director or not, a reference must be made to the nature of the office and the nature of his duties. No matter by what name he is addressed, if such a person performs the functions of a director, he would be regarded as Director.

In this research paper we’ll jump directly into the powers and duties of the Directors under the Companies Act,2013.

• Powers of the Board of Directors:

1. Same powers as are vested in the company:

Section 179 of the Act lays down that- “Subject to the provisions of the Act, the Board of Directors of a company, shall be entitled to exercise all such powers and do all such acts and things as the company is authorised to exercise and do”.

It may be noted that, subject to certain restrictions contained in the Companies Act,1956 and the MoA and AoA of the company, the directors can exercise similar powers as the company can. In other words, the MoA and AoA regulate the powers of the directors. The directors can exercise their powers within the limits stated therein.

The Share-holders of the company have the right to exercise certain powers in the general meeting of the company. These powers vested in the share-holders, cannot be transgressed or exercised by the directors.

The Board of Directors have the power to regulate the working hours of the employees of the Company.

2. Powers by Passing Resolution at the Board Meeting:

Directors can exercise following powers by passing resolution at the meeting of the Board of Directors-

1. Power to make calls;
2. Power to issue debentures;
3. Power to borrow money;
4. Power to invest funds of the company;
5. Power to make loans

It may be noted here, that the Board of Directors also have the power to delegate the above said powers to any principal officer of the company. Such powers can be delegated by the Board by passing specific resolution to that effect.

3) Powers with the Approval of the company in General Meeting:

The Board of Directors can exercise the following powers only with consent of the company in the General Meeting:

1. Power to sale or lease the company’s Undertaking;
2. Power to have the extension of time for payment of a debt due by a director;
3. Power to make investment of compensation received on compulsory acquisition in securities other than trust securities;
4. Power to borrow money beyond the paid-up capital of the company;
5. Power to make contributions to any charitable or the other funds beyond Rs. 50,000/- in one financial year or 5% of the average net profits during the preceding three financial years, whichever is greater.

• Duties of Board of Directors:

The position of the Director in the management and administration of affairs of the company is predominant and the duties are regulated by the AoA of the company. The Duties may be classified as follows:

1. Fiduciary Duties;
2. Duties of care, skill and perfection;
3. Other Duties

1. Fiduciary Duties:

1. Such duties are confined to the company and not to the individual
2. They must not make a secret profit
3. They must not take undue advantage of their position
4. They are an important link between the members, shareholders and creditors on one side and the company on the other.

2) Duties of care and Skill:

1. They are required and expected to carry out their duties with care and skill.
2. If they fail in exercising such care and skill, they are accused of guilt of negligence.
3. They must be honest and Dedicated to the Functions of the Company.

3) Other Duties:

1. To attend Board Meeting
2. They should not delegate their functions except to the extent provided in the Act, i.e. by passing specific resolution, etc.
3. They must disclose their interest to the outsiders.
4. They must maintain confidentiality and act in Trust with the Company.

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