Duties & Responsibilities of Independent Directors in Current Scenario - Jb Nagar

8/8/2019 Duties & Responsibilities of Independent Directors in Current Scenario - Jb Nagar

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DUTIES & RESPONSIBILITIESDUTIES & RESPONSIBILITIES

OF INDEPENDENTOF INDEPENDENT

DIRECTORSDIRECTORS

By CA Shriniwas Y. JoshiBy CA Shriniwas Y. Joshi


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INFLUENCEINFLUENCE OF DIRECTORS ONOF DIRECTORS ON

SOCIETYSOCIETY

Control on Assets

Control on Goods and Services

Control on Money

Effect on Environment

Directions of Investments in the Economy

Setting Standards for raising Risk Capital

Influencing Fiscal Policies through

Politicians.


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Duties of DirectorsDuties of Directors

a. Statutory

b. Regulatoryc. Dependent on Law of Agency

d. Person in fiduciary position


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Powers of DirectorsPowers of Directors Sec.291Sec.291

(1) Subject to the provisions of this Act,

the Board of Directors of a company

shall be entitled to exercise all suchpower, and to do all such acts and

things, as the company is authorised to

exercise and do:


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Powers of DirectorsPowers of Directors Sec.291ContdSec.291Contd

Provided that the Board shall not exercise

any power or do any act or thing which is

directed or required, whether by this orany other Act or by the memorandum or

articles of the company or otherwise, to be

exercised or done by the company in

general meeting:


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Provided furtherthat in exercising any such

power or doing any such act or thing, the Board

shall be subject to the provisions contained in

that behalf in this or any other Act, or in the

memorandum or articles of the company, or in

any regulation not inconsistent therewith and

duly made there under, including regulations

made by the company in general meeting.


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(2) No regulation made by the company in

general meeting shall invalidate any prioract of the Board which would have been

valid if that regulation had not been made.


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General Principles re. DutiesGeneral Principles re. Duties

City Equitable Fire Insurance Co.

a) Consideration must be given to the

nature of the companys business, themanner in which the work is distributed

between the directors themselves.

b) Directors must act honestly.


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General Principles re. Duties Contd..General Principles re. Duties Contd..


c) director must exercise diligence.

d) a director is liable if the company

suffers a loss owing to his beingignorant of some facts.


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e) Director must exercise reasonable

care and skill but is not liable for theerrors of judgment.

f) continuous non-attendance at meetings

may render a director liable for the

breach of trust which is committed

by others.


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g) Diligence carries with it the necessityof giving a reasonable amount of

attention to the companys affairs.


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DIRECTORS AS OFFICERS INDIRECTORS AS OFFICERS IN

DEFAULT :DEFAULT :

Section 5(f) any person charged by the

Board with the responsibility of complying

with that provision.

Provided that the person so charged has

given his consent in this behalf to the

Board.


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DIRECTORS AS OFFICERS INDIRECTORS AS OFFICERS IN

DEFAULT : ContdDEFAULT : Contd

Section 5(g) - Where any company does

not have any of the Officers specified in

clauses (a) to (c) any Director or Directors

who may be specified by the Board in this

behalf or where no Director is so specified,

all the Directors .


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Classifications of Directors DutiesClassifications of Directors Duties

Fiduciary

Care, Skill and Diligence Collective Duties

Individual Duties


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Directors as TrusteesDirectors as Trustees

Penalty under Sec. 299(4)

Vacation of Office under Sec. 283(1)(i) Interest need not be direct

No exceptions, No exempt contracts


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Directors as Trustees.. Contd.Directors as Trustees.. Contd.

Validity of Contract when interested

director casts his vote.

Responsibility to all stake holders in case

of loss as a result of negligence and

fraudulent conduct.


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General Claims against DirectorsGeneral Claims against Directors

Civil Rights Violations

Antitrust Violation

Interference with Contractual Rights

Misleading Representations

Imprudent Investment

Inadequate Supervision of underlings

Illegal Payments to Officials.


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Individual Duties of DirectorsIndividual Duties of Directors

Attend Board Meetings (Sec.285)

To attend duties personally and shouldnot delegate his office.

To disclose interest (Sec.297)


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Individual Duties of Directors ..Contd..Individual Duties of Directors ..Contd..

To know the basics of affairs of the

company. To abstain from discussion and voting

(Sec.300)


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Duties of Directors in respect ofDuties of Directors in respect of

negligence or inertia in usingnegligence or inertia in using

powers and rights as Directors.powers and rights as Directors.


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Directors Responsibility StatementDirectors Responsibility Statement

Section 217(2AA)

Preparation of accounts and application

of accounting standards. Accounting Policies

Safeguarding Assets of the Company

Prevention and Detection of Fraud Going Concern Basis


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Liabilities under other ActsLiabilities under other Acts

Standard Penal Provision

Section 179 if Income Tax Act, 1961 Provident Fund Act

Consumer Court


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Independent DirectorIndependent Director

Whistleblower

Material Pecuniary relationship

Director with technical skill orrepresenting special interest - ground not

sufficient to be exonerated

Directors on companies having specialbusiness.


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Relief from LiabilityRelief from Liability

Section 633 Powers of court to give

relief if the Director

a. Acted honestlyb. Acted reasonably

c. Having regard to all the circumstances,

ought fairly to be excused.


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Relief from Liability Contd..Relief from Liability Contd..

Can Section 633 Provide relief to

escape liabilities under other acts? Resignation by Director to relieve

himself from further liabilities.

Directors with unlimited liability?


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QuestionsQuestions --

1. Whether directors alone could be

prosecuted without prosecuting the

company? (Sheoratan Agarwal v. State

of M.P. Supreme Court Judgement).

2. Whether director can be absolved for

responsibility if he argues that he knows

nothing was informed about nothing and

he believed that every thing is right.


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Questions Contd..Questions Contd..

3. If the directors enter into a

transaction which was beyond their

powers as defined in the articles is

the company bound by their action?4. Whether director has right for

inspection of books of accounts and

records of the company.


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Thank you.Thank you.

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Duties & Responsibilities of Independent Directors in Current Scenario - Jb Nagar