DUTIES OF DIRECTORS

Duties of directors may be discussed under following

heads:

1. Fiduciary duties,
2. Duty for care and skill,
3. Duty to attend board meetings,
4. Duty not to delegate,
5. Duty to disclose in terest, and
6. Statutory duties.
FIDUCIARY DUTIES: The director occupies a fiduciary position and
must therefore, exercise their power in good faith and for the benefit of the
company as the whole. Directors should not enter into arrangements in which
there is a possibility that the directors personal interest could conflict with
those of the company which they are bound to protect.

DUTY OF CARE AND SKILL:A director must perform his duties

with reasonable care and skill i.e. with that amount of care which an ordinary
man will be expected to take, if the business of the company was his own.
Eg: A director will be liable for negligence in the carrying out of his duties,
where the dividend was paid by directors after the company traded only for
eight months without any investigation of company’s trading position, such
payment was improper and directors must refund.
DUTY TO ATTEND BOARD MEETING: A director should attend
the board meeting whenever he is able to do so, but he is not bound to
attend all board meetings.
Section 283(1)(g) provides that the office of director becomes vacant if he
absents himself from three consecutive meetings of the board or from all
meetings of the board, for a continuous period of three months, whichever
is longer, without obtaining leave of absent from the board.

DUTY NOT TO DELEGATE: As a rule directors must perform their

duties personally and should not delegate their office. The directors are
bound by the maxim “delegatus nonpotest delegare”.
DUTY TO DISCLOSE INTEREST: as a director is an agent of the
company, he must see that his in interest and duty do not conflict. It follows
that the company can avoid a contract in which the director has an interest
unless the prior sanction of the board has been taken.

According to Company’s Act(299), a director who is interested in any

transaction of the company, he is bound to disclose his interest to the
board.
STATUTORY DUTIES:
These are enumerated below:

1. Duty not to allot shares until minimum subscription is raised.

2. Duty to sigh the annual report and the certificate attached thereto.
3. Duty to forward the statutory report to every member of the company.
4. Duty to call an annual general meeting every year within proper time.
5. Duty to call an extraordinary general meeting on a valid requisition.
6. Duty to take a share qualification.
7. Duty to disclose shareholding.
8. Duty to submit a statement of affairs on winding up.
Managing director:
Section 2(26) defines a managing director as, "a director who, by virtue of an
Agreement with the company or a resolution passed by the company in general
Meeting or by its board of directors, or by virtue of its memorandum or articles of
Association, is entrusted with substantial powers of management which would
Not otherwise be exercisable by him, and includes a director occupying the
Position of a managing director, by whatever name called”.

Manager:
As per section 2 (24)”manager means as individual who, subject to the
Superintendence, control and direction of board of directors, has the management
Of the whole or substantially the whole, of the affairs of the company and includes,
Directors or any other person occupying the position of a manager, by whatever
Name called and whether under a contract of service or not”.
Managing director Whole-time director
The appointment of a managing director The appointment of whole-time director
need not necessarily be made with the requires the sanction of shareholders, by
consent of the members. means of special resolution.

He can be appointed for a maximum There is no such restriction.

period of 5 years.

He can be a managing director of 2 or He can not be a whole- time director of

more companies. more than 1 company.

He has substantial powers of He is just an employee of the company

management having powers as per the terms of
employment.

A managing director and a manager can He can be appointed together with the
not exist simultaneously. managing director or manager.
Manager Managing director
He may not be a director He must be a director of the company
There can not be more than one There may be more than one managing
manager of the company director of the company

He may be appointed under a contract of He may be appointed by virtue of

service or otherwise. agreement or a resolution passed by a
company in general meeting,

Grounds of disqualification remains Grounds for disqualification remains

effective only for 5 years. active for whole life.

The central government may remove the The central government has no such
disqualifications powers.

He has powers more than a managing He has just substantial powers of

director has. management.

His maximum remuneration may not The maximum limit is fixed at 10% of net
exceed 5% of net profits. profits of all the managing directors.