Director

A director is a person appointed to the board of a company to manage its affairs and act as its agent in conducting business. Section 2(34) CA 2013 defines director as a director appointed to the board of a company. Collectively, the directors form the Board, which under Section 179 CA 2013 has the power to exercise all such powers and to do all such acts and things as the company is authorised to exercise and do, subject to the MOA, AOA, and resolutions of the general meeting. The board — not the shareholders — manages the company on a day-to-day basis.

Section 166 CA 2013 codifies the duties of directors: (1) act in accordance with the MOA/AOA; (2) act in good faith for the benefit of the company as a whole; (3) exercise duties with due and reasonable care, skill, and diligence; (4) not involve in situations creating conflicts of interest; (5) not achieve or attempt to achieve any undue gain; and (6) not assign the directorship to anyone. These duties are owed to the company — not directly to individual shareholders. A director in breach of these duties is personally liable to the company, which may sue through the board or through a Section 241 petition by shareholders.

Types of directors under CA 2013: (1) Executive Director — full-time, involved in day-to-day management; (2) Non-Executive Director — part-time, provides oversight but not involved in management; (3) Independent Director (Section 149(6)) — no material relationship with the company; mandatory for listed companies and large unlisted public companies; required to chair the Audit Committee; and (4) Managing Director — director entrusted with substantial powers of management (Section 2(54)). Every company must have a minimum number of directors (private: 2; public: 3; OPC: 1) and a maximum of 15 (extendable by special resolution).

For advocates, director liability issues arise in: (1) fraudulent trading — directors personally liable for debts if they knowingly carried on business with intent to defraud creditors; (2) disqualification proceedings — under Section 164 or NCLT orders; (3) oppression/mismanagement petitions where directors are respondents; (4) regulatory proceedings by SEBI against directors of listed companies for insider trading, market manipulation, or disclosure violations; and (5) insolvency proceedings under the IBC where the Resolution Professional investigates pre-insolvency transactions.