What Are the Duties of a Director in a Private Limited Company?
Private limited company director is a person who acts on behalf of the company. She/he controls manages and directs the company and its members. Collectively the directors are known as the board of directors. They handle the company operations and do all the major policy and decision-making activities.
Private Limited Company is maybe the most notable designs for passing on the business in India. It is outlined under the Companies Act, 2013 (in advance Companies Act, 1956). A Company is an alternate legitimate substance indisputable from its people. The regular issues and the director is managed by the Board of Directors. Directorate goes about as administering body of the Company.
According to the law, the number of directors in different types of companies is as follows:
One-Person Company – Minimum 1 director and a maximum of 15 directors
Private Limited Company – Minimum 2 directors and a maximum of 15 directors
Public Limited Company – Minimum 3 directors and a maximum of 15 directors
Appointment of Directors
A new Director can be appointed to the company by the Board of Director by passing an ordinary resolution in an Extraordinary General Meeting or an Annual General Meeting. It is mandatory for any individual who is to be added as a Director of the company for the first time to get DIN or Director Identification Number issued by the Ministry of Corporate affairs after submitting necessary documents.
The Board of directors can also appoint directors Additional Directors u/s 260 who hold office up to the ensuring Annual general meeting, Director in a vacancy caused by resignation /death of a regular director u/s 262 to hold office up to the term of original director in whose place he is appointed and Alternate Directors u/s 313 to represent original director who is away and such director holds office till the original director returns.
Resignation of Directors
Removal of a director from a company can be done by passing an ordinary resolution in an Extraordinary General Meeting or an Annual General Meeting. Generally, Ordinary resolutions can be passed based on the simple majority of the board members.
A casual vacancy in the management level of a company caused by the removal of a director from a Private Limited Company must be filled by adding or appointing a new director within 6 months to time from the date of resignation or removal of the former director.
There are three possible cases in which the removal of a director of a company happens:
- The Director himself gives his resignation
- Removal of a Director suo-moto by the Board
- The Director does not attend three continuous Board Meetings of the company
TYPES OF DIRECTORS IN A PRIVATE LIMITED COMPANY
Executive Director: A regular working Director with higher area towards the association. Non-Executive Directors: Non-working Director, not engaged with the regular working of the organization yet partake in the strategy making or arranging process.
Managing Directors: Holds a considerable capacity to decide, handle and guide different individuals from the organization.
Independent Directors: Expertise and experienced Director who offers master guidance to the board when required yet have no immediate relationship with the organization.
Residential Director: A Director who reside in India for no less than 182 days. An organization should hold one private Director.
Small Shareholder Directors: They are the individuals from the organization who can name or eliminate the Director in a recorded organization.
Women Directors: The organizations who have a settled up capital of Rs. 100 crores or hold their protections recorded on the stock trade or have a turnover more than Rs. 300 crore should have a Women Director.
Additional Directors: A person who can accept the position and goes about as a Director until the following Annual General Meeting.
Alternate Director: An other Director comes on board when a Director is missing for over 90 days or 90 days for a brief period.
Nominee Director: The focal government or the Shareholders or outsiders select them. when there is calm bungle or the board individuals abuse their obligation.
Duties of Directors in a Private Limited Company
Section 166 of the new Act provides that a director of a company (including a private company) shall act in accordance with the Articles of the company. His duties are listed in the section as under:
- He has to act in good faith in order to promote the objects of the company for the benefit of its members as a whole.
- He needs to act to the greatest advantage of the organization, its workers, investors, local area and for the security of climate.
- He will not allot his office to some other individual.
- He needs to carry on his obligations with due and sensible consideration, ability and industriousness and exercise autonomous judgment.
- He shall not involve in a situation in which he may have a direct or indirect interest that conflicts or likely to conflict with the interest of the company.
There are more duties of a director are :-
- a) Fiduciary duties of loyalty and good faith.
- b) Duties of care, skill and diligence.
- c) Collective duties of directors under company law.
- d) Individual duties of directors under company law.
Fiduciary duties;- Fiduciary duties are based on the concept of good faith, and are owed to the company as a result of the control that directors exercise over the Company. It is the duty of directors to act in the best interest of the Company. Fiduciary duties are a Legal obligation and cannot be waived in any manner or form.
Duties of care, skill and diligence:- In India there is no particular arrangement with respect to the obligations of care and ability of the Director in the Companies Act. Courts have been for the most part following the English choices and the Common Law rules. A Director should take the consideration which a customary man may be relied upon to take in leading the undertakings of the organization. He isn’t a guarantor of the achievement of the organization. A Director’s obligation has been set down as expecting him to act with so much consideration as is sensibly normal from him having respect as far as anyone is concerned and experience.
The directors are not liable for mere errors of judgment. They are not bound to give continuous attention to the company. A director is liable only for gross and culpable negligence.
Collective duties of directors under company law:-
Companies Act, 1956 contains certain specific provisions with regard to duties to be performed by directors collectively as a Board. Some of these are:
- Investment of funds (Sec.292 & 372)
- ) No misstatement in prospectus (Sec.56)
- c) Holding of Annual General Meeting (Sec.166)
- d) Filing certain resolutions like appointment/reappointment of MD (Sec.192)
- e) Directors’ Report (Sec.217)
- f) Appointment of Auditors (Sec.224)
- g) Holding of Board Meetings (Sec.285).
Individual duties of directors under company law for Duties of a Director:
Some of the individual duties and obligations imposed on every director by the Companies Act, are as under:
Duty to go to Board Meetings
Duty to record his agree to go about as Director (Sec.264 and 266)
Duty to take capability shares (Sec.270)
Duty to abstain from discussion and voting in which he may be directly or indirectly concerned or interested (Sec.300).
