Private Limited

What Are the Duties of a Director in a Private Limited Company?

The director of a company has not just been hired nominally; each individual on the board has a designated set of duties that need to be performed to the maximum

A director of a Pvt ltd company or a limited company or a one-person company must fulfil certain duties and responsibilities. Sometimes, a new director is unaware of these duties. In this article, you will understand that the duties of a director are necessary for the functioning of a company, which in turn will have a strong board of directors.

The Companies Act of 2013 has a list of roles and responsibilities for a company’s director. However, before we get into that, let us first understand the role of a company’s director.

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For all practical purposes, a director is an individual that performs the duties and responsibilities of a director as per the provisions of the Companies Act, 2013. They are trustees of the company’s assets and perform the role of an agent in the transactions 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

However, in all the above cases, the no. of directors may exceed 15  by passing Special Resolution.

Duties of a Director

Typically, directors must use their skills and experience to perform the functions of a director. If need be, a director must play different roles in the company – an officer, a trustee, an agent, etc.

All the directors of various companies registered under the ROC of India must fulfil some mandatory obligations. The fact is that the directors of many startups fail to educate themselves about these duties. As a result, they end up making some costly mistakes in the end.

Many will forget to educate themselves on these, but any director of a company, whether one person, private or public should be aware of his/her duties before becoming one. None of what follows will be ground-breaking. After all, you should know that, as a director, you need to act in the best interests of the company. Nonetheless, here are the duties listed of directors.

Best Interests

At all times, the director must act in the best interests of the company, particularly above personal interest. Even a director acting honestly but not in the best interests of the company is in breach of duty.

Proper Use of Assets

A director is in charge of the assets of the company and is the signatory in case of the transfer of any assets of the company. The director must not take advantage of this power.

Keep Information Confidential

As a director, you have access to all important information about the operations and financials of a company. This should remain confidential and not be shared with anyone unless it is for the benefit of the company.

Attend Meetings

A director must attend as many board meetings as possible. Any director absent for more than three meetings in a calendar year will be automatically terminated from the board.

Not to Exceed Powers

The Memorandum of Association (MOA) of a company defines what a company can do, while the Articles of Association (AOA) state the powers given to its directors. The directors must ensure that it stays within the boundaries of both.

It is vital that as the director of any company you keep all the information about it confidential. If your company is listed on any of the stock exchanges in India, then confidentiality assumes greater significance. You might be charged for insider trading for unethical actions and omissions barred by law:

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