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Duties of Directors in A Company

Directors of a company have several important duties, including acting in the best interests of the company, not misusing company assets for personal gain, avoiding conflicts of interest, maintaining confidentiality of company information, and attending board meetings. A director must exercise their power to benefit the company, consider the company's interests above all else, and not use privileged company information or opportunities for personal profit or to the company's detriment. This helps ensure companies have ethical leadership that benefits all stakeholders.

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574 views2 pages

Duties of Directors in A Company

Directors of a company have several important duties, including acting in the best interests of the company, not misusing company assets for personal gain, avoiding conflicts of interest, maintaining confidentiality of company information, and attending board meetings. A director must exercise their power to benefit the company, consider the company's interests above all else, and not use privileged company information or opportunities for personal profit or to the company's detriment. This helps ensure companies have ethical leadership that benefits all stakeholders.

Uploaded by

SHIBILI BULLCHOLLA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Duties of Director of a Company

The position of Director of a Private Limited Company or Limited Company or


One Person Company comes with certain duties and responsibilities. Many Directors
of a Company are unaware of these duties and responsibilities expected of them and
hold the position just as a namesake. Our intention with this article is to change that
mindset and create awareness about the duties and responsibilities of a Director of a
Company. This will in turn help create companies that have a strong and ethical Board
of Directors, thereby benefitting all the stakeholders of a company.

1. Duty to act in the best interests of the Company


Directors are in a fiduciary position in relation to the company. So, the Director
must exercise his/her power for the benefit of the company or in the best interest of
the company. A Director must also consider the interests of the company supreme
and, in any case, above their personal interest. Therefore, a Director acting honestly
but not in the best interests of the company is in breach of duty.

Fiduciary: A fiduciary is a person who holds a legal or ethical relationship of trust. Typically, a
fiduciary prudently takes care of money for another person.

2. Duty NOT to misapply company assets


Directors do not have legal ownership of the company’s assets. They only have
effective control of them, and they must use them and employ them for the proper
purposes of the company, and in the best interests of the company.
3. Duty NOT to make secret profits
A Director holds a key position in relation to the company. Therefore, in the
course of management of the business, the Director may get confidential and sensitive
information concerning the company’s business and affairs, or trade secrets. This
privileged information cannot be used by the Director for his/her personal benefit and
gain to the detriment of the company.
4. Duty of confidentiality
Directors would have access to all the relevant information about the operations
and financials of a company. However, a Director has a duty to ensure that such
information is not, directly or indirectly, divulged. A Director must not disclose or make
use of that confidential information for any purpose other than for the benefit of the
company.
5. Duty to NOT permit conflict of interest
A Director of a company has a duty to not enter into any arrangement which will
possibly impair the Director’s interest and cause a conflict of interest with the
Company. A conflict of interest arises when a person is in a position to derive personal
benefit from actions or decisions made in their official capacity.

6. Duty to attend meetings


A Director of a company must make best efforts to attend as many board
meetings as circumstances permit. In India, if a Director is absent from three
consecutive meetings of the Board, or from all meetings held in three months,
whichever is longer, without obtaining leave of absence from the Board, then the
Director could lose his/her Directorship in the Company.

7. Duty NOT to exceed powers


The Memorandum of Association (MOA) of a Company states what the
company is authorized to do. Whereas, the Articles of Association (AOA) of the
Company state what powers are given to the Directors of the Company. It is the duty
of the Directors to ensure that not only do they keep within the company’s powers but
also that they keep within the powers actually given to them in the Articles of
Association.

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