ASSIGNMENT ON the Position, Powers and Duties of Directors under the Companies Act, 2013.

1. 2015
Apurva Mittal
SPM, PGP 14
20141009
Legal Aspects of Business

2. Q1. As a Company Secretary of a newly started Petroleum Refinery advice the
Management about the Position, Powers and Duties of Directors under the
Companies Act, 2013.
Stipulation and elucidation of the duties and responsibilities of the directors of a company,
especially the public limited companies, are welcome and great contribution of the new
company law of India, the Companies Act of 2013, to better corporate governance and
security, and the best possible growth and prosperity in the corporate world of India. The
former company law of India, the Companies Act of 1956, was disgustingly deficient in this
respect. The new CA-2013 offers a landmark piece of legislation in this regard, which duly
and explicitly clarifies, redefines, and enlarges the ambit of duties and responsibilities of the
directors. These newly introduced provisions by CA-2013 regarding the duties and
responsibilities of the directors, including the independent directors, not only provide greater
certainty to the directors regarding their conducts and responsibilities, and thus, ensuring
better and impeccable corporate management and governance; but also enable and empower
the beneficiaries, regulators, and the courts, to judge, regulate, and control the activities and
obligations of the directors more objectively and effectively.
This prudent legislation of the CA-2013 over the duties and liabilities of the directors, is
further supported and supplemented by the revised corporate governance norms of SEBI, in
order to bring the SEBI's corporate governance norms in connection with the listed
companies, in close harmony and consistency with the provisions of the CA-2013.
As a Company Secretary of this newly started Petroleum Refinery, I would like to
advice the management by first of all explaining about the designation and profile
of a director, the need for having the same on board and then moving towards
the Position, Powers and Duties of Directors under the Companies Act, 2013.
Who is a Petroleum Refinery Director?
 An appointed or elected member of the board of directors of the Petroleum Refinery.
 He has the responsibility for determining and implementing the Petroleum Refinery’s policy.
 A Refinery director need not
-to be a shareholder or
-an employee, and
-may hold only the office of director under the provisions of the Act.
 Directors derive their powers emanating from board resolutions
 Unlike shareholders, directors cannot participate through proxy.
 Unlike employees, cannot absolve themselves of their responsibility for the delegated duties.
Section 2(34) of the Companies Act, 2013 defines a director as – ―director‖ means a director
appointed to the Board of a company.

3. Disqualifications for appointment as director
A person shall not be eligible for appointment as a director of a company, if —
•He is of unsound mind and stands so declared by a competent court
•He is an undischarged insolvent
•He has applied to be adjudicated as an insolvent and his application is pending
•He has been convicted and sentenced to imprisonment for atleast 6 months and 5 years from
expiry of sentence have not got over
•He has been convicted and sentenced for a period of 7 years or more
•An order disqualifying him for appointment as a director has been passed by a court or
Tribunal and the order is in force
•He has not paid any calls in respect of any shares of the company held by him & 6 months
have elapsed from the last day fixed for the payment of the call
•He has been convicted of the offence dealing with related party transactions under section
188 at any time during the last preceding five years
•He has not obtained DIN
•A person who is director of a company which has not filed financial statements or annual
returns for 5 continuous yrs, till expiry of 5 yrs from date of default
•A person who is director of company which has failed to repay deposits, debentures or
distribute dividend for a period of one year, till expiry of 5 years from date of default
•Private Companies can provide for additional disqualifications in their Articles
Board of Directors
New Section 149 provides that the minimum number of directors in the case of a public
company shall be three and in the case of a private company it shall be two. The maximum
number of directors can be 15. 2 However, a company can provide for maximum number of
directors as more than 15 by passing a Special Resolution. The Government can prescribe by
Rules that in certain class of companies, there shall be at least one woman director. It is also
provided that atleast one of the directors shall be a person who has stayed in India for 182
days or more in the previous calendar year. Draft Rule 11.1 states that in every listed
company there should be one Woman Director who should be appointed within one year
from the date of this sections coming into force. The Rule also provides that in every other
public company where paid up Share Capital is Rs.100 cr. or more or turnover is Rs.300 cr.
or more, a Woman Director shall be appointed within 3 years from the date on which this
section comes into force.
The concept of ―one person company ― (OPC) is now introduced in the new Act. This term is
defined in Section 2 (62) to mean a company which has only one person as a Member. In
such a company the minimum number of directors can be only one person who is a resident
in India.
Independent Director
The liability regime of the CA-2013 not only imposes the above-mentioned duties and
responsibilities on the directors of Indian companies, but also advocates for independence
and equitableness of the board of a company, especially a public limited company.

4. Consequently, the roles, duties, and responsibilities of the Independent Directors have also
been stipulated by the new Indian Companies Act of 2013. An Independent Director is that
member of the board of a company, who does not possess any financial relationship with the
company (except the sitting fees), nor can own shares in the company. The earlier Indian
Companies Act of 1956 had no explicit provisions for the independent directors, and only the
Old Clause 49 of the Listing Agreement of SEBI contained prescriptions for induction of
independent directors to the listed companies.
The new Indian Companies Act of 2013 dictates that every listed company must contain at
least one-third of the total magnitude of its directors, as the independent directors; and it also
empowers the Government of India to include other categories of companies within the scope
of this provision or requirement (Section 149 of the CA-2013). Public limited companies
composited as per the former CA-1956, are granted a transition period of one year for making
strict compliance with this mandatory provision. Again, the independent directors are not
permitted to hold office for more than two consecutive terms of five-year periods.
In the new regime, the roles and duties of the independent directors attained significant
expansion, and many new other areas have been prudently covered. Broadly, they are
intelligently assigned the highly responsible role of the arbiters among various constituencies
within the corporation. Hence, the new provisions for the independent directors of the limited
companies are certainly very constructive for transparent and sound corporate governance,
and are hugely beneficial to the company and its all shareholders. Some of the most
significant functions, duties, and liabilities of the independent directors, are the following (as
per the Schedule IV of the CA-2013): ---
 To assist in forwarding equitable and independent judgment to the board
 To secure and promote the interests of all stakeholders of the concerned company,
particularly of the minority shareholders
 To conciliate and balance the conflicting interests of the stakeholders
 To attend actively and constructively most of the board and committee meetings
 To pay proper and adequate attention to Related Party Transactions (RPTs)
 To report concerns honestly and impartially about any unethical behavior, violation of
the code of conduct, or any suspected fraud in the company
Duties of directors under the new Indian CA-2013
The duties and responsibilities of directors stipulated by the Indian Companies Act of 2013,
can broadly be classified into the following two categories: ---
[i] The duties and liabilities which encourage and promote the sincerest investment of the
best efforts of directors in the efficient and prudent corporate management, in providing
elegant and swift resolutions of various business-related issues including those which are
raised through "red flags", and in taking fully mature and wise decisions to avert unnecessary
risks to the company.
[ii] Fiduciary duties which ensure and secure that the directors of companies always keep the
interests of the company and its stakeholders, ahead and above their own personal interests.
The following duties and liabilities have been imposed on the directors of companies, by the
Indian Companies Act of 2013, under its Section 166: ---

5.  A director of a company shall act in accordance with the Articles of Association
(AOA) of the company.
 A director of the company shall act in good faith, in order to promote the objects of
the company, for the benefits of the company as a whole, and in the best interests of
the stakeholders of the company.
 A director of a company shall exercise his duties with due and reasonable care, skill
and diligence and shall exercise independent judgment.
 A director of a company shall not involve in a situation in which he may have a direct
or indirect interest that conflicts, or possibly may conflict, with the interest of the
company.
 A director of a company shall not achieve or attempt to achieve any undue gain or
advantage either to himself or to his relatives, partners, or associates and if such
director is found guilty of making any undue gain, he shall be liable to pay an amount
equal to that gain to the company.
 A director of a company shall not assign his office and any assignment so made shall
be void.
 If a director of the company contravenes the provisions of this section such director
shall be punishable with fine which shall not be less than one Lakh Rupees but which
may extend to five Lac Rupees.
Powers of Directors
Being agents of the company in regard to dealing with outsiders, individual directors cannot
exercise any powers in relation to management of company. Directors can exercise the
powers in relation to management of a company collectively as a Board and an individual
director could be delegated powers by the Board.

6. Liability of Directors
Directors will have no personal liability so long as they exercise the duties set out earlier in
this Article. It should be noted that pursuant to the provisions of Section 149(12) of the new
Act a non executive director including an independent director and nominee directors will be
held liable only in respect of such acts of omission or commission by a company which had
occurred with his knowledge, attributable through board processes and with his consent or
connivance or where he had not acted diligently. Under Section 195 of the new Act, a
director, inter alia, is prohibited from indulging in Insider Trading. There are many provisions
in the Act, which are not in line with the Regulations framed in this regard by the Securities
and Exchange Board of India, which are applicable to listed companies. Thus in their cases
there could be duplications and the requirements of the Act or SEBI Regulations may be
stringent. In such situations it would be prudent and in fact is required that listed companies
should comply with more stringent requirements of the two so that they are not hauled up for
possible violations.
Evaluation of performance:
(i) The performance evaluation of independent directors shall be done by the
entire Board of Directors, excluding the director being evaluated.
(ii) (ii) On the basis of the report of performance evaluation, it shall be
determined whether to extend or continue the term of appointment of the
independent director.
Retirement of Directors
Under Section 152(6) of the new Act, one-third the total number of directors for the time
being are liable to retire by rotation, have to retire at each annual general meeting. Similar
provision exists in the Articles of Association of companies. If the number retiring by
rotation is not one third then the number nearest to one third would retire. It should be noted
that fractions in the said one-third should not be grossed up as one as in the case of the
requirement of the appointment of the independent directors. If a company desires to retire

7. more than this number, then the number in excess of the one-third will have to be retired by a
special resolution. This, however, should not be construed to mean that if the Articles of
Association of a company provides that all directors would retire at each annual general
meeting then the number in excess of one-third can retire only by means of a special
resolution. This is so because, in such a situation the company concerned follows the
provisions in the Articles and in the case of the former that has the effect of amending the
Articles which can be done only by means of a special resolution. Section 152 of the new Act
also provides that the directors retiring would be those who have been longest in office and in
the event that there are more than the number required to retire at the annual general meeting
on this score, the names of the retiring directors subject to the provisions in the Articles will
have to be decided by lots.
Resignation of Directors
There is no regulation in the existing Act with regard to resignation of directors. Judge made
law largely governs this. The new law aptly regulates the resignation of directors. Section 168
of the new Act exhaustively deals with the matter. This has become a boon to non-executive
directors of companies.
Thus, the new Indian Companies Act of 2013 is certainly a very innovative and landmark
legislation in respect of the duties and responsibilities of the directors (of companies) also.
Both broad categories of directors, namely, the directors having pecuniary relationship with
the company, and the independent directors, have been properly considered under this mature
legislation for directors. It is quite obvious from above illustrations that the CA-2013
sincerely seeks to make the corporate management and governance in India rather efficient,
fully accountable, transparent, and maximally beneficial to all stakeholders and related
professionals, through this intelligent legislation over duties and responsibilities of directors
in Indian companies.