Journey of a Director : From “Game of thrones” to “Game of thornes”

Gone are the days the people were fascinated to be on the board of a Corporate for the sake of boasting the position of the captain of it. Directors not only the watch dogs and whistleblowers but are confidence keepers of the stakeholders of the company too. Unlike the erstwhile Companies Act, 1956, the new companies Act had made it the statutory duty of director to act in accordance with the articles of association of the Company. The said mandate made it obligatory on the part of the directors of a company to be well versed with the clauses of the Articles of association and act in accordance with the same.


A director have to act in good faith in order to promote the objects of the company for the benefit of its members as a whole and in the best interest of the company, its employees , the shareholders, the community and for the protection of the environment. The said statutory duty casted upon the directors is very huge and immense. It requires lot of commitment and dedication at the end of a director. In normal parlance, main objective of a company to make profit. But the Act had gone one step ahead and states that the director should promote the objects of the company for the benefit of its members. A member of a company is entitled for “Dividend” on his investments, though the said is not a right of a shareholder. So the Act impliedly mentions that the director have to work hard to give some benefits to the members of the company. Similarly the Act states that the Directors shall have to act in the best interests of the company, its employees, the shareholders. Though the Act cast upon such a heavy burden on the shoulders of the directors, the “benefits” which is intended by the act cannot be measured in absolute terms. As the Act does not defines the term “best interests” it is better for a director to be “reasonable” in his deeds. The term “reasonable” is a meaningful word. It means fair, sensible, appropriate or moderate. So, in short, the Act expects a Director to be reasonable in his duties. Any action which is “not reasonable” shall be termed as “unreasonable” and while performing the duties of a director he /she should think about famed “sword of Damocles” , which is literally hanging over his/her head.

The Act also envisioned the director as a person who carries out his duties with “due and reasonable” care and the one having “skill and diligence”. The Act demands a director to have independent judgement. All these are “soft skills” which will vary from person to person and there is no proper measurement to identify the level of care, depth of reasonableness, heights of skills, breadth of diligence. So , again, the Act expects a director to act as a man of “prudence and principle” rather than an academician or a management expert.


A director should be transparent in his deeds, words and thoughts. He is expected to be vigil and careful while exercising his duties and should strive to avoid conflicts when dealing with the company. A director should be a man of integrity and he should reflect his character in is deals. If any situation comes in which is conflicting with his duties, he should disclose the same before appropriate forums and maintain the transparency. Conflict of interest is one of the most important factor which determines the functioning of a director.


A director of a company shall not assign his office and any assignment so made shall be void. A director a representative of shareholder and he shall not delegate the same further. 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. Making an undue gain or advantage by a directors is against the probity and good faith and highly unreasonable deed. 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 lakh rupees. The section 166 makes a director liable to pay an amount equal to the undue gain to the company. So the section not only cast the duty but also make him liable for any deviations in the said duties


A director who is having fiduciary duties is now cast upon with statutory duties which make him liable for any deviations. The position of director is no more an ornamental position and it can be undoubtedly state that the same had shifted from “Game of thrones” to “Game of thornes”. So it is high time for a director to step up as a duty-bound hound from an uncommitted vagabond



BIJOY P PULIPRA





Picture courtesy: Internet

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