Thursday, 27 January 2022

Roles and Types of Directors( Companies Act,2013)

 The primary role and function of directors are to run the company. Directors share the responsibilities and liabilities of the company. Below are the various roles of the directors:

  1. Director as an Agent- It is true that a company is an artificial person and cannot run on its own. Thus, the director acts as an agent on the behalf of the company to make payments, appointments, etc. In the case of Vineet Kumar v.  Union of India, the court observed that the company is liable for contempt of court due to the conduct of its director.

  2. Director as an employee- Directors are not considered as an employee of the company but they can enter into a contract of service with the company. It was held in the case of R.R Kothandaraman V. CIT (1957).

  3. Directors as an officer- Directors enjoys complete authority over a company and as a result of it are treated as an officer of the company. And with authority comes responsibility and with responsibility comes liability. Directors can be held liable also.

  4. Director as trustee- Directors are vested with the power to manage the properties, money, etc of the company belonging to various shareholders and hence they act as a trustee in the company. In the case of Ramaswamy Iyer V. Brahmayya & Co., it was held that directors can be held liable for their misuse of power in reference to the power of utilising funds of the company.

Types of Directors-

There are various types of directors in a company and the following are the details of it-

  1. Alternate director- Alternate director is a director who acts on behalf of an appointed director during his absence. An alternate director can only be appointed in a case when the director is going outside India for at least a period of three months or more.

  2. Additional director- Section 161(1) of the Companies Act talks about the additional director. An additional director acts as an interim director. Additional director derives their power from the Articles of Association. In the case of Needle Industries ltd V. Needle Industries Newey Holdings ltd.1981, it was held that the additional director cannot be appointed if articles of association do not provide the board with the power to appoint.

  3. De-facto director- A de-facto director acts as a director and is also treated as a director but a de-facto director is not appointed as a director. He is also liable as a director like other directors.

  4. Executive director- An executive director deals with the day-to-day working of the business. They act as the managing director of the company.

  5. Non-Executive director- Non-executive directors are not engaged in the day-to-day activities of the business but are involved in the policy-making of the company.

  6. Women director- It is mandatory for a company to appoint at least one women director on the board as per the Companies Act, 2013. Such a company must be listed and public company.

  7. Resident Director- Section 149(3) of the Companies Act talks about the resident director. It is mandatory to have at least one director who has stayed in India for a total period of 182 days or more in previous calender year.

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