Duties of A Director in India And in the UK

📘 DUTIES OF A DIRECTOR: INDIA vs UNITED KINGDOM

🇮🇳 PART 1: DUTIES OF A DIRECTOR UNDER INDIAN LAW

Legal Framework:

Companies Act, 2013, particularly Section 166

Supplemented by judicial decisions and common law principles

Statutory Duties under Section 166 of Companies Act, 2013:

Act in accordance with the articles (Section 166(1))

Directors must follow the provisions of the company’s articles of association.

Act in good faith (Section 166(2))

Directors must act in good faith to promote:

The objects of the company

The benefit of its members

The best interests of the company, its employees, shareholders, community, and environment

Exercise due and reasonable care (Section 166(3))

Directors should exercise their duties with due diligence, skill, and independent judgment.

Avoid conflict of interest (Section 166(4))

Directors must avoid any situation where they may have a direct or indirect interest that conflicts with the company’s interest.

Not to achieve undue gain (Section 166(5))

Directors shall not derive undue personal gain. If found guilty, they must pay back the gain.

Not to assign their office (Section 166(6))

A director cannot assign their office to another person.

🧑‍⚖️ Key Indian Case Laws:

🔹 Narayani Devi v. Tagore Commercial Corporation (1980)

Held: Directors must act in good faith and in the interest of the company; personal interest must not override corporate interest.

🔹 Official Liquidator v. P.A. Tendolkar (1973)

Held: Directors are fiduciaries and must exercise their powers honestly and with reasonable care, even if they delegate responsibilities.

🔹 Dale & Carrington Invt. P. Ltd. v. P.K. Prathapan (2005)

Held: The Supreme Court held that directors have a fiduciary duty and should not misuse their powers to gain control or oppress minority shareholders.

🧑‍💼 Summary of Director’s Duties in India:

DutyNature
Fiduciary dutyTo the company and stakeholders
Duty of care and diligenceReasonable skill and judgment
Duty to avoid conflictsNo personal interest over company interest
AccountabilityLiable for breach of duty

🇬🇧 PART 2: DUTIES OF A DIRECTOR UNDER UK LAW

Legal Framework:

Companies Act 2006, specifically Sections 171–177

These duties codify common law and equitable principles.

Codified General Duties (UK Companies Act 2006):

Section 171 – Duty to act within powers

Directors must act in accordance with the company's constitution and only use powers for their proper purpose.

Section 172 – Duty to promote the success of the company

Must act in a way that is likely to promote the success of the company for the benefit of its members as a whole.

Section 173 – Duty to exercise independent judgment

Directors must not let others unduly influence their decisions.

Section 174 – Duty to exercise reasonable care, skill, and diligence

Both objective and subjective standards of care apply.

Section 175 – Duty to avoid conflicts of interest

Directors must not place themselves in a position where there is a conflict between personal interest and duty.

Section 176 – Duty not to accept benefits from third parties

Directors must not accept bribes or benefits that could compromise their duties.

Section 177 – Duty to declare interest in proposed transaction or arrangement

Directors must disclose any personal interest in company transactions.

🧑‍⚖️ Key UK Case Laws:

🔹 Regal (Hastings) Ltd. v. Gulliver (1942)

Held: Directors who make personal profits in the course of their duties must account for it to the company, even if the company itself could not have taken the opportunity.

🔹 Foss v. Harbottle (1843)

Principle: The company is the proper plaintiff in actions regarding wrongs done to it, not individual shareholders. Directors must act for the company.

🔹 Howard Smith Ltd. v. Ampol Petroleum Ltd. (1974)

Held: Directors must use their powers for proper purposes, and not merely to retain control or manipulate shareholding structures.

🔹 Re City Equitable Fire Insurance Co. Ltd. (1925)

Held: Directors are not expected to exhibit greater skill than may reasonably be expected from a person of their knowledge and experience, but they must act honestly and with care.

🧑‍💼 Summary of Director’s Duties in UK:

DutySection (CA 2006)Nature
Act within powersS.171Follow company constitution
Promote successS.172Consider long-term and stakeholder interests
Independent judgmentS.173No undue influence
Reasonable care and skillS.174Objective + subjective standard
Avoid conflict of interestS.175No personal vs company conflict
No undue benefitsS.176Reject bribes or gifts
Disclosure of interestS.177Must declare interest in contracts

🔍 COMPARATIVE ANALYSIS: INDIA vs UK

AspectIndia (Companies Act 2013)UK (Companies Act 2006)
Legal FrameworkSection 166Sections 171–177
Fiduciary DutiesYes (implied and explicit)Yes (codified)
Duty of Care & DiligenceSection 166(3)Section 174
Conflict of InterestSection 166(4)Section 175
Benefit from PositionSection 166(5)Section 176
IndependenceImplied in Indian lawExplicit in Section 173
Broader StakeholdersIncludes employees, environmentIncludes employees, community (S.172)
EnforcementNational Company Law Tribunal (NCLT), CourtsCompanies and shareholders via derivative action

🏁 Conclusion

Both India and the UK recognize directors as fiduciaries who must act with honesty, skill, and in the company’s best interests. The UK law provides greater codification and clarity, while Indian law incorporates these duties both statutorily and through judicial interpretation.

Understanding these duties is crucial for:

Corporate governance

Risk management

Avoiding personal liability as a director

LEAVE A COMMENT

0 comments