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:
Duty | Nature |
---|---|
Fiduciary duty | To the company and stakeholders |
Duty of care and diligence | Reasonable skill and judgment |
Duty to avoid conflicts | No personal interest over company interest |
Accountability | Liable 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:
Duty | Section (CA 2006) | Nature |
---|---|---|
Act within powers | S.171 | Follow company constitution |
Promote success | S.172 | Consider long-term and stakeholder interests |
Independent judgment | S.173 | No undue influence |
Reasonable care and skill | S.174 | Objective + subjective standard |
Avoid conflict of interest | S.175 | No personal vs company conflict |
No undue benefits | S.176 | Reject bribes or gifts |
Disclosure of interest | S.177 | Must declare interest in contracts |
🔍 COMPARATIVE ANALYSIS: INDIA vs UK
Aspect | India (Companies Act 2013) | UK (Companies Act 2006) |
---|---|---|
Legal Framework | Section 166 | Sections 171–177 |
Fiduciary Duties | Yes (implied and explicit) | Yes (codified) |
Duty of Care & Diligence | Section 166(3) | Section 174 |
Conflict of Interest | Section 166(4) | Section 175 |
Benefit from Position | Section 166(5) | Section 176 |
Independence | Implied in Indian law | Explicit in Section 173 |
Broader Stakeholders | Includes employees, environment | Includes employees, community (S.172) |
Enforcement | National Company Law Tribunal (NCLT), Courts | Companies 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
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