Company Directors Powers and Duties

11/03/2020 1 By indiafreenotes


The directors are considered as the head and brain of a company. When the brain functions, the company is said to function. For the proper functioning, the directors should be properly entrusted with some powers. The directors generally acquire their powers from the provisions of the Articles of Association and then from the Companies Act.

  1. General Powers of a Company Director

As per Sec. 291 of the Act, the Board is entitled to exercise all such powers and to do all such acts and things as the company is authorized to do. The exceptions are the acts, which can be done by the company only in the general meetings of the members as required by law.

2. Specific Powers of a Company Director

A) As per Sec. 262, in the case of a public company or a private company, which is a subsidiary of a public company, the power to fill a casual vacancy of directors is to be exercised at a Board meeting.

B) As per Sec. 292, the following powers of the company shall be exercised by the Board by means of resolution passed at the meeting of the Board:

  • To make calls,
  • To issue debentures,
  • To borrow moneys by other means,
  • To invest the funds of the company, and
  • To make loans.

The last three powers cannot be delegated to the Manager or to a Committee of Directors but must be exercised only at a Board meeting.

  1. Powers of Director subject to the Consent of the Company

The directors of a public company or of a private company can exercise the following powers, which is a subsidiary of a public company only with the consent of the company in the general meeting:

  • To sell, lease or otherwise dispose of the undertaking of the company.
  • To remit or give time for repayment of any debt due to the company by a director.
  • To invest the sale proceeds of any property of the company in securities other than trust securities.
  • To borrow moneys where the moneys already borrowed (other than temporary) exceeds the total of the paid-up capital and free reserves of the company.
  • To contribute to charities and other funds not directly relating to the business of the company or to the welfare of the employees in any year in excess of Rs.50,000 or 5% of the average net profits of the three preceding financial years whichever is greater.
  1. Powers of Director subject to the Consent of the Central Government

A) As per Sec. 268, any provision relating to the appointment or reappointment of a Managing Director can be altered by the Board with the consent of the Central Government.

B) As per Sec. 295, the Board, subject to the Central Government’s consent, has the power to appoint a person for the first time as a Managing Director.

C) As per Sec. 295, the Board, only with the previous approval of the Central Government, can make any loan or give any guarantee or provide any security in connection with a loan made by any other person to:

  • Any of its directors or any director of its holding company, or
  • Any partner or relative of such director, or
  • Any firm in which any such director or relative is a partner, or
  • Any private company of which any such director is a member or director, or
  • Anybody corporate, 25% or more of whose total voting power may be exercised or controlled by any such director or two or more directors together, or
  • Anybody corporate, whose Board or Managing director or Manager is accustomed to act in accordance with the directions or instructions of any director or directors of the leading company.

Subject to the approval of the Government, the Board has the power to invest in the shares of another company in excess of the limits specified in Sec. 372.

Duties of directors

The duties of directors and the Board are primarily responsible for leading the organisation on behalf of the stakeholders. As well as they are responsible for ensuring the legal entity of the company. It means that the company must remain viable and properly functioning in the present and the future as well. Under the common law, directors have to be honest, exercise delicacy and skill when dealing with company issues, while working on behalf of the company.

Duties of Directors

  • Deciding the company’s future goals and priorities.
  • Communicating with the stakeholders to inform them of the company’s growth and ensuring their input plays a part in the company’s future.
  • Checking the external market conditions to ensure that the company is headed in the right direction.
  • Monitoring the performance of employees and encouraging them to achieve their targets is one of the primary duties of directors.
  • Setting the budget for the company’s operations and keeping tabs on the profit and loss margin.
  • Reporting back to the stakeholders at the Annual General Meeting (AGM).
  • Establishing rules and regulations and forming policies that everyone in the company would follow.
  • Making sure the organisation has a good system of governance and that there is no gap in communication.
  • Being in an advisory capacity to the CEO.
  • Doing effective risk management assessment

Code of Conduct

  • To not use company information for personal gain or insider training.
  • To not take advantage of the power of their authority.
  • Avoid conflict of interest between personal interests and the company.
  • To maintain the reputation of the organisation and not do anything that could dishonour the company.
  • To diligently follow the lead and orders of the Chief Executive Officer of the company and not go against him.
  • Attend all board meetings and give useful insights and ideas.
  • Respect the authority of fellow colleagues.
  • To have a debate in a logical, calm-headed manner and come to conclusion with the approval of the majority.
  • Maintain confidentiality about important company information. Not to leak it to the press or competition which will be detrimental to the company’s growth.
  • To accept the decisions once they have been passed.
  • Act in an honest, professional and respectful manner with members of the board and employees of the company.
  • Recognise that all is his actions must lead to proper growth and development of the company.
  • Perform the duties assigned to them without fail.

Code of conduct is an effective tool to define the things expected from the directors and to make them understand which behaviour is appropriate and which behaviour is not.