1. Power, Duties of Directors
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

2. Fiduciary Duties of Board of Directors
Fiduciary duty means that, as shareholders’ guardians, directors must be trustworthy, acting in the best interest of shareholders, and investors in turn have confidence in the directors’ actions.
MANDATED BY LAW AND SPECIFIED IN COMPANIES CHARTERS AND BYLAWS
The corporate governance literature presents the following fiduciary duties of boards of directors:
Duty of due care
Duty of loyalty
Duty of Good Faith
Duty to Promote Success
Duty to Exercise Diligence, Independent Judgment, and Skill
Duty to Avoid Conflict of Interests
Fiduciary Duties and Business Judgment Rules.
Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA
8/24/2018

3. Fiduciary Duties of Board of Directors
Duty of Due Care - determines the manner in which directors should carry out their responsibilities. Failure to uphold the set stipulations may constitute a breach of the fiduciary duty of care of expected directors.
Duty of loyalty - requires directors to refrain from pursuing their own interests over the interests of the company. Breach of loyalty can occur even in the absence of conflicts of interest if directors consciously disregard their duties to the company and its shareowners.
Duty of Good Faith – Its an important of directors fiduciary obligations, and any irresponsible, reckless, irrational or disingenuous behaviors or conduct can breach that fiduciary duty.
Duty to promote success – directors should act in a good faith and promote the success of the company to benefit of its shareholders and other stakeholders. Includes: approving the establishment of strategic goals, objectives and policies that promote enduring shareholders value as well as protect existing value.
Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA
8/24/2018

4. Fiduciary Duties of Board of Directors
Duty to exercise due diligence, independent judgment, and skill - directors should be knowledgeable about the companies’ business and affairs, continuously update their understanding of the company activities and performance, and use reasonable diligence and independent judgment in making decisions.
Duty to avoid conflicts of interests - potential conflict of interest may occur when director: receives a gift from a third party he is doing business with, either directly or indirectly enters into a transaction or arrangement with that company, obtains substantial loans from the company, or engages in backdated stock options.
Fiduciary Duties and Business Judgment Rules - directors operate under a legal doctrine called “business judgment rules”. Under that law directors that make decisions in good faith, based on rational reasoning, and an informed manner can be protected from liability to the company’s shareholders in the ground that they appropriately fulfilled their fiduciary duty of care.
Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA
8/24/2018

5. Duties/responsibilities of directors
For the first time, duties of directors have been specified in the Act.
A director shall:
(i) Act in accordance with the company’s Articles
(ii) 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 interests of the company
(iii) Exercise his duties with due and reasonable care, skill & diligence.
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

6. Duties/responsibilities of directors
A director shall not:
(i) Involve in a situation where he may have direct or indirect interest
(ii) Achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives
(iii) Shall not assign his office
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

7. Liabilities of Director
Companies Act, 2013 cast a criminal liability and civil liability on “officer who is in default” which includes Executive Director and KMP.
Definition of Officer in default is as follows:
“officer who is in default”, for the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely:—
(i) whole-time director;
(ii) key managerial personnel;
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

8. (iii) where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified;
iv) any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

9. (v) any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity;
(vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;
(vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer;
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

10. Board Meeting (Sec. 173) and the Companies (meetings of Board and its Powers) Rule 2014.
Minimum 4 meetings in a year. Maximum gap between two meetings – 120 days.
Minimum Notice of 7 days for a meeting. No shorter notice permitted unless independent director is present, if any [Sec 173]
Small Companies – At least One meeting in each half of calendar year. Minimum gap between two meetings – 90 days [Sec 173]
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

11. Board Meeting
BM Notice may be given by hand delivery/electronic means.
Meetings through Video Conferencing permitted. But proper recording of video conferencing to be kept.
Minimum quorum shall be one third of its total strength or two directors, whichever is higher
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

12. Participation by video conferencing
The participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means.
Procedure as per Companies (Meetings of Board and its Powers) Rules, 2014.
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

13. Secretarial Standard on Board Meetings (SS-1)
The Secretarial Standards issued by ICSI are recommendatory in nature.
Notice in writing of every Meeting should be given to every Director by hand or by post or by facsimile or by or by any other electronic mode.
Unless the Articles prescribe a longer notice period, Notice should be given at least fifteen days before the date of the Meeting.
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

14. Secretarial Standard on Board Meeting (SS-1)
The Board should meet at least once in every three months, with a maximum interval of 120 days between any two Meetings such that at least four Meetings are held in each year.
Every company should have a Chairman who would be the Chairman for Meetings of the Board.
Leave of absence should be granted to a Director only when a request for such leave has been communicated to the Secretary or to the Board or to the Chairman
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

15. The presence of all the members of any Committee constituted by the Board is necessary to form the Quorum for Meetings of such Committee unless otherwise stipulated by the Board while constituting the Committee.
Quarterly or half-yearly financial results should be approved at a Meeting of the Board or its Committee and should not be approved by means of a Resolution passed by circulation.
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

16. Minutes should not be pasted or attached to the Minutes Book.
Within fifteen days from the date of the Meeting of the Board or Committee or of an adjourned Meeting, the draft Minutes thereof should be circulated to all the members of the Board or the Committee, as the case may be, for their comments.
Minutes should not be pasted or attached to the Minutes Book.
Minutes, if maintained in loose-leaf form, should be bound at intervals coinciding with the financial year of the company.
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA

17. Thank you!!!
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Unit IV– Company Law, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA