What are the responsibilities of a Director in a Private Limited Company?

Introduction

Certain obligations and tasks are associated with the post of director for a Private Limited Company. Many Directors of a company occupy the post merely as a namesake because they are uninformed of the obligations and responsibilities expected of them. With this blog, we hope to raise awareness on “What are the responsibilities of director in a Private Limited Company?” This will benefit all of a company’s stakeholders by fostering the development of organizations with strong and ethical board of directors.

Meaning of a Company Director

A Director is defined by Section 2 (13) of the Companies Act of 1956 as “any person exercising the position of Director, by whatever name called.” Their appointment, duties, retirement rights, and salary are all covered under the Articles of Association.

In simple words, Director is a person who represents the company. He or she oversees, directs, and controls the business and its employees. The board of directors is the name given to the group of directors. They oversee all business operations and make all significant policy and decision-making decisions related to the company.

Know more: Different types of a director in a company 

What are the responsibilities of a director in a Private Limited Company?

• Avoid making illegal gains

A Director has a crucial position in the organization. Therefore, the Director may obtain sensitive and private information about the operations and affairs of the company, as well as trade secrets, during the course of managing the business. The Director is not allowed to use confidential information related to the company’s bank account or bank transactions for personal gain. It is the responsibility of a director to keep personal expenses separate from company expenses.

• Act in the best interests of the company

Directors have a fiduciary responsibility to the company. As a result, the Director must use his or her authority for the benefit of the company or in the best interests of the company. A Director must also put the interests of the company first and, in any case, above their own. As a result, if a director engages in any form of fraud or money laundering activity, it is considered a breach of a director’s responsibility.

• Responsible for not to disclosed company’s information

Directors would have access to all relevant information about a company’s operations and finances. However, a Director is responsible for ensuring that such information is not disclosed, either directly or indirectly. A Director is not permitted to disclose or use confidential information for any purpose other than the benefit of the company.

• Responsibility of not to exceed powers

A company’s Memorandum of Association (MOA) states what the company is authorized to do. The Company’s Articles of Association (AOA) state what powers are granted to the Company’s Directors. It is the Directors’ responsibility to ensure that they not only stay within the company’s powers, but also stay within the powers explicitly granted to them in the Articles of Association.

• Not to misuse company’s assets

The assets of the company are not legally owned by the directors. They only have effective control over them, and they must use and employ them for the company’s proper purposes and in the best interests of the company.

• Need to attend company’s meeting

A company’s directors must make every effort to attend as many board meetings as possible. In India, if a Director misses three consecutive Board meetings, or all meetings held in three months, whichever is longer, without obtaining leave from the Board, the Director may lose his/her Directorship in the Company.

Final thoughts

It is critical that as the director of any company, you keep all company information confidential. If your company is listed on any of India’s stock exchanges, confidentiality becomes even more important. You could be charged with insider trading for unethical actions and omissions that are prohibited by law. As a result, before acting as a director of a company in India, a director of a Private Limited Company must understand his or her responsibilities and duties.