Duties of Director of a Company

The position of Director of a Private Limited Company or Limited Company or One Person
Company comes with certain duties and responsibilities. Many Directors of a Company are
unaware of these duties and responsibilities expected of them and hold the position just as
a namesake. Our intention with this article is to change that mindset and create awareness
about the duties and responsibilities of a Director of a Company. This will in turn help create
companies that have a strong and ethical Board of Directors, thereby benefitting all the
stakeholders of a company.

Duty to act in the best interests of the Company

Directors are in a fiduciary position in relation to the company. So the Director must
exercise his/her power for the benefit of the company or in the best interest of the
company. A Director must also consider the interests of the company supreme and, in any
case, above their personal interest. Therefore, a Director acting honestly but not in the best
interests of the company is in breach of duty.

Fiduciary: A fiduciary is a person who holds a legal or ethical relationship of trust.

Typically, a fiduciary prudently takes care of money for another person.

Duty NOT to misapply company assets

Directors do not have legal ownership of the companys assets. They only have effective
control of them, and they must use them and employee them for the proper purposes of the
company, and in the best interests of the company.

Duty NOT to make secret profits

A Director holds a key position in relation to the company. Therefore, in the course of
management of the business, the Director may get confidential and sensitive information
concerning the companys business and affairs, or trade secrets. This privileged information
cannot be used by the Director for his/her personal benefit and gain to the detriment of the
company.

Duty of confidentiality
Directors would have access to all the relevant information about the operations and
financials of a company. However, a Director has a duty to ensure that such information is
not, directly or indirectly, divulged. A Director must not disclose or make use of that
confidential information for any purpose other than for the benefit of the company.

Duty to NOT permit conflict of interest

A Director of a company has a duty to not enter into any arrangement which will possibly
impair the Directors interest and cause conflict of interest with the Company. A conflict of
interest arises when a person is in a position to derive personal benefit from actions or
decisions made in their official capacity.

Duty to attend meetings

A Director of a company must make best efforts to attend as many board meetings as
circumstances permit. In India, if a Director is absent from three consecutive meetings of
the Board, or from all meetings held in three months, whichever is longer, without obtaining
leave of absence from the Board, then the Director could lose his/her Directorship in the
Company.

Duty NOT to exceed powers

The Memorandum of Association (MOA) of a Company states what the company is
authorized to do. Whereas, the Articles of Association (AOA) of the Company state what
powers are given to the Directors of the Company. It is the duty of the Directors to ensure
that not only do they keep within the companys powers but also that hey keep within the
powers actually given to them in the Articles of Association.