Fiduciary duty of an

independent director
towards all
stakeholders of a
company A critical
study
 CONTENT

1. Introduction
2. Literature review
3. Research questions
4. Research objective
5. Tentative chapter division
6. Hypothesis
7. Research methodology

Submitted by- Submitted to- Mr. Ashish Pathak

Rohit Bhasin Asst. Professor

(LLM-2016-17) ALS

INTRODUCTION

Term corporate governance is seeking a lot of attention of each and every country, investors
and corporate sector around the world and it has become a vogue word in the corporate
world. When the various scandals at national and international level came into limelight, after
that the concept of corporate governance demanded more concern and attracted eyes from all
over the countries.

And as a result the world of corporate governance has seen drastic changes and leads towards
a step of huge transformation in the duties, roles and responsibilities of the board of director
and management.

The main transformation that occurs in corporate governance with the globalisation is to
amend the clause 49 of the listing company and change the old Companies Act 1956 with the
new companys act of 2013, to bring the new concept of independent director and shows how
independent directors are liable?

The main objective to bring the concept of independent director into the corporate system
through the Companies act 2013 is to make the corporate governance work more effectively
and to overcome the problems which was faced during the time of scandals and scams and
due to which the goodwill of corporate governance has been hampered and become a media
buzz also bring mismanagement of the companies into focus.

LITERATURE REVIEW

Review of literature is helpful in gaining background knowledge of the research topic and
identifying the various issues related to it. It is also helpful in understanding the research
problems thoroughly, formulating the objectives and research design of the study. The present
study extends the previous literature by examining liabilities of independent director in a
company.

Various articles, working papers, books and reports of the regulatory authorities have been
studied for the purpose of thorough understanding of this concept. The review of relevant
literature is as follows:

Cadbury (1992) chaired a committee on Financial Aspects of Corporate Governance. In

his committee report, he discussed the Code of Best Practices to be followed by the
companies. The code had 19 recommendations related to independent directors, non-
executive directors, executive directors, reporting and control. The committees report had
also stressed on the formation of audit committee with independent members.
The committee also recommended the disclosure of executive directors remuneration in detail
along with the performance incentives. So far as internal control system was concerned, it
had been recommended to report on the effectiveness of the internal control system adopted
by the companies. On the whole, the main focus of the report was to assess the accountability
of the board towards its shareholders and society at large.

JJ Irani committee report 2005

The committee is to think that the presence of independent directors on the board of a
company should improve corporate governance, as to access the provisions of the board to
its area of shareholders as a whole.

Section 149(6) of the Companies Act 2013 defines independent director in relation to
accompany and section 150 of the act indicates the manner of selection of independent
directors and maintenance of data bank of independent directors.

Kumar Mangalam Birla Committee 1999

The SEBI had created a committee to move forward and meet the standard of good
corporate governance. The groups report is the early appropriate and comprehensive effort
to develop a code of corporate governance

RESEARCH OBJECTIVE

The dissertation shall have the following objectives, to be pursued in a systematic and
coherent manner:-

1. To study the concept of corporate governance

2. To study the role of independent director in a company for good corporate
governance.
3. To trace the liabilities of independent director.

RESEARCH QUESTION

1. What is the Concept of independent director?

2. What is the need for independent director in a company?
3. Position of an independent director in different countries?
4. What are the changes in clause 49 of listing agreements and new Companies Act
2013?
5. What are roles, responsibilities and liabilities of independent director?
6. How far law is effective in protection of stakeholders?

CHAPTER DIVISION

1. Concept and relevancy of independent director .

2. Position of independent directors in different countries.
3. Report of different committees on independent director.
4. Ingredient of clause 49 of Listing Agreements and the Company Act 2013
5. Roles, responsibilities and liabilities of independent directors.
6. Corporate scams
7. Conclusive suggestion.

HYPOTHESIS

The present study is an attempt introduced in ascertaining the different liabilities and
responsibilities of Independent directors with respect of a Company. Due to rise in fraud
cases in corporate sector, the need of amendment was required and due to this the
Companies Act 2013, was introduced to focus an important of role and liabilities of
independent director under companies Act 2013. It focuses specially on how an independent
director has emerged to play an important role for good corporate governance in establishing
whether Independent Director add the need for the liabilities given to an independent
director under this new law?

RESEARCH METHODOLOGY

The methodology that I propose to follow in my dissertation would be that of non empirical.
This dissertation shall include both primary as well as secondary sources of information.
Primary sources shall be used to the extent of the legislation as well as rules and regulations
passed by the centre and the state. Secondary sources of information would include Books,
Articles as well as Websites.