ROLES AND RESPONSIBILITIES OF BOARD OF DIRECTORS FOR CORPORATE GOVERNANCE IN AN ORGANIZATION

Submitted ByAnkita Raghuvanshi 12BSPHH010156

Duties of the Board of Directors

Types of Duties
1. Fiduciary Duties 2. Statutory Duties

Fiduciary Duties
1. Duty of Good Faith
The decision makers within the company should act in the interests of the company, and not in their own interests. The easiest way to comply with this duty is not to engage in transactions that involve a conflict of interest

2. Duty of Care
The duty to pay attention and to try to make good decisions. The directors need to make rational decisions. In determining whether a board has met its duty of care, the legal test is whether the board availed itself of all reasonably available material information about the subject of the decision

3. Duty not to delegate

Director being an agent is bound by the maxim delegatus non potest delegare which means a delegatee can not further delegate. Thus, a director must perform his functions personally. However, he may delegate in certain conditions.

Statutory Duties
To file return of allotment To disclose interest (Section 299-300) To disclose receipt from transfer of property (sec. 319) To disclose receipt of compensation from transferee of shares (Sec.320) Duty to attend Board meetings

Statutory Duties Contd.

To convene statutory, Annual General meeting (AGM) and also extraordinary general meetings [ Section 165,166 &169] To authenticate and approve annual financial statement (Section 215). To appoint first auditor of the company (Section 224). To make a declaration of solvency in the case of Members voluntary winding up (Section 488).

Liabilities

Liability to the company

Directors can be held liable for Breach of fiduciary duty Ultra vires acts: Negligence Mala fide acts

Liability to third parties

Liabilities under the Companies Act Liability for breach of statutory duties Liability for acts of co-directors Criminal liability

Director Independence

Independence of Directors
Disclosing conflicts of interest:
Does the Board have clear guidelines of conflicts that must be disclosed? Who discloses conflicts? To whom are conflicts disclosed? What happens if conflicts are not disclosed?

How is independence enforced?

What if conflicts are disclosed later?
good faith vs. bad faith

What is disclosed to the Board and/or to shareholders?

Board Committees
What is their purpose? What is their power? How are members selected, renewed or removed?

How Committees Operate

Process:
Setting the agenda Discussion, debate, vote, minutes Recommendation, decision, report

Constraints:

Budgetary and resources Access to outsiders: management, advisors, suppliers, etc.

What happens to committee findings and recommendations?

Conclusion: Several Models with Converging Objectives

Prevent (and react to) wrong-doing by management, directors, advisors/suppliers, partners and shareholders Ensure protection of shareholder interests and rights Ensure the long term growth of the company