The Role of a Director in a Company

Directors play an eminent role in the company. They have a fiduciary duty towards the company and its members. They exercise all their powers under this duty.

The following are roles of the directors in a company.

To act with bonafide intentions and good faith

The company members expect the directors to act in the best interest of the company. They do not just act as the agents but as trustees. They must act honestly and avoid any negligence on their part while acting as a director. They are supposed to balance the interest of members, creditors and shareholders along with focusing on the economic interests of the company.

To act within the powers of the company

Directors must act within the powers and according to the memorandum of the company. Any action that is beyond the allotted powers is not permitted. All their decisions should be in favour of the company’s growth. When the purpose behind the directors act is , wrongful and against company policy and interest then the director will be held liable.

Promote the company

Promotion and growth of the company should be the primary concern of the director. Hence the director must keep the following in mind while executing his role:

• The long-term consequence of any decision that he/she takes.
• The interest of the company employees
• Fostering the business relationships of the company with customers and suppliers.
• Making sure that the company does not impact the community of the environment in a negative matter.
• Makes sure to act fairly while dealing with members of the company.

Take impartial and independent decisions

They should be firm about the decisions they take, and the ones they believe are the best for the company’s interest. No arrangements or contracts can be made regarding how they would vote during board meetings or how they should conduct themselves in the future.

Prevent conflict of interest

Directors should make sure they don’t get themselves into a situation where the company’s and their personal interest are in conflict.

These are some of the ways the directors fulfill this:

• The director has to run by all the decisions and contracts with the board and cannot do without receiving approval. This should be followed even if there is no unfair advantage or abuse of position by the director.
• Directors should never use company’s property, assets or any information he has access to due to the position he holds for personal gain. While taking any such decision, the board or the director has to expressly state that it was in regard to the company’s affairs.
• Directors should not compete with the company.
• They have a duty to exercise care and reasonable skill in their work. Act in the best way possible. Directors actions are judged upon how he ought to have acted and what measures h/she took to prevent any possible conflict.

Now we can look at the administrative duties that the directors owe to the company.

As directors are, the main managerial heads of the company they are responsible for fulfilling certain compliances like:

Filing returns with the RoC: They have a duty to file returns within thirty days from the day the shares are allotted.

Sending out notices regarding shareholder meetings: The directors must convey the shareholders about any shareholder meetings according to their specified periods.

For example,

• A notice about the first AGM meeting should be sent within eighteen months of company incorporation.
• In case of a public company, the notice about statutory meeting should be conveyed within six months.
• Announcement regarding extraordinary general meeting should be made to members holding at least ten percent of the paid up capital of the company.

Approving company’s documents: The directors have to approve the balance sheets and profit and loss accounts of the company. Check and assess them before they sign each document to prevent any mishap.

Fulfilling audit requirements: In the case of winding-up or liquidation, the directors must assure that the books or accounts are completed and updated.

Conclusion

The way a director conducts himself and fulfills his duties makes a great impact on the company operations. It increases the company’s reputation and helps it grow and expand faster and in a systematic manner.