Status of a director before appointment, during employment & after resignation/retirement from board of directors

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Labz Notification 6 of 2011

A written-cum-video initiative to know your corporate legal position as on date

 

Legal Queries??

You will know the advantages of getting appointed as a director, but are you aware of your responsibilities?  Is it possible to get a legal health check-up of the company? How to study the company before getting appointed as a Director? Are you a director of the private or public limited company? Do you wish to resign from the directorship? Are legally appointed as a director? Are you legally relieved as a director? Are you responsible for the company’s violation after you leave the company? 

 

Solution…

Status of a director before appointment, during employment & after resignation/retirement from board of directors

The directorship in a company comes with a package of rights, responsibilities and liabilities. The position has its own benefits and is equally dangerous.

 

The Board of directors takes business decisions and run the company on behalf of the shareholders. The director’s or designated partners shall legally be accountable after obtaining & registering DIN, DSC and filing of consent to act as directors with Registrar of Companies. There are certain restrictions in which directors shall obtain consent from the shareholders or Central Government or Court or Tribunal or such other authority. Read More... 

 

Requirement under Indian laws on Status of a director before appointment, during employment & after resignation/retirement from board:

1. Requirements before appointment: check the profile of the company especially its liabilities and legal status with the Registrar of companies by getting a search report
2. Requirements during employment: all the forms including form 32, 23, 25C, 25A has been filed for your directorship; also check whether they have your correct address.
3. Requirements after resignation/retirement: Form 32 has been filed with your valid resignation letter and ensure you collect your Digital Signature from the company & the delete from company’s computer systems (including laptops given by the company). 

 

Myth buster on Status of a director before appointment, during employment & after resignation/retirement from board:

It is the directors themselves who shall ensure all the secretarial compliances like audit & filing of financials, returns and updation of statutory records are done in time.  Even a delayed compliance (i.e filing with fine after due date) can invite action against directors of the company and RoC has sent many show cause notice for that reason recently.  Further more, it becomes the responsibility of directors to update company on any new directorships, acquisition of shareholding in a new company or a firm and ensure that you remain silent in such board meetings where there is dealing with a company in which you are a shareholder or director.  Ask your Company Secretary or Compliance department whether they are closing observing compliance under Labour laws, negotiable instruments Act, Securitis laws, Foreign Exchange laws (FEMA) and Competition laws as the penalties under these laws are severe in nature.   

 

Caution point on Status of a director before appointment, during employment & after resignation/retirement from board!!!

There is a lengthy list of caution points and shareholders or other persons can create a personal liability on directors with respect to debts, taxes, contracts, prospectus, fraud and failure to obtain shareholding in the company.  Directors shall keep an eye on the rights of shareholders like their right to inspect books & papers, receive certain reports and view details of subsidiary companies, etc… and even further, the group rights of shareholders to call for a general meeting, take action for oppression, mismanagement shall be given due consideration as it may halt the functioning of the company as such. Directors should always keep their eyes & ears open on legal requirements, new legal updates and sought compounding then & there on spotting offences, so that they remain immune from all liabilities at all points in time.

 

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