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Director is a very important person in context of a Company. He has been vested with certain crucial roles and responsibilities. Therefore the appointment of director must be made carefully. There are some liabilities and disqualifications associated with a Director’s appointment and we have discussed the same in this article.
The Liability of the Directors can be both joint and collective for any and every act prejudicial to the interests of the company. Though the Director and the Company are separate entities, under the following cases the Director may be held liable on behalf of the Company:
A person shall not be eligible for appointment as a director of a company or Change in Directors, if —
Every director shall inform the company concerned about his disqualification in Form DIR-8 before he is appointed or re-appointed.
Now, it has been made the duty of the company to mandatory intimate ROC (in E-form DIR-9) about its failure, and if it fails to intimate within a period of thirty days, the Directors and officers of the company shall be the officers in default.
Also, it has been made the duty of the Auditors to state in its Auditors Report whether any director is disqualified for non-compliance as noted above.
The office of a director shall become vacant in case—
The office of director held by him has become vacant on account of any of the disqualifications specified above and then also the person functions as a director of the company, then he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees to maximum five lakh rupees, or with both.
To protect their interest and avoid undue liability, it is advisable that directors adopt a cautious approach. A few of the safeguards that can be considered and implemented are as follows:
Hence it can be summarized that the Directors need to ensure that they take legal advice, in cases of doubt to avoid penalty and imprisonment. They should be cautious in their approach and this way they can avoid falling into legal trouble. In case you need more information regarding Appointment of Director, liabilities or disqualifications of a Director, then you may go through our blogs on the Enterslice website.
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Procedure for Issuance of Duplicate Share Certificate
Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.
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