Directors Liability Recurring Issues and Some Recent Developments – MCA has been making life easier for directors iPleaders and Intelligent Legal Risk Management Solutions LLP

Non-executive Directors Independent Directors Nominee Directors of Government or Public Sector Financial Institutions Directors appointed under SICA, 1985 Non-executive Directors on board who do not take remuneration nor engage in minutiae of management iPleaders and Intelligent Legal Risk Management Solutions LLP

Direction to RoC Registrar of Companies should take extra care in examining the cases where above Directors are also identified as Officer in default. No such Directors shall be held liable for any act of omission or commission by the company or by any officers of the company which constitute a breach or violation of any provision of the Companies Act, 1956 (provided…) iPleaders and Intelligent Legal Risk Management Solutions LLP

Provided… …breach or violation occurred without his knowledge attributable through Board process without his consent or connivance where he has acted diligently in the Board process. iPleaders and Intelligent Legal Risk Management Solutions LLP

The Board Process The Board process includes meeting of any committee of the Board and any information which the Director was authorised to receive as Director of the Board as per the decision of the Board. iPleaders and Intelligent Legal Risk Management Solutions LLP

Guidelines to RoC for investigation Must see if directors resigned and Company failed to file Form 32 Non-ex Status of Director should be captured in Annual Filings iPleaders and Intelligent Legal Risk Management Solutions LLP

Section 297 Approvals This is required if directors are engaging in any related party transaction with the Company. sale, purchase or supply of any goods, material or services underwriting the subscription of any shares in, or debentures paid-up share capital of not less than rupees one crore Central Government Approval required iPleaders and Intelligent Legal Risk Management Solutions LLP

Simplified Online procedure for S.297 approval From 24 th Spetember Application and grant – both online Practicing Professionals certification required stating that theres no conflict of interest, contract is competitive and arms length, and that provisions of the Act have been complied with iPleaders and Intelligent Legal Risk Management Solutions LLP

Directors still miserable… Often being sued in India – as pressure tactics in litigation. Very difficult to anticipate. Debt recovery Check Bounce S. 420 – fraud by company Also, often proceeded against under labour laws, environmental laws for non-compliance by company iPleaders and Intelligent Legal Risk Management Solutions LLP

Measures of caution Always act with utmost honesty and good faith Exercise standard of care – as a reasonable man will act What is expected from a person of expertise and experience as the Director in question If these tests are satisfied – a court can let the Director go under S. 633 iPleaders and Intelligent Legal Risk Management Solutions LLP

Finally… Take Directors & Officers insurance coverage Company can finance it (other expenditures for defending charges for illegal activity can not be passed on to company, even if shareholders are willing) iPleaders and Intelligent Legal Risk Management Solutions LLP

Thank You Thanks to all of you for watching the presentation. iPleaders and Intelligent Legal Risk Management Solutions LLP