Question

Based on the latest Companies Act 2016, discuss the difficulties in the process of monitoring directors in discharging their duties. Illustrate with examples.

Answer 1

In the companies act 2016 :-

The duties of directors are given in the section 166 :-

The duties of the directors as per section 166 of companies act are as follows :-

1. To act as per Articles of association of the company

2. To act in good faith in order to promote the objects of the company for the benefit of its menbers as a whole & in best of interests of company, employees, shareholders, community and for protection of environment

3. Exercise his duties with due & reasonable care, skill & due diligence, shall exercise independent justice

4. He/ she shall not involve in the situation in which he may have a direct / indirect interest that conflicts/may conflict with the interest of the company.

5. He shal not acheive or attempt to acheive any undue gains or advantages, either to himself, relatives, partners, associates & if he found guilty of this he shall be liable to pay an amount equal to that gain.

6. He shall not assign his office & any such assignment shall be void.

Some other duties of the directors are :-

1. To file all the required documentation with regulatories.

2. To convene general meetings without contravention of any legal aspects

3. To attend board meetings of the company

4. To disclose interest in the transactions which are doing by the organisation

5. To approve the annual financial statements.

6. To approve and attach the board report.

7. To appoint first auditors.

if the director contravenes the provisions of this act, such director shall be punishable with fine of minimum ₹100000 and it may extend upto ₹500000.

Difficulties in monitoring the directors in discharging their duties :-

1. Main problem is without voluntary disclosure of the interest of the director, no one can know that a director has an interest in particular transaction done by the organisation. This is the major difficulty in monitoring the directors duties.

2. Monitoring the decision making of a director whether, director is acting as independent or influenced by any other person.

3. Without a clean and crisp investigation, it is highly impossible to monitor the activities of the director, that there is no undue advantage to his relative, or others from the activities of the company

4. Attending of all the board meetings will b difficult, many of directors shows interest to attend the board meeting ine audio video sources.

5. every director cannot file all the documentation required to be filed by him to the regulatories on his own motion, it means the company secretary has to overlook all the legal compliances.

6. directors has to attend number of possible board meetings and has to approve the minutes of the the board meetings, has to attach on the board reports to the annual financial statements. This may be difficult because the directors who are attending a board meeting they may or may not attend the next board meeting in which the minutes of the previous board meeting was came to approval.

These are some of the difficulties in monitoring director duties as per companies act 2016.

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