Preface: Understanding The Context!
The enforcement and implementation of the Companies Act, 2013, in place of the erstwhile Companies Act, 1956, did not witness any major derivations from the previous one, but certainly, there have been amendments, modifications, and alterations in many fields.
The most significant shift has been in the approach towards bringing private companies and their officers under stringent regulations and norms. The primary motive was to tie the loose ends, ensure the smooth running of the company, make the officers like directors, finance officers, etc. responsible towards any wrongdoing!
Directors Role & Responsibility!
In comparison to the Companies Act, 1956, the Companies Act of 2013, the role and responsibility that vests in a director has been widened and more specifically defined. It recognizes that a very wide spectrum of duties lies with the directors, as crucial decisions depend on their judgement.
The Act, 2013, does not give out an exhaustive list of responsibilities but spells out only certain basic duties of a director:-
- Duty of care and diligence;
- Exercise of powers in good faith;
- Duty to have regard to the interest of the employees, etc.
But there are many more unsaid duties and responsibilities that have to be judiciously performed by a director. As the powers invested in them are immense, therefore, it is but natural that responsibilities are also significantly huge.
Directors Disqualification & Vacation of Office by The Director!
A relevant transformation by the way of more stringent norms and regulations regarding disqualification of directors or vacation of office by them, in the new Act, comes from the fact that they should take their role with complete earnestness.
Section 283 of the Companies Act, 1956, deals with various grounds leading to disqualification of a director. Sub-section (g) states that if a director did not attend three meetings of the Board consecutively, or, remained absent for more than three months, without prior permission of the Board, then he was deemed to have vacated his office.
A similar provision has found mention in the Companies Act, 2013, but with some changes. Section 167 (1) (b) states that the failure to attend Board Meetings for a continuous period of one year should be made a ground for the vacation of office by the concerned director regardless of leave of absence being given by the Board for the meetings held during the year.
Manifold Significance of Such Vacation!
Modifications as such have been done by the Committee for a definitive purpose! The message that comes out of such changes communicates that a director, whether appointed or nominated, should take his duties seriously, as he plays a pivotal role in the smooth running of a company.
Unable to attend Board meetings for one year is also a clear indicator that the director is absent for a long period, which naturally hampers decision making in the company.
Not attending meetings augurs to dereliction of duty by the director which may arise out of apathy or any other reason.
Thus, taking a serious note of these factors the section has introduced vacation of office, irrespective of the fact that if it is done with or without permission of the Board.
There are many more factors that lead to the disqualification of directors under the Companies Act, 2013. Some of them can be reversed to provide relief by removal of directors disqualification, but there are other reasons which cannot be altered. In such cases, the disqualified directors are left with no hopes to resurrect their career.
“A disqualified director first needs to ascertain the reason for it, then look for a solution to reverse it, if there is any provision!”
-Shweta Gupta, Founder, and CEO, MUDS