Tag: Directors
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Vacating Directorship in Companies: Examining a Fallacy
[Paras Ahuja is a third year law under-graduate at National law University, Jodhpur] Section 167(1) of the Companies Act, 2013 provides for several grounds that mandate directors of companies to vacate their office. Section 167(1)(a) provides for one such ground, wherein the office of the director shall become vacant if he is disqualified to be a director under section…
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Disqualification of Directors: Construing Retrospectivity
[Aditya Singh Chauhan is a B.A. LL.B (Hons.) student at the National Law University, Jodhpur] The Companies Act, 2013 (“Act”), under section 164(2)(a), provides for the disqualification of directors of a company in case they fail to file financial statements and annual returns for a period of at least three (3) consecutive financial years. The…
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MCA Clarifies on Legal Actions against Outside Directors
[Posted by Umakanth Varottil] Recognizing the specific roles that different directors of a company play, section 149(12) of the Companies Act, 2013 contains a safe harbour provision that protects certain types of directors against liability. It relates to three types of directors, who are, for the sake of convenience, referred to as “outside” directors: (i)…
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Shareholder Ratification for Directors’ Breach of Duty
[Rajat Maloo is a III year B.A., LL.B. (Hons.) student at the National Law School of India University, Bangalore] Common law provides that those to whom duties are owed may release those who owe the duties from their legal obligations. In the corporate law context, this principle has been applied by courts in cases where…
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Reinforcing the Corporate Governance Framework on Director Competence
[Tushar Oberoy and Rishabh Sharma are 4th year BA.LL.B. (Hons.) students at NALSAR University of Law, Hyderabad] A director of a company has manifold duties and responsibilities that include ensuring that the interests of all shareholders are protected and that healthy management practices are put in place. For effective fulfillment of these responsibilities, a competent…
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Delhi High Court Rules on Disqualification of Directors
[Posted by Umakanth Varottil] In order to address the scores of shell companies in existence, the Ministry of Corporate Affairs (MCA) introduced a range of measures in the wake of the 2017 demonetization exercise. One of them pertains to the disqualification of directors in companies that have failed to file financial statements or annual returns…
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Qualifying test requirements for Independent Directors – a hasty, slipshod & cumbersome requirement
[Posted by Jayant Thakur] I have written a piece for Moneylife on the new requirements of the Ministry of Corporate Affairs for independent directors that mandate existing as well as first-time independent directors to enrol in a databank as also pass certain qualifying test. The Rules, that are spread over several notifications and also an…
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Director Liability: Nexus with Role and not Position
[Pammy Jaiswal is a Partner at Vinod Kothari and Company, and can be reached at corplaw@vinodkothari.com] While there have been an increasing number of rulings on the liability of directors, the question that mostly came up for examination related to their involvement in the day-to-day operations of the company. The liability of non-executive directors has mostly…
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Shareholding Patterns and Director’s Duty of Loyalty: Comparative Analysis of India and the US
[Ishani Mookherjee is a 3rd year B.A. LLB (Hons.) student at Jindal Global Law School] The Delaware Supreme Court, in Cede v. Technicolor Inc., examined the applicability of the business judgment rule in the United States (US). For a business decision to be protected by this rule, two conditions have to be satisfied – the duty…
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The (Ambiguous) Position of Chairman Emeritus in Corporate Governance
[Priya Garg is a 5th year student at West Bengal National University of Juridical Sciences (WBNUJS), Kolkata] When Ratan Tata, the then Chairman Emeritus of the Tata Group of companies, allegedly exercised his influence over the Group’s directors to dethrone its then Chairman, Cyrus Mistry, because of the former’s dissatisfaction with the latter’s functioning,[1] a new corporate…