Directors as Fiduciaries: Examining Duties, Liabilities, and Corporate Accountability under the Companies Act, 2013

• Shantanu

  Author

• Dr. Tanu Arora

  Author

• Dr. Narinder Khubber

  Author

The directors are placed at the forefront of the corporate governance as fiduciaries charged with the responsibility of managing and regulating the corporate affairs. The Companies Act, 2013 is a monumental change in the Indian corporate law as it clearly codifies the fiduciary responsibilities of directors, and so, the Indian corporate law is not based on a common law, but rather, a common law-based framework. The paper will critically analyse the nature, scope, and application of fiduciary duties of directors under Companies Act, 2013, especially focusing on statutory fiduciary duties in Section 166, judicial interpretation, and developing accountability in companies.

This paper evaluates the fundamental fiduciary duties including the duty of good faith, duty of care and diligence, duty to prevent conflicts of interest and the duty to act in the best interest of the company and its stakeholders. It also assesses the level of civil and criminal penalties to be charged on directors in case of breach of these obligations, such as the problem of vicarious liability, personal responsibility, and the safety of independent and non-executive directors. The paper sheds light on the issues of applying fiduciary standards, and in particular, the conflict between the need to facilitate sound corporate governance and the need to prevent too much criminalisation of board decisions through an analysis of judicial precedents and regulatory practices.

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