Roles and Responsibilities of Directors Under Companies Act


Section 157A of the Act

  • The business of the company shall be managed by or under the direction of the directors.
  • The directors may exercise all the powers of a company except any power that the Act or the company’s constitution requires the company to apply in general meeting.
  • Under common law, directors are regarded as fiduciaries and therefore owe fiduciary duties to their companies subject to Section 157 of the Act.
  • Act also prescribes certain duties on directors, which mirror their general duties under the common law.

157(1): Director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office.

157(2): an officer or agent of a company shall not make improper use of any information acquired by virtue of his position as an officer or agent of the company to gain, directly or indirectly, an advantage for himself or for any other person, or to cause detriment to the company.

157(3): a breach of sections 157(1) and 157(2) renders the officer or agent liable to the company for any profit made loss suffered by the company due to breach and the officer or agent shall be liable upon conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding one year.

157(4): provides that the section is in addition to and not in derogation, of any other rule of law relating to the duty or liability of directors or officers of a company.

Section 157 makes certain functions mandatory and does not derogate from existing rules. Act does not purport to be an exhaustive statement of the law relating to the duties that directors owe to their companies.

In the exercise of their duties, directors must act bona fide in what they consider is in the best interests of the company. As held in a legislative case law: when the acts of directors are challenged, the courts do not substitute their own judgment for that of the directors.

Sec 159: of the Act provides that in exercising their powers, directors are entitled to have regard to the interests of the company´s employees generally, as well as the interests of its members. The entitlement to have regard to the interests of employees is also a sensible one since advancing the interests of employees will often be in the best interests of the company.


1. Accounting records & Annual Accounts
A director needs to guarantee that the necessity to keep legitimate bookkeeping records is actively catered to. Section 199 of the Act requires the organisation to keep such accounting records that adequately clarify the transactions and monetary positions of the organisation.
Section 201 of the Act requires the directors to deliver to the shareholders a profit and loss account and an asset report in any event once every date-book year.
The organisation’s profit and loss record and asset report must be put forward before the organisation at its Annual General Meeting inside the initial year and a half after consolidation and from there on at interims no more than 15 months from the previous records.
Absolved private limited companies with a turnover of under $5 million are exempted from documenting examined accounts. However, the legal necessity to keep up bookkeeping records still exists.
The accounting records must be maintained at such places as the directors think fit. Failure by a director to take reasonable steps to ensure compliance with the requirement (Section 199(6)) renders him guilty of an offence.

Despite anything mentioned in the organisation’s Memorandum or Articles of Association, the Directors should not, without the previous sanction of the organisation, practice any power of the organisation to issue the unissued shares of the organisation (Section 161).
Any director, who issues shares without conceding the organisation, might be subject to repay the organisation as well as the individuals who were issued the shares and incurred losses.

3. Dividends
An organisation Articles of Associations contains the provisions regulating the declarations of dividends.
It is the capacity of the director to recommend the payment of the profit and the capacity of the shareholders when all is said in done meeting to pronounce the profit.
If the director fails to abide by such obligation, they are subject to a personal liability to the creditor (Section 403(2) of the Act).

4. Meetings
The Act provides for holding of meetings, such as:

  1. Statutory meetings – Section 174
  2. Annual general meetings – Section 175
  3. Shareholders representing 10% of the company’s paid-up capital can hold an Extraordinary General Meeting – Section.

If the requirements are not adhered to, the company, as well as every officer, will be held guilty of an offence.

5. Appointment of Auditors
The company director must appoint an auditor within three months of incorporation, who will then hold office until the time the company’s Annual General Meeting concludes (Section 205 (1)).
At every Annual General Meeting, the company must appoint an auditor will hold office until the next meeting (Section 205 (2) of the Act).
If the above-mentioned terms are not complied with, the directors, as well as the company, will be held guilty. However, if the company can be absolved from appointing an auditor in cases where the organisation is dormant or if a private exempt company has a turnover of less than $ 5 million.

6. Duty to Disclose

(a) Interests in transactions
According to Section 156, a Director is required to disclose his interest in transactions / proposed transactions/ corporations/ firms; at a meeting of the company directors. Failure to do so will constitute a breach.

(b) Holdings in the Company
A record of the Directors’ Holdings in shares and related parties is required to be maintained by the Company under Section 164.

(c) Information for Register of Directors
Under Section 173, a Company is obliged to keep a record of Auditors, Directors and Secretaries.
If a Director cannot comply with maintaining this standard for reasons that are related to him, he is required to give the company a written notice of the same as per Section 165.

(d) Disposal of the Company’s undertaking
Notwithstanding anything in the company’s Memorandum or Articles, the directors shall not carry into effect any proposals for disposing of the whole or substantially the whole of the company’s undertaking or property unless the company in general meeting (Section 160) has approved those proposals.

(e) Cross-Directorship
An individual cannot hold the position of a Director of two competitive companies. Nonetheless, if the companies approve such a situation, cross-directorship is not considered a breach.