Companies Act Section 166 — Duties of directors
CHAPTER XI APPOINTMENT AND QUALIFICATIONS OF DIRECTORS
Commercial / Corporate
Summary
Sub-section (1) states that a director must act according to the company's articles, subject to the provisions of this Act.
Sub-section (2) requires a director to act in good faith to promote the company's objects for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community, and for the protection of the environment.
Sub-section (3) says a director must carry out their duties with due and reasonable care, skill, and diligence, and must exercise independent judgment.
Sub-section (4) prohibits a director from getting involved in a situation where they may have a direct or indirect interest that conflicts, or could possibly conflict, with the company's interest.
Sub-section (5) states that a director must not achieve or attempt to achieve any undue gain or advantage for themselves or for their relatives, partners, or associates. If a director is found guilty of making such an undue gain, they are liable to pay an amount equal to that gain to the company.
Sub-section (6) provides that a director cannot assign their office, and any assignment made is void.
Sub-section (7) states that if a director contravenes the provisions of this section, they are punishable with a fine of not less than one lakh rupees, which may extend to five lakh rupees.
Official Text
(1) Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company.
(2) A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.
(3) A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
(4) A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
(5) A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
(6) A director of a company shall not assign his office and any assignment so made shall be void.
(7) If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.