Friday, April 15, 2011

PROSECUTION OF DIRECTORS RESTRICTED TO ACTUAL DEFAULTEES IN TERMS OF A NOTIFICATION BY MINISTRY OF CORPORATE AFFAIRS

In super session of all earlier circulars, it is clarified that no independent or nominee shall be held liable for any act of omission or commission by the company or by any officers of the company
which constitute a breach or violation of any provision of the Companies Act,1956, and which
occurred:


  • Without his knowledge attributable through Board process includes meeting of any committee of the Board and any information which the Director was authorized to receive as Director of the Board as per the decision of the Board,
  • Without his consent or connivance or
  • Where he has acted diligently in the Board process

Where there is a Managing Director or Manager, the Managing Director or the Manager as the case
may be and in addition, the Company Secretary appointed u/s 383A or the person who has been
charged with work of maintenance and preparation of Annual Accounts in compliance
with aforesaid provisions would be officer in default. Directors including Non-Executive Directors,
officers and employees not connected with responsibility with the above provisions should not be arrayed as delinquent directors. While considering the non-executive directors for including in the list of officers in default for a particular violation of the Companies Act, it should be examined whether the violation has taken place with his knowledge attributable through board process, with his consent or connivance and whether he acted diligently or not.

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