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Liabilities of Directors

Directors of a company can face various liabilities under different situations: 1. To third parties for material misrepresentations in a prospectus. 2. For failure to repay minimum application money if minimum subscription was not met or for irregular share allotment. 3. For failure to perform statutory duties like maintaining accounts or filing returns. Directors are liable to the company for negligence, ultra vires acts, breach of trust, and misfeasance. They may also be criminally liable for failures to comply with legal requirements. Liabilities can include monetary fines or imprisonment. Directors generally are not liable for acts of co-directors without knowledge or suspicion of wrongdoing.

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15 views15 pages

Liabilities of Directors

Directors of a company can face various liabilities under different situations: 1. To third parties for material misrepresentations in a prospectus. 2. For failure to repay minimum application money if minimum subscription was not met or for irregular share allotment. 3. For failure to perform statutory duties like maintaining accounts or filing returns. Directors are liable to the company for negligence, ultra vires acts, breach of trust, and misfeasance. They may also be criminally liable for failures to comply with legal requirements. Liabilities can include monetary fines or imprisonment. Directors generally are not liable for acts of co-directors without knowledge or suspicion of wrongdoing.

Uploaded by

vijaysvucampus
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Liabilities OF DIRECTORS

PRESENTED BY:-

K.HARINATH REDDY
liabilities of directors:
Wherever duties are prescribed, liabilities too would be prescribed.
Directors of a company may be held liable under
the following situations:-

i. To third parties in connection with the issue of a


prospectus, which does not contains the particulars
required under the Companies Act are which contains
material misrepresentation.
ii. Under the act on the following conditions
a) On their failure to repay application money of
minimum subscription has not been subscribed.
b) On an irregular allotment of shares to an allottee if
loss or damage is sustained.
c) On their failure to repay application money if the
application for the securities to be dealt in on a
recognized stock exchange is not made or refused,
and
d) On failure by the company to pay for goods
wherein the name of the company is not
mentioned legibly.
The liabilities of the directors can be broadly divided
into following categories:-

Liability to the company

Liability to third parties

Liability for breach of statutory duties

Liability for acts of co-directors

Criminal liability
The Director’s Liability to the
Company:-

Directors are also liable to the company under the


following heads:

1.Negligence
2.Ultra vires acts
3.Breach of trust
4.Misfeasance
Liability to third parties:-

To third parties in connection with the issue

of a prospectus, which does not contains the

particulars required under the Companies Act are

which contains material misrepresentation.


Liability for breach of statutory duties:-

Directors should carry out several statutory duties most of


which relate to the maintenance of proper accounts, filing
returns or observance of certain statutory formalities.
if they fail to perform these duties, they render
themselves liable to penalties.
LIABILITY FOR THE ACTS OF
CO-DIRECTORS

A director is not liable for the acts of his


co-directors provided he has no knowledge
and he is not a party to it.
Like wise, if a director is fraudulent, his
co-directors are not liable for not discovering
his fraud in the absence of circumstances to
arouse their suspicion.
Criminal liability:-

As per the provision of the Companies Act, directors


are held liable for criminal liability in many cases such as
failure to make compliance regarding annual accounts or for
accepting deposits in contravention of the provisions.
Criminal liability could result in a monitory fine of prescribed
amounts to imprisonment for specified periods
Legal Liability Theories Available to
Victims - Terrorism
 Negligence
 Express or Implied Contract
 Strict Liability
 Duty to Maintain Secure Common Areas
 Breach of the Voluntary Duty to Protect
 D&O (Duties of care/loyalty/disclosure)
Accounting Problems are Getting
Many Companies into Trouble

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