As a company director, you must adhere to several key compliance duties under the Companies Act, 2013, to ensure transparent and ethical governance. Firstly, you are required to disclose any interest in other entities using Form MBP-1 at the first board meeting of each financial year or when changes occur. Additionally, a declaration of disqualification under Sections 164(1) and 164(2) using Form DIR-8 is necessary under similar circumstances. Independent directors must also declare their independence at the first board meeting annually or upon any changes. Directors must also complete their KYC via Form DIR-3KYC by September 30 each year to verify and update their details with the Ministry of Corporate Affairs. Moreover, attendance at at least one board meeting every twelve months is mandatory to ensure active participation. Finally, if a director has an interest in a contract or arrangement, they must disclose it at the relevant board meeting, although private company directors may still participate after disclosure. These responsibilities are essential for maintaining compliance, transparency, and ethical standards within the company.
Page Contents
- Compliance responsibilities under the Companies Act, 2013 for a Company Director
- (a) Disclosure of Interest via MBP-1 at the First Board Meeting of Every Financial Year or Whenever There is a Change
- (b) Declaration of Disqualification Under Section 164(1) and 164(2) at First Board Meeting of Every Financial Year or Whenever There is a Change
- (c) Declaration of Independence Under Section 149(7) at the First Board Meeting of Every Financial Year or Whenever There is a Change
- (d) Directors KYC
- (e) Requirement to Attend One Board Meeting During a Period of Twelve Months
- (f) Disclosure of Nature of Interest in Contract or Arrangement at the Board Meeting in which discussions pertaining to it will take place
Compliance responsibilities under the Companies Act, 2013 for a Company Director
(a) Disclosure of Interest via MBP-1 at the First Board Meeting of Every Financial Year or Whenever There is a Change
Applicable Provision:
Pursuant to Section 184 of the Companies Act, 2013, every director must, at the first meeting of the Board in which they participate as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the disclosures already made, disclose their concern or interest in any company, body corporate, firm, or other association of individuals which shall include the shareholding, in form MBP-1.
Purpose: Ensures transparency and avoids conflicts of interest.
(b) Declaration of Disqualification Under Section 164(1) and 164(2) at First Board Meeting of Every Financial Year or Whenever There is a Change
Applicable Provision:
Pursuant to the provisions of Section 164 of the Companies Act, 2013, Every Director shall at the first Board Meeting of every financial year or whenever there is change submit a declaration of disqualification under Section 164(1) and 164(2) of the Companies Act, 2013 in form DIR-8.
Purpose: Ensures that only sensible, responsible, and compliant persons are part of the Board of the Company.
(c) Declaration of Independence Under Section 149(7) at the First Board Meeting of Every Financial Year or Whenever There is a Change
Applicable Provision:
Pursuant to Section 149(7) of the Companies Act, 2013, every independent director must at the first meeting of the Board in which they participate as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in circumstances affecting their independence, give a declaration that they meet the criteria of independence as provided in Section 149(6).
Purpose: Ensures transparency, independence, and absence bias/conflict of interest.
(d) Directors KYC
Applicable Provision:
Pursuant to Rule 12A of the Companies (Appointment and Disqualification of Directors) Rules, 2014, every individual who has been allotted a Director Identification Number (DIN) on or before the end of the financial year and whose DIN is in approved status must file Form DIR-3KYC before 30th September of the financial year for the first time or when details need to be updated/changed.
In other cases, every individual holder of DIN and whose DIN is in approved status, shall do the director KYC via DIR-3KYC (web) before 30th September of the financial year.
Purpose: Verifies existing details and for updating information about the director in the records of the Ministry of Corporate Affairs.
(e) Requirement to Attend One Board Meeting During a Period of Twelve Months
Applicable Provision:
Pursuant to Section 167 of the Companies Act, 2013, the office of a director shall become vacant if the director absents themselves from all the meetings of the Board of Directors held during a period of twelve months, with or without seeking leave of absence from the Board.
Purpose: Ensures active participation, involvement, and responsibility of a director in decision-making and other crucial matters related to the Company.
(f) Disclosure of Nature of Interest in Contract or Arrangement at the Board Meeting in which discussions pertaining to it will take place
Applicable Provision:
Pursuant to Section 184 of the Companies Act, 2013, every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into with:
- A body corporate in which such director or such director in association with any other director holds more than 2% shareholding or is a promoter, manager, CEO of that body corporate; or
- A firm or other entity in which such director is a partner, owner, or member,
shall disclose the nature of their concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting.
However, in the case of a Private Company, a director, after disclosure of interest, may participate in the meeting.
Purpose: Ensures transparency and avoids conflicts of interest.
In Conclusion:-
These responsibilities are crucial for maintaining transparency, compliance, and ethical governance within the company.
Being a director of a company, it is imperative to adhere to the provisions of the Companies Act, 2013, which outline your responsibilities and obligations. These duties—ranging from disclosing interests and declaring independence, to ensuring participation in board meetings and maintaining up-to-date KYC records —are designed to promote transparency, prevent conflicts of interest, and ensure the integrity of the company’s governance. By fulfilling these responsibilities diligently, you contribute to the ethical and compliant functioning of the company, ultimately safeguarding its reputation and success.
Author Bio
