Director’s Duties under Indian Law – A 2025 Perspective

Explore legal duties of directors under Indian corporate law.

Directors play a central role in governance. Their responsibilities have grown with rising stakeholder expectations and stricter laws.

Fiduciary Duties: Directors must act in good faith and in the best interest of the company.

Avoiding Conflict of Interest: Directors cannot engage in competing businesses or exploit corporate opportunities.

Duty of Care: Must act with due diligence, skill, and independent judgment.

Compliance Oversight: Directors are responsible for ensuring adherence to laws including CSR, ESG, and reporting norms.

Recent Cases: Courts have increasingly held directors personally liable for negligence.

Directors must balance shareholder value creation with legal and ethical responsibilities.

Related Party Transactions – Common Pitfalls & Best Practices

Avoid compliance risks in related party transactions under the Companies Act.

Related Party Transactions (RPTs) are under heavy scrutiny by regulators because they can be used to siphon company resources. Proper approvals and disclosures are critical.

Definition: Related parties include directors, key managerial personnel, their relatives, and entities controlled by them.

Approvals: Board resolution is required. In certain cases, shareholder approval through special resolution is also mandatory.

Arm’s Length Test: Transactions must be at fair market value. Independent valuation reports may be required.

SEBI LODR: Listed companies face stricter norms, including audit committee and shareholder approvals.

RPTs must be handled with complete transparency. Proper documentation and independent reviews are the best safeguards.

: Understanding Section 186 – Loans and Investments by Companies

Learn compliance rules under Section 186 for loans, investments, and guarantees.

Section 186 of the Companies Act governs inter-corporate loans, investments, and guarantees. Non-compliance may lead to heavy penalties for companies and directors.

Approval Requirements: All such transactions need Board approval. If limits are exceeded, a special resolution is required.

Limits: Cannot exceed 60% of paid-up share capital + free reserves + securities premium, or 100% of free reserves + securities premium, whichever is higher.

Interest Rate Rule: Loans must not be given below the prevailing yield of government securities.

Exemptions: Wholly-owned subsidiaries and joint ventures may have relaxed conditions.

Companies must monitor inter-corporate transactions closely and ensure board/shareholder approvals are documented.