Board of Directors: Appointment, Duties & CSR (Sec 135)

Directors occupy a fiduciary position of immense trust, subject to strict statutory standards and public welfare mandates.

1. Appointment and Disqualifications (Section 164)

• Every public company must have at least 3 directors, and private companies at least 2 directors. Maximum limit is 15 (can be raised by special resolution).
• Disqualifications (Sec 164): Includes unsound mind, undischarged insolvent, convicted by court of an offense involving moral turpitude with imprisonment exceeding 6 months, or failure to file financial statements for 3 consecutive years.
• Independent Directors (Sec 149(6)): A director who has zero material or pecuniary relationship with the company, its promoters, or subsidiaries, ensuring unbiased governance.

2. Fiduciary Duties of Directors (Section 166)

A director of a company must strictly adhere to the following statutory duties:

• Act in accordance with the Articles (AOA) of the company.
• Act in good faith to promote the objects of the company for the benefit of its members as a whole, and in the best interests of employees, shareholders, and the environment.
• Exercise duties with reasonable care, skill, and diligence.
• Not involve in a situation in which they may have a direct or indirect conflict of interest with the company.
• Not achieve or attempt to achieve any undue gain or advantage (either to themselves or relatives).

3. Corporate Social Responsibility (CSR) [Section 135]

India was the first country to mandate CSR spending for profitable companies.
Applicability: Every company having:

• Obligation: Must spend in every financial year at least 2% of the average net profits of the company made during the three immediately preceding financial years on social welfare activities listed in Schedule VII (e.g., education, poverty eradication, healthcare, environmental sustainability).