Rights of Directors, and the Registers Kept About Them

In one line

A director has rights the Act gives him personally, chiefly to be told about meetings, to see the books and to be paid, and the company must keep a public register of who its directors are and what they own.

In exam wording: the Act confers on a director, among others, the right to notice of Board meetings under section 173(3), the right of inspection of the books of account under section 128(3), the right to participate and vote, the right to be heard before removal under section 169, and the right to remuneration under section 197. Section 170 requires a register of directors and key managerial personnel and their shareholding, section 171 gives members a right to inspect it, and section 172 supplies the residual penalty for Chapter XI.

Why the law has this at all

A director's duties in section 166 are demanding, and several of them are impossible to discharge without corresponding rights.

He must act with due and reasonable care, skill and diligence. He cannot, unless he is told when the Board meets and can see the books. So section 173(3) gives him seven days' notice and section 128(3) gives him access.

He must exercise independent judgment. He cannot, unless he may speak and vote and, when the company turns against him, be heard before he is removed. So section 169(1) and (3) protect him.

The registers exist for the opposite reason. A director's rights are personal; the register is public. Anybody dealing with a company needs to know who its directors are and what they hold, and section 170 read with section 171 makes that discoverable, by the members free of charge and, through the section 170(2) return, by the world through the Registrar.

Some words this chapter uses

Key managerial personnel is defined in section 2(51). Securities held means the shares, debentures and other securities a director or KMP holds. An extract is a copy of part of a register. Residual penalty means one that applies where no other is provided. Free of cost means without charge, which is unusual: most inspections in the Act carry a prescribed fee.

The rights of a director, gathered

The Act has no single section of rights, so an answer must assemble them and cite each.

1. The right to notice of Board meetings. Section 173(3): not less than seven days' notice in writing to every director at his registered address, by hand, post or electronic means. The officer whose duty it is to give notice and fails is liable to twenty-five thousand rupees under section 173(4). A meeting at shorter notice for urgent business needs at least one independent director present, or ratification afterwards.