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Singhania & Partners organizes an Interactive Session on Directors’ Liability-Pitfalls

MediaInfoline September 2, 2016

Singhania & Partners a leading law firm in India organized an Interactive Session on Directors’ Liability-Pitfalls vis-à-vis privileges. This Session took place at Business Sweden, Swedish Embassy, Delhi in the presence of Justice M.M.Kumar (Retd.) President, National Company Law Tribunal and Sara Larsson, General Manager, Swedish Chambers of Commerce in India and H.E Jan Lyukx, Hon’ble Ambassador of Belgium to India to discuss the prestigious position of a Director and the various privileges and pitfalls that come with it.

Appointment as a Director is now emerging as a lucrative source of income for experienced professionals especially post retirement but it comes with its own pitfalls. The Seminar was held to discuss amongst other things the question, Can proceedings be initiated against the Director in case of financial wrongdoings by the company and if so, what are the defences available to him?

Ravi Singhania, Managing Partner of Singhania & Partner, said, “The foremost and important thing for Board of Directors is to familiarize themselves with not only operations of the enterprise but also key management and senior executives to be aware of the environment at the company. There is also need to ensure due compliance of the relevant legislations like competition law, company law, foreign exchange management laws as well as SEBI compliances. Insurance only covers bonafide actions.  If they accept the board position it is important that they take this privilege seriously or else they would be in  a hot soup. We guide our clients in ensuring an effectively functioning board.”

Typically, Directors’ liabilities can arise under the Companies Act and under other laws. Under the Corporate Law, an Independent Director can be held liable only if omission or commission by a company occurred with the director’s knowledge. In other cases, the question of imposing such vicarious liabilities is not subject to any limitation. In corporate law, to quash a complaint against a Director, the latter must furnish acceptable circumstance to substantiate his contention. With various opportunities available for professionals, it is also imperative that Directors have well-drafted agreements covering indemnification. Directors’ and officers’ liability insurance and indemnification should sufficiently cover the director even after resignation/retirement.

Addressing the gathering Justice M.M.Kumar (Retd.) President, National Company Law Tribunal said, “NCLT always tries to avoid litigation and long process of fighting a legal case and instead tries and help in reconciliation or settlement. It is very important to understand how these laws work and the companies should abide by these laws. NCLT works in ensuring that the law is being adhered to by the companies. Such seminars and conferences make people aware of laws and the pitfalls.”

Speaking on Director Privileges during the session Mr.Arvind Singhal, Chairman-MD, TechnopaK Advisors pointed out how a good board should function, “Mission of a good Board is to assist in Value Preservation and Value Creation. Every director should have a holistic oversight of current business operations and ensure highest standards of governance (mandatory as well as own values) The Board should have sufficient diversity (backgrounds & expertise of various members) and a mix of “operational” and “strategic” thinkers and while it should have Subject Matter Experts, should also have some members who represent another industry from where some best practices could be learnt. And finally, given substantially increasing time requirements from each of the Board members, and the expansion of their role, Directors’ compensations has to be suitably aligned.”



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