What is Position of Directors ?

It is very difficult to pinpoint the exact legal position of the directors of a company. They have been described by various names, sometimes as agents, sometimes as trustees, and sometimes as managing partners of the company. But “such expressions are not used as exhaustive of the powers and responsibilities of such persons but only as indicating useful points of view from which they may, for the moment and for the particular purpose, be considered.”

We may now consider the position of the director’s form all these points of view.

Directors as Agents. A company as an artificial person acts through directors who are elected representatives of the shareholders. They are, in the eyes of the law, agents of the company for which they act, and the general principle of the law of principal and agent regulate in most respects the relationship between the company and its directors.

Directors as Employees. Although the directors of a company are its agents they are not employees or servants of the company for being entitled to privileges and benefits, which are granted under the Companies Act to the employees. But there is nothing to prevent a director form being a servant of the company under a special contract of service, which he may enter into with the company.

The Companies Act itself indicates many situations where a director may be in the employment of a company.

Directors as officers For certain matters under the Companies Act, the directors are treated as officers of the company [Sec 2 (30)]. As such they are liable to certain penalties if the provisions of the Companies Act are not strictly complied with.

Directors as trustees Directors are treated as trustees

· Of the company’s money and property; and

· Of the powers entrusted to them.
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