Director's Duties & Liabilities in India: Avoid Heavy Penalties (2026)

Being a Director is prestigious, but perilous. Section 166 of the Companies Act, 2013 codifies the duties of a director for the first time in Indian law.

Ignorance is not an excuse. Directors can be held personally liable, fined, or even imprisoned for non-compliance by the company.

1. Key Duties under Section 166

• Duty to act in accordance with Articles: You cannot bypass the Articles of Association (AoA).
• Duty to exercise reasonable care: You must exercise independent judgment and skill. You cannot just rubber-stamp decisions.
• Duty to avoid conflict of interest: You cannot be involved in a situation where you have a direct or indirect interest that conflicts with the company.
• Duty not to achieve undue gain: You generally cannot make secret profits from your position.

2. Liabilities & Consequences

If a director contravenes the provisions of Section 166, such director shall be punishable with fine which shall not be less than ₹1 Lakh but which may extend to ₹5 Lakhs.

3. Disqualification of Directors (Section 164)

You can be disqualified for 5 years if:

• The company fails to file financial statements or annual returns for any continuous period of 3 financial years.
• The company fails to repay deposits or pay interest or redeem debentures.

Frequently Asked Questions (FAQ)