Section 166: Duties of directors
This section is for outlining the responsibilities and expected behavior of company directors.
Penalty
(7) If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
The section, clause by clause
What the section says
In plain terms
(1)Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company.
A company director must follow the company's rules as set out in its articles.
(2)A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.
A director must act honestly to promote the company's goals for the benefit of all members, and in the best interests of the company, employees, shareholders, the community, and the environment.
(3)A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
A director must carry out their duties with reasonable care, skill, and diligence, and make independent decisions.
(4)A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
A director must not get involved in situations where their personal interests conflict with the company's interests.
(5)A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
A director must not try to get unfair advantages for themselves or their relatives, and if they do, they must pay the company back the amount they gained.
(6)A director of a company shall not assign his office and any assignment so made shall be void.
A director cannot transfer their role to someone else, and any such attempt will be invalid.
(7)If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
If a director breaks these rules, they can be fined at least 1 lakh rupees but no more than 5 lakh rupees.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. The proviso ins. by Act 1 of 2018, s. 52 (w.e.f. 7-5-2018).
- 2. The proviso subs. by Act 1 of 2018, s. 52 (w.e.f. 7-5-2018).
- 3. The Explanation renumbered as Explanation I thereof by s. 53, ibid. (w.e.f. 9-2-2018).
- 4. Ins. by s. 53, ibid. (w.e.f. 9-2-2018).
- 5. Subs. by Act 29 of 2020, s. 33, for sub-section (6) (w.e.f. 21-12-2020).
- 1. The proviso ins. by Act 1 of 2018, s. 54 (w.e.f. 7-5-2018).
- 2. The proviso subs. by Act 1 of 2018, s. 54 (w.e.f. 7-5-2018).
Search the whole Act, or ask it a question, in the interactive browser.
Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.