Be Alert!-MCA notifies about liabilities of Directors and KMPs

Clarification on prosecution filed or internal adjudication proceedings initiated against Independent directors, non-promoters and non KMPS non-executive reg.

In Companies Ac, 2013 there are several provisions where proceedings are vital to proposed against an officer in default for abusive committee.

Generally, a whole time director and key managerial personnel are linked with day to day work of the company and therefore whole time director and key managerial personnel are liable for default committee by a company.

The directors, who have precisely given their permit for incurring liability in terms of GNL-3 filed with the registrar, would be liable in the absence of KMP.

The liability of a person will arise, who is under the immediate authority of the board or any KMP, if he has submitted his consent for incurring liability of any of the provision dealing with maintenance, filing or distribution of the accounts in GNL-3 form.

However in such cases, the action should be initiated only contrary to a specific director, officer, or any other person who is answerable and accountable for the default.

Independent directors (IDs) and non-executive directors (NEDs) (non- promoters and non-KMPs) should not align in any illegal or civil proceedings under the Act, unless the criteria defined in section 149(12) is met.

Excluding Independent directors (IDs) the Non-promoters, Non-KMPs and non-executive directors (NEDs) would exist in the following cases:

1. Directors who are selected by the Government on the public sector operations.
2. Directors who are selected by Public sector financial institution, financial institutions, or banks acquiring participation in equity of the company or else
3. Directors selected in pursuance to any legal or administrative needs by the NCLT.

Unless any specific requirement is provided in the Act, all particulars of filing, records with the registry, maintenance of statutory registers or minutes of the meetings, or compliance with the orders issued by the statutory authorities, including the NCLT under the Act, are not the responsibility of the Independent directors (IDs) or non-executive directors (NEDs). The responsibilities of non-executive directors (NEDs) may arise when there is no whole time director (WTDs) and key managerial personnel (KMPs).

To ascertain the involvement of the concerned officers of the company necessary documents are required at the time of giving notices to the company during inquiry, inspection, investigation, or proceeding.

To ascertain whether a particular director or the KMP was serving in the company, the e-forms DIR-11 and DIR-12 should also be examined with the copies of annual returns and financial statements.

Guidance may be required from the MCA through the office of DGCA for any proceedings required to be initiated by the Registrar with regard to the liability of any person.

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