JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD MBA I LEGAL AND BUSINESS ENVIRONMENT Previous Question Paper (May - 2022 - R19)

The Companies Act 2013 introduced significant reforms to corporate governance and transparency. Key features include:

• One Person Company (OPC): Allows a single individual to form a private company, promoting entrepreneurship.
• Corporate Social Responsibility (CSR): Mandates that companies meeting specific net worth, turnover, or profit thresholds must spend 2% of average net profits on CSR activities.
• Electronic Governance: Encourages paperless compliance, enabling electronic filing of documents and virtual board meetings.
• Independent Directors: Requires listed companies to appoint independent directors to ensure transparency and protect minority shareholders.
• Class Action Suits: Empowers shareholders to file suits against the company or directors for fraudulent or oppressive conduct.
• National Company Law Tribunal (NCLT): Established a specialized quasi-judicial body to expedite the resolution of corporate disputes and insolvency cases.
• Women Directors: Mandates the appointment of at least one woman director for certain classes of companies to promote gender diversity in leadership.

Directors act as the agents of the company and are responsible for its management. Their powers and liabilities are defined as follows:

Powers of Directors: Directors exercise powers collectively through the Board. Key powers include:

• Power to issue shares and debentures.
• Power to borrow money on behalf of the company.
• Power to invest company funds and grant loans.
• Power to approve financial statements and the Board's report.
• Power to appoint or remove key managerial personnel.

Liabilities of Directors: Liabilities arise from their fiduciary duty and statutory obligations:

• Liability for Breach of Trust: Directors are liable for any loss caused by their negligence or breach of fiduciary duty.
• Liability for Ultra Vires Acts: Directors are personally liable for acts performed beyond the scope of the company's Memorandum of Association.
• Statutory Liability: Directors face penalties for non-compliance with the Companies Act, such as failure to file annual returns or financial statements.
• Liability for Fraud: Under Section 447, directors are held personally and criminally liable for fraudulent activities, with unlimited liability in cases of proven fraud.
• Liability for Misstatement in Prospectus: Directors are liable to pay compensation to investors for any loss incurred due to misleading statements in a prospectus.