Director Duties Under Companies Act 2013: What Every Director Must Know in 2025

Being a director of an Indian company is not merely a title — it is a position of significant legal responsibility. The Companies Act, 2013, supplemented by the Rules framed by the Ministry of Corporate Affairs (MCA), imposes a comprehensive set of duties, disclosure obligations, and personal liabilities on directors that many board members remain unaware of until a regulatory action or shareholder dispute forces the issue. With the MCA actively updating the compliance framework — including the Companies (Appointment and Qualification of Directors) Amendment Rules, 2025, notified on 31 December 2025 and coming into force on 31 March 2026, which overhaul director KYC requirements — this is an important moment for directors of Indian companies to review their obligations.

The Companies Act, 2013 codifies director duties in Section 166. Directors must: (a) act in accordance with the articles of association; (b) act in good faith and in the best interests of the company, its employees, shareholders, community, and environment; (c) exercise duties with due and reasonable care, skill, and diligence; (d) not involve themselves in situations where direct or indirect interests conflict with those of the company; (e) not achieve or attempt to achieve any undue personal gain or advantage; and (f) not assign their office to another person. Breach of these duties can attract personal liability and disqualification. Related party transactions under Section 188 require board approval (and in some cases shareholder approval), and transactions not at arm's length or not in ordinary course of business require special resolution in many instances. The 2025 Amendment Rules change the Director KYC regime: instead of annual DIR-3 KYC filings, directors now file KYC once every three years (the first triennial cycle under the new regime, with directors who completed KYC in FY 2025-26 due again by 30 June 2028).

In practice, directors face several categories of risk that the Companies Act specifically addresses. First, liability for defaults: if a company fails to file statutory returns, maintain registers, or comply with MCA orders, directors can be held personally liable under the Act's penalty provisions. Section 149 mandates minimum numbers of independent directors on boards of listed and certain public companies, and independent directors who fail to attend board meetings consistently or who do not exercise independent judgment risk personal censure and removal. Second, insider trading and SEBI regulations: for listed companies, directors are 'connected persons' under SEBI (Prohibition of Insider Trading) Regulations, 2015, and are prohibited from trading on unpublished price sensitive information (UPSI). Third, liability in winding up and insolvency: directors of companies admitted to insolvency proceedings under the IBC, 2016 may face Section 29A disqualification from submitting resolution plans, and the Resolution Professional may investigate fraudulent or preferential transactions.

The MCA's ongoing digitalisation of corporate compliance — including mandatory e-filing of board resolutions, digital maintenance of statutory registers (mandated by the Companies (Accounts) Second Amendment Rules, 2025, effective 14 July 2025), and enhanced disclosure requirements in annual filings — means that directors can no longer treat compliance as a back-office function. Directors should periodically attend board effectiveness reviews, ensure their DIN (Director Identification Number) is active and KYC is current, and seek independent legal advice when transactions involving related parties, significant asset disposals, or unusual loans are on the board agenda. Sansa Kanoon Pranali Partners advises directors on fiduciary duties, corporate governance, related party transactions, SEBI compliance, and defence in MCA or NCLT proceedings. Contact us at sansalegal.com for a board advisory session.