Qualification / duties and liabilities of director

by • 06/01/2013 • GeneralComments (0)508

Q.19 Describe the qualification / duties and liabilities of director.



A person is appointed as director, if he fulfills the following requirements.

1. He must be natural person.

2. He must be shareholder of the company and has purchase maximum number of share, which is necessary to become a director.

3. He must have attained the age of majority, which is of eighteen years.

4. He must have given his willingness to work as director at least fourteen days before the annual general meeting at which directors are selected.

5. He must be of sound mind.

6. He has not applied to be adjudicated as an insolvent and if already declared insolvent then he has been discharged from his liabilities.

7. He has not been convicted by a court of law for an offence involving moral turpitude.

The above mentioned qualifications are not necessary if the director is a representative of the creditors, government, an institution or authority or whole time employee of the company or chief executive of the company.



The duties of the directors are determined in the articles of association of the company keeping in view the natural and scope of the business of the company. However the duties of the directors may be as follows.


1. The directors must comply provisions of Companies Ordinance, Articles of association and memorandum of associations and any statutory modification thereof for the time being in force.

2. The first directors of the company are bound to fulfill all the formalities required for the registration of the company.

3. They must set out policies for the smooth running of the company’s activities.

4. In accordance with the provisions of companies’ ordinance and articles of association, to arrange the annual meeting of the company.

5. They are bound to present the annual report of the company in annual general meeting.

6. The directors must active part in the management of the company with reasonable skill and diligence.

7. They must make arrangements for the proper utilization of company’s capital.

8. They must check and inspect the accounts of the company.

9. It is the duty of the directors to submit to the registrar of the company, the copies annual account, notice and other documents if so required.

10. It is the duty of the directors to make arrangements for the payment of dividend to the shareholders when it has been declared.

11. To enter into contract with others on behalf of the company.

12. The directors are bound to submit statement of affairs at the time of winding up company.



According to Companies Ordinance 1984, the liabilities of the Directors may be as follows.

1. General Liabilities

The general liabilities of the directors of the company are limited by shares up to the amount of their holdings.


2. Civil Liability for Misstatement in Prospectus

Any director and promoter of the company are liable for any loss or damage sustained by reason of any untrue statement included into the prospectus.


3. Criminal Liability for Misstatement In Prospectus

When a prospectus includes untrue statement, every person .who signed or authorized the issuance of prospectus (directors or Promoters) is punishable with imprisonment up to two years and with fine up to rupees ten thousand or both unless he proves that statement was immaterial or he has reasonable ground to believe that statement was true.

4. Unlimited Liability

In a limited company, the liabilities of the directors or of any director may be if so provided in the memor.4ndum, unlimited.


5. Liability for Contradiction of Ordinance

Any one who knowingly and willfully contravenes the provisions of Companies Ordinance 1984, regarding the election and other matters about the directors is liable to a fine up to ten thousand rupees.


6. Liability or Notification

A person who is not qualified to be a director or chief executive of the company or has vacated his office as director or chief executive but represents himself or act as director or chief executed is liable to fine up to rupees two thousand daily.


7. Liability for irregularity in Meetings

If the meeting of the directors is held in the absence of a quorum (one third or four which

ever is greater or not held at least twice in a year, the directors are liable to fine up to ten thousand rupees and additional rupees one hundred for every day if the default continues, in case of listed companies and up to rupees two thousand and additional rupees fifty daily if the default continues, in e of non-listed company.


9. Liability for Negligence

Any director, chief executive or any officer the company is liable for any negligence default; break of trust, of which he may be guilty in relation to the company,


9. Liability Far Political Payment

Any company which pays any amount for any political purpose to any party or an individual, cry director or officer of the company who is knowingly and willfully in default is punishable with imprisonment up to two years and also be liable to fine.

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