Nominee director

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Nishila (Querist)

03 May 2012 Hey Friends,

Can any one tell me whether a nominee director be held liable in case of frauds?
If yes than under provisions of which section?

CS Mitesh Mehta

CS Mitesh Mehta (Expert)

04 May 2012 Nominee Directors are appointed by certain shareholders, third parties through contracts, lending public financial Institutions or banks, or by the Central
Government in case of oppression or mismanagement. The extent of a nominee Director’s rights and the scope of supervision by the shareholders, is
contained in the contract that enables such appointments, or (as appropriate)the relevant statutes applicable to such public financial institution or bank. However, nominee Directors must be particularly careful not to act only in the interests of their nominators, but must act in the best interests of the company and its shareholders as a whole.The fixing of liabilities on nominee Directors in India does not turn on the circumstances of their appointment or, indeed, who nominated them as Directors. Certain duties and liabilities that apply to, or can be affixed on,Directors in general. Whether nominee Directors are required by law to
discharge such duties or bear such liabilities will depend on the application of the legal provisions in question, the fiduciary duties involved and whether such
nominee Director is to be regarded as being in control or in charge of the company and its activities. This determination ultimately turns on the specific facts and circumstances involved in each case.

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