MCA breather for company directors

Directors in companies who have found themselves on the wrong side of the law for violations by their officers may now breathe easy.

The ministry of corporate affairs has issued a directive to all its Regional Directors, cautioning them against taking action on company directors unless it is conclusively proved that the default happened with their knowledge.

According to the current provisions under the Companies Act , penal actions for defaults committed under the company law are either to be taken against an "officer in default" or a "director(s)".

This often leaves the directors at the mercy of the investigating officers even when the default may have been without their knowledge.

"No such (company) directors shall be held liable for any act of omission or commission by the company or by any officers of the company which constitute a breach or violation of any provision of the Companies Act," the ministry said in its directive to its regional offices.

At present, there is not much clarity on who should an investigation officer prosecute for defaults taking place within a company leading to the registrar of companies often acting tough against directors of companies that have violated company law norms.

ET