Intellectual Property Rights: Practice and Drafting by Adv Gautam Matani. Register Now!
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Salil Gupta (Director)     02 November 2009

can a director and md have protection for default of company

I mother in law was the md of the company, me and my wife directors and my wifes relative another director ..this was on paper ..however the day to day all decisions and running of the company was being done by the relative fact for all practical purposes the company and its profits or losses all were of the relativ. however lately the company is in financial trouble..and we fear...there could be other issues which we are not aware yet.. during the last 8 months all of us except the relative have quit the company..our shares in the company is less than 10% the balance belongs to the there anyway.. i can protect myself, my wife and my mother in law from financial or possible other defaults of  the company..since we were in effect directors only on paper...


 6 Replies


Everything is on the paper. How you can you escape?

1 Like

Salil Gupta (Director)     03 November 2009

Yes but the fact is that we were only on paper...but in truth the company was totally run...and all decisions good or bad were taken by the other director ...and if we can take this in writing from that director and also prove in some way that we were only puppets ...



If you take an Affidavit from your relative who is responsiable for the loss of business then there is hope to you to get relief.

1 Like

Swaroop Godbole (advocate)     03 November 2009

i think at the end, theory of contribution in case of fradulent and altra vires activities will remain unsolved..

calculate all the existing and probable liabilities immidiately, then we can have sufficient material to decide where we can wind up OR sell out the company? what will be tax treatment then ? is this manufacturing concern? then we can decide as to taking benefits under sick industrial unit...  what is the amount of accumulated loss or reserves??

dear sir,

there are many options but we can think over it once we know the facts..


Swaroop Godbole

lex rem Ass.




1 Like

Raj Kumar Makkad (Adv P & H High Court Chandigarh)     03 November 2009

As you have resigned from the company since last 8 months and company is exclusively been delat with by the relative of your wife so yur status is just of a shareholder of 10% as you told so you are not liable for any wrong decisions or losses of the company except your  own share.

1 Like

CS Pooja (Company Secretary)     04 November 2009

A director will be liable for the period when he was holding the matter whether he was involved in the decision making or not.... When the meetings were held, where the decisons were taken in the company, the appropriate quorum wud have been required...hence the presence would have been shown.. plus the balance sheet would have been signed by the other director also (i.e. you/ ur wife..)... to conculde, a director cant escape the liability for the period when he was holding the directorship..

1 Like

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