Duties and Liabilities of Independent Directors

By Admin on 2025-08-23

Independent Directors have fiduciary duties towards the company and its stakeholders. Their primary duties include exercising due diligence, avoiding conflicts of interest, and ensuring compliance with laws and ethical standards. They must act in good faith to protect the interests of shareholders, employees, creditors, and the community. As per Section 166 of the Companies Act, directors must not gain undue advantage and must disclose any conflict. Importantly, Independent Directors are protected from liability for acts of omission or commission by the company if they acted diligently and in good faith. However, negligence or failure to perform oversight duties can expose them to penalties under SEBI and MCA regulations.

📌 Example: If a company manipulates financial results and Independent Directors can prove they raised concerns in board meetings and insisted on an internal audit, they will not be held liable. But if they ignored red flags, they may face regulatory action.