Note On Vicarious Liability Of Directors And Shareholders

The Companies Act, 2013 as well as the erstwhile Companies Act, 1956 contain a set of liabilities restricting the activities/actions of the Directors and also the Shareholders. The present article covers the various liabilities of the Directors and Shareholders under Companies Act, 2013 as well its comparison with the liabilities set forth in the erstwhile Companies Act, 1956.

The first set of liabilities is statutory in nature, being specifically set forth in the Companies Act, 2013 (hereinafter referred to as "the 2013 Act"). These could either be a civil liability requiring directors to make payments to victims or the state, or they could be criminal liability resulting in fines or imprisonment. The approach in the new regime has been to impose stiffer penalties in case of a criminal offence so as to act as a strong deterrent on directors' conduct when it falls short of the desired standards.