How Indian law can resolve the conflict of dual loyalties faced by nominee directors.
Authors
Rishika Agarwal, Jindal Global Law School, O.P. Jindal Global University, Sonipat Haryana, India.
Aparajita Kaul, NALSAR University of Law, Hyderabad, India.
Summary
The objective of this article is to determine how Indian law can resolve the conflict of dual loyalties faced by nominee directors. We first study nominee directors’ duties towards their nominator in commercial practice, and directors’ duties under the stakeholder-oriented provision of section 166(2) in Indian Companies Act 2013.
We then take stock of the judicial approaches towards nominee directors in the United Kingdom and in India. The Companies Act 2013 is presently inadequate to resolve the identified conflict. We suggest codifying a pragmatic approach by allowing nominee directors to pursue their nominator’s interests, subject to the company’s interests.
To determine the company’s interests, we refer to the Entity Maximisation and Sustainability Approach proposed by Andrew Keay that allows for a plurality of interests to be considered by a director, while providing a clear objective. In concluding, we call for further deliberation on the enforcement of the nominee directors’ duties.
Published in: Oxford University Commonwealth Law Journal
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