Are Director Positions in India Worth the Liability Risk? | Doing Business in India | Episode 12

General

April 2, 2026

Director liability in India is extensive, keeping many foreign investors awake at night. Even where directors are innocent, they can remain entangled in litigation for years. This episode of the Veyrah Law series explores the practical realities of holding board positions in India. While directorships are traditionally used to retain business oversight, the associated legal risks can be significant.

The episode moves beyond basic legal concepts to examine strategic alternatives such as observer status and shareholder-level protections, offering insights on how investors can retain control without assuming unnecessary personal exposure.

It further discusses how adopting the financial investor playbook can effectively safeguard strategic investments. As highlighted in the episode, true business control does not always require a formal board presence.

Are Director Positions in India Worth the Liability Risk? | Doing Business in India | Episode 12

Keywords

Director Liability: The legal and financial responsibility a board member has for the actions or non-compliance of a company.
Non-Executive Director: A board member who is not involved in the day-to-day management or operations of the business.
Observer Status: A role where an individual can attend board meetings and receive information but does not have the legal status or liability of a director.
Shareholder-Level Protections: Rights written into a company’s governing documents that allow shareholders to veto or approve major decisions without being on the board.
Articles of Association: The public legal document that defines a company’s purpose and the duties and powers of its directors and shareholders.
Veto Rights (Reserved Matters): Specific high-stakes decisions (like taking on debt or selling assets) that cannot be made without the express consent of certain shareholders.
Jointly and Severally Liable: A principle of liability involving where the group is liable as a whole and each individual also has full liability.
Information Rights: Contractual rights that ensure an investor has access to financial statements, bank records, and operational reports to stay informed from the outside.
Negotiable Instruments Act: The specific law in India which deals with cheque bounces, among others.

Timestamps

0:00

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Introduction

0:52

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Mitigating director liability risk

1:02

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Disclaimers

1:24

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Why director liability is a major concern in India

1:50

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Legal position under the Companies Act, 2013

2:10

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Reality of investigations and proceedings

2:27

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MCA circular on non-executive and independent directors

3:12

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Key areas of statutory liability

3:20

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Liability under company law

3:45

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Liability under the Income Tax Act, 1961

4:16

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The Insolvency and Bankruptcy Code, 2016

4:51

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Negotiable instruments

5:27

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Foreign exchange management act (FEMA)

5:40

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Criminal liability: Bharatiya Nyaya Sanhita, 2023

6:02

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The practical challenge of defending your position

6:36

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Case study: 7 years to clear a director’s name

7:38

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Why take a directorship? Control and oversight

8:25

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Strategic alternatives for investors

8:36

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Assess the need for directorship

8:57

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Negotiate observer status

9:45

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Shareholder approval requirements

10:17

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Enshrined rights in charter documents

10:43

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Detailed information rights

11:07

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Joint management appointments

11:34

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Focus on initial structure

12:00

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Commercial clarity on objectives

12:34

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Final recommendations

Production Date:

Recorded on 21 February 2026

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