Legal Framework and Statutory Standing
Comparative Rights and Obligations
| Feature | Statutory Provision | Legal Implication |
|---|---|---|
| Appointment Authority | Section 92, Companies Act 1994 | Derived from AoA or Shareholder Agreements. |
| Fiduciary Duty | Common Law & Section 108 | Duty is to the Company, not just the Appointer. |
| Liability | Section 396 | Personally liable for 'Officer in Default' violations. |
| Removal | Section 106 | Subject to removal by shareholders via extraordinary resolution. |
The Dual-Fiduciary Dilemma
A Nominee Director faces a unique legal challenge: balancing the interests of the Appointing Authority (e.g., a Venture Capital firm or a Bank) against the Best Interests of the Company. Under Bangladesh law, if a conflict arises, the director's duty to the company prevails. Failure to act in the company's interest can lead to claims of 'Oppression and Mismanagement' under Section 233 of the Companies Act 1994.
Key Risks and Liabilities
- Vicarious Liability: Under the Income Tax Act 2023 and VAT Act 2012, directors can be held liable for unpaid corporate taxes if willful neglect is proven.
- Disqualification: A Nominee Director may be disqualified under Section 94 if they fail to obtain qualification shares (if required by AoA) or become insolvent.
- Confidentiality Breaches: Sharing sensitive board information with the appointing shareholder without express authorization in the AoA can lead to breach of trust litigation.
Consult Barrister Liton Asaduzzaman Sarkar
Ensure your board representation is legally sound and compliant with RJSC regulations.
Schedule a Compliance AuditFrequently Asked Questions
Can a Nominee Director be held liable for the company's debts?
Generally, no, due to the principle of separate legal entity. However, under Section 396 of the Companies Act 1994, they may be personally liable if they are found to be an 'officer in default' regarding statutory non-compliance or fraudulent trading.
What is the maximum number of directorships a Nominee can hold in Banks?
According to Section 15 of the Bank Company Act 1991, a person cannot be a director of more than one bank company at the same time, regardless of whether they are a nominee or independent director.
Is a Nominee Director required to hold qualification shares?
Under Section 97 of the Companies Act 1994, a director must hold qualification shares if the Articles of Association so require. However, for Nominee Directors representing the Government or a statutory body, this requirement is often waived via specific legal instruments.
◆ Related Statutory Guides & Practice Insights
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