A company director must exercise corporate powers for the company’s lawful purposes, comply with the Companies Act and the company’s constitution, avoid undisclosed conflicts, protect company property, and act honestly in the company’s interests. Incorporation does not protect a director from personal liability for the director’s own breach of duty, fraud, statutory offence, personal guarantee, or unauthorised act.
Governing law
The Companies Act, 1994 contains Bangladesh’s principal statutory rules on appointment, qualification, conduct, removal, disclosure, accounts, and liability of directors. Sections 90 to 115 deal specifically with directors and related corporate management matters.
Section 90 prescribes minimum board composition. Section 91 addresses appointment. Section 92 requires consent to act and compliance with applicable qualification requirements. Section 94 identifies statutory disqualifications, including minority, unsoundness of mind, insolvency-related conditions, and prolonged default in paying calls on shares.
Sections 95 and 96 address notice and frequency of board meetings. Section 102 restricts contractual provisions that purport to exempt or indemnify directors and other officers against liability for negligence, default, breach of duty, or breach of trust. Sections 103 to 108 regulate loans, offices of profit, interested transactions, disposal of undertakings, removal, and vacation of office.
Section 88 of the Trusts Act, 1882 is also relevant. Where a director or another person occupying a fiduciary character obtains a financial advantage by using that position, the person must hold the advantage for the benefit of the person whose interests were protected by that fiduciary relationship.
A director is not simply an employee or shareholder
A director is part of the body responsible for corporate management. The director’s powers come from the Companies Act, the memorandum, the articles, resolutions, and valid delegations.
A shareholder may own shares without being a director. A director may also hold few shares, subject to any qualification-share requirement. The two roles should not be confused. Shareholders make decisions reserved for the general meeting, while directors manage matters allocated to the board.
A nominee director appointed by a particular investor does not cease to owe duties in the corporate role. The nominee should consider the company’s lawful interests and cannot simply treat company property or information as belonging to the appointing shareholder.
Duty to act within legal authority
Directors must act within the company’s objects, articles, statutory powers, board authority, and shareholder approvals required by law.
A director who enters a transaction without authority may expose the company to dispute and may incur personal responsibility to the company or the third party. Board resolutions should clearly record authority for material contracts, borrowing, security, property transfers, share issues, bank mandates, and related-party dealings.
Section 107 restricts directors from selling or disposing of the company’s undertaking, or remitting certain debts due from a director, without the consent required by the Act.
Duty of honesty and proper purpose
A director must not use corporate powers to obtain an improper personal advantage, entrench control, divert a business opportunity, prejudice the company, or benefit one shareholder group through an unlawful purpose.
For example, issuing shares merely to dilute a dissenting shareholder, transferring a company asset to a related person below value, or directing a customer to a competing personal business may constitute misuse of authority even if the director can formally point to a broad board power.
The company may seek restoration of property, repayment of secret profit, compensation, cancellation of an improper transaction, or other relief depending on the facts and procedural route.
Conflicts of interest and related-party dealings
A director should disclose any direct or indirect interest in a proposed or existing transaction and comply with statutory and constitutional procedures.
Sections 103 to 105 restrict loans to directors, offices of profit, and certain contracts in which directors are interested. The precise application depends on the type of company, transaction, approval, and statutory exception. A director should not participate informally in a conflicted transaction merely because the other directors know about the relationship.
Good governance requires a written conflict disclosure, board consideration by disinterested directors where possible, accurate minutes, independent valuation for significant assets, and any shareholder approval required by law or the articles.
Duty concerning company property and opportunities
Company money, records, property, confidential information, customers, and business opportunities belong to the company, not to individual directors.
A director who receives a commission, rebate, side payment, corporate opportunity, or other benefit through the office may have to account for it. Section 88 of the Trusts Act supports the principle that a fiduciary cannot retain a financial advantage obtained through the fiduciary position.
Corporate accounts should not be used to pay personal expenses without a lawful basis, proper disclosure, accounting treatment, and approval. Labelling a payment as a “director’s advance” does not cure an unlawful loan or misapplication.
Duty of care and oversight
The Companies Act does not contain a single modern codified section using the complete expression “duty of care, skill and diligence.” Nevertheless, directors remain responsible for complying with statutory management duties, maintaining proper governance, protecting company assets, and making decisions on an informed basis.
A director should read board papers, attend meetings, question unusual payments, understand the company’s financial position, monitor major legal risks, and ensure required filings and financial statements are prepared.
A non-executive or nominee title does not provide automatic immunity. Liability is fact-specific, including what the director knew, authorised, ignored, signed, or was legally required to supervise.
Board meetings and records
Section 96 requires board meetings within the statutory frequency, including at least four meetings each year with no more than the prescribed interval. Directors should verify the exact dates against the section when preparing an annual calendar.
Board notices, agendas, attendance records, declarations of interest, resolutions, dissenting views, supporting papers, and minutes should be maintained accurately. A director who disagrees with an unlawful proposal should ensure that the objection is recorded and should consider obtaining independent legal advice.
A signature on blank minutes, blank cheques, undated resolutions, or incomplete financial statements can create serious evidential and legal risk.
Accounts and financial statements
Directors are responsible for ensuring that statutory books of account and financial reporting requirements are observed. Sections 181 onward regulate company accounts, while section 189 deals with authentication of the balance sheet and profit and loss account.
Directors should ensure that revenue, liabilities, related-party payments, loans, capital contributions, and company assets are recorded honestly. Approval of misleading accounts may create civil, criminal, regulatory, and reputational consequences.
Reliance on an accountant or auditor does not necessarily excuse a director who knew of falsity, ignored obvious warning signs, or authorised the underlying transaction.
Personal liability
A company’s separate identity ordinarily protects a director from liability for a company debt merely because the person holds office. Personal liability may nevertheless arise where the director:
acts without authority and assumes personal responsibility;
signs a personal guarantee;
makes a fraudulent or negligent representation;
misapplies company property;
receives a secret profit;
breaches statutory duties;
participates in an offence;
signs a dishonoured company cheque in circumstances covered by section 140 of the Negotiable Instruments Act, 1881; or
becomes liable under winding-up, tax, labour, environmental, or sector-specific law.
These are distinct legal grounds. A creditor cannot automatically convert every unpaid company debt into a personal claim against directors.
Indemnities and relief
Section 102 restricts clauses that attempt to excuse directors in advance from liability for negligence, default, breach of duty, or breach of trust. It preserves limited indemnification in circumstances recognised by the section, including successful defence or court-granted relief.
Section 396 empowers the court, in specified proceedings, to relieve an officer from liability where that person acted honestly and reasonably and, having regard to all circumstances, ought fairly to be excused. Relief is discretionary and should not be treated as guaranteed protection.
Removal and vacation of office
Section 106 permits removal of a director by extraordinary resolution, subject to the Act and procedural requirements. Section 108 identifies events that may cause a director’s office to become vacant, including specified conflicts, absence, disqualification, or prohibited conduct.
Removal from office does not erase liability for earlier acts. Resignation also does not extinguish liability incurred while the director held office.
Practical governance documents
Companies should maintain appointment and consent forms, director identification records, statutory registers, conflict declarations, board and shareholder minutes, delegations of authority, bank mandates, related-party transaction records, financial statements, audit reports, regulatory licences, and RJSC filings.
A departing director should ensure that the resignation is properly delivered, accepted where required, recorded, and filed with RJSC. The director should retain lawful evidence of the resignation and should not remove confidential company records.
Courts and authorities
RJSC may take action concerning filing defaults and statutory corporate records. The High Court Division exercises jurisdiction over statutory company matters, including applications under the Companies Act and proceedings connected with winding up or mismanagement.
Ordinary claims involving contract, property, fraud, employment, taxation, regulatory offences, or dishonoured cheques may proceed before other competent courts, tribunals, or authorities.
Key case law
Abdul Wadud (Md) v Heaven Homes Private Ltd and others, reported at 65 DLR (2013) 143 and 18 MLR 369, is frequently cited in Bangladesh company-law practice concerning statutory company jurisdiction and compliance by directors and officers.
The judgment’s reported citation could be identified, but an official online full-text copy was not available for line-by-line verification during this review. The bound report should be consulted before attributing a detailed proposition or quotation to the case.
Exceptions and open questions
Bangladesh company law combines express statutory rules with fiduciary principles developed through judicial decisions. The absence of a single consolidated statutory duty provision does not mean directors have unrestricted discretion.
The availability of a derivative claim brought on behalf of a company, as distinct from a personal claim or a section 233 application, remains procedurally complex. It should not be presented as an automatic remedy without examining Bangladesh precedent, company standing, authorisation, and the nature of the alleged wrong.
Common mistakes
Common mistakes include treating the company account as personal money, signing documents without board authority, failing to disclose related interests, approving loans to directors informally, ignoring annual filings, failing to attend board meetings, and believing that resignation removes past liability.
Another mistake is assuming that the majority shareholder’s instructions excuse unlawful conduct. A shareholder resolution cannot authorise fraud, defeat mandatory legislation, or automatically release directors from statutory duties.
For related Ain.bd guidance, see Shareholders’ Rights and Remedies against Company Mismanagement, Private Limited Company Registration in Bangladesh: A Legal Guide, and Cheque Dishonour Cases in Bangladesh: Notice, Limitation and Procedure.
Law updated as of 13 July 2026.
Primary-source references
The Companies Act, 1994, sections 90 to 115, 181, 189, 331 and 396; the Trusts Act, 1882, section 88; and Abdul Wadud (Md) v Heaven Homes Private Ltd and others, 65 DLR (2013) 143.
Disclaimer
This article provides general legal information and is not legal advice. A director’s duties and liabilities depend on the company’s constitution, the director’s role, the transaction, knowledge, authority, evidence, and applicable special laws. Consult a licensed advocate in Bangladesh for a specific matter.