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What Actions Can Be Taken If A Director Misuses His Power Over Company’s Assets | Advocate Rajesh Kshetry

Legal Action Can Be Taken If A Director Misuses His Power Over Company’s Assets

We all have heard the term “Misappropriation of Assets,” haven’t we? Misappropriation of assets occurs when employees or other individuals connected to a business abuse their position of authority and steal from the company through various fraudulent practices. Asset misappropriation occurs more often than most employers think in businesses and organizations. Many employees, sometimes the directors themselves, steal from the company and exploit its assets for their benefit, which erodes trust between them and the employer. It is also known as “Insider fraud.”


These kinds of fraud are frustrating aspects of running a business. But have you ever pondered upon what actions can be taken if a Director misuses his power over the company’s assets? You’ll get to know about it here!

What To Do When A Director Focus On His Own Interest?

You should know that when a director violates their fiduciary duties out of self-interest, this misbehavior can result in a judgment of unfitness and a director disqualification order.

A Director is responsible for advancing the firm’s prosperity, according to Section 172 of the Companies Act of 2006. Because assets are being used to benefit the individual rather than the business, the act of asset misappropriation fraud will violate these obligations.

Directors must prioritize the company’s creditors by maintaining the value of its net assets following Section 172(3) of the Companies Act of 2006 and Section 214 of the Insolvency Act of 1986. This is a typical instance of misappropriating corporate assets.

The director has a significant status in the business and should refrain from engaging in dishonest behavior. They must not prioritize their interests over the needs of the business. Before one company collaborates with another, it must disclose any potential conflicts of interest or benefits it may have received.

What Actions To Take After The Discovery Of Such An Incident?

If you are stuck in a similar situation and wondering what actions can be taken if a Director misuses his power over a company’s assets, then keep reading.

You need to contact the police. This is illegal. You are the victim of theft, and the repercussions could be severe. As an employee, you might have to make up for any losses, which could result in financial loss. You ought to report the fraud to Action Fraud as well.

Any employees suspected of being involved should be immediately suspended to stop further losses. You must do an investigation and follow the company’s disciplinary policy to avoid being the fall guy in an “unfair dismissal” lawsuit. Calculating your loss precisely should take some time.

Now that you know what to do, it’s time to take the necessary steps!


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