Implicit Rules explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Twenty years of board seats distilled into three habits — and the third one is where careers are damaged.
The three rules
I generally adhere to three rules — abide by code of conduct, always ensure confidentiality, and err on the side of caution when it comes to the disclosure requirements like potential conflict of interest as also annual declarations.
The first two rules describe obligations everyone accepts in principle. The third describes a judgement made repeatedly, often quickly, and usually alone.
A disclosure question arises as a small doubt. Is this relationship material? Is this shareholding worth mentioning? Does a cousin's business count as a related party? The temptation is to assess it privately, conclude that it is immaterial, and move on.
Err on the side of caution reverses that default. Where there is doubt, disclose — because the cost of an unnecessary disclosure is a line in a register, and the cost of an omitted one is the appearance of concealment.
The consequence is stated from experience: I have witnessed embarrassing situations when a board member reflects a casual approach in submitting such declarations. Note the word casual. These failures are rarely dishonest; they are a form filled in quickly, from memory, without checking.
And the aggravating factor: in regulated entities, impact of errors in disclosures can be even more serious. A regulator's fit-and-proper assessment turns on exactly these declarations, and an error there is a personal regulatory matter, not a company one.
Note how many separate declarations a director maintains — disclosures of interest / shareholdings / other board positions, the annual independence declaration, the change-of-circumstances declaration, and the annual code of conduct affirmation. Each is an occasion to be casual on, and each is dated.
The boundary of the role
A board member is for strategic inputs and oversight — so avoid the temptation to getting into operational matters unless your intervention is specifically requested either by the Chairman or CEO.
This is a genuine discipline rather than a platitude. A director with deep functional expertise is drawn towards the operational detail they understand best, and the pull is strongest precisely where their knowledge is strongest.
The exception is narrow and named: intervention specifically requested either by the Chairman or CEO. That keeps the initiative with the executive and preserves the director's ability to review the outcome later — which they cannot do if they helped produce it.
The three rules applied
| Rule | In practice |
|---|---|
| Abide by the code of conduct | Read it, re-read it before the annual affirmation, apply it to senior management too |
| Always ensure confidentiality | Return papers; no discussion in public; no personal copies |
| Err on the side of caution on disclosures | Disclose the doubtful item; check rather than recall; never submit casually |
The declarations to diarise
- Disclosure of interest, and any change in it.
- Shareholdings, personal and by relatives.
- Other board positions held.
- The annual declaration of independence under the section 149(6) criteria.
- The annual affirmation of compliance with the code of conduct.
Common mistakes
- Treating the implicit rules as personal preference rather than protection.
- Completing declarations from memory instead of from records.
- Assessing a doubtful interest privately and not disclosing it.
- Drifting into operational matters within one's own area of expertise.