2. POWER OF BOARD OF DIRECTORS
(SECTION 179)
• The Board of Directors of a company shall be entitled to exercise all powers, and to
do all acts and things, as the company is authorised to exercise and do. The Board
shall be subject to restrictions imposed under this Act or in Memorandum or Articles
or any regulation of the Company. The Board shall not exercise any power which is
required to be exercised by the company in general meeting.
• No regulation made by the company in general meeting shall invalidate any act of
the Board done prior to these regulations come into existence and effect.
3. • Powers to be exercise in Board Meeting (Section 179, Sub – Section 3):
• The Board shall exercise following powers only by means of resolution passed in its meeting:
• (a) to make calls on shareholders in respect of money unpaid on their shares;
• (b) to authorise buy-back of securities under section 68;
• (c) to issue securities, including debentures, whether in or outside India;
• (d) to borrow money;
• (e) to invest the funds of the company;
• (f) to grant loans or give guarantee or provide security in respect of loans;
• (g) to approve financial statement and the Board’s report;
• (h) to diversify the business of the company;
• (i) to approve amalgamation, merger or reconstruction;
• (j) to take over a company or acquire a controlling or substantial stake in another company;
• (k) any other matter which may be prescribed.
4. RESTRICTIONS ON BOARD OF DIRECTORS
• Company to restrict power of Board (Section 179, Sub – Section 4):
• The company in general meeting has power to impose restrictions and conditions on the
exercise by the Board of any of the powers specified in this section.
• Restrictions on Power of Board (Section 180):
• The Board of Directors may exercise particular powers only with the consent of the
company given by way of special resolution passed in general meeting of the company.
• These are:
• To sell, lease or otherwise dispose of the whole, or substantially the whole, of the
undertaking of the company, or where the company owns more than one undertaking, of
the whole, or substantially the whole, of any such undertaking
• To remit, or give time for the re-payment of, any debt due by a director except in the case or
renewal or continuance of any advance made by a banking company to its director in the
ordinary course of business
5. • To invest, otherwise than in trust securities, the amount of compensation received by
the company in respect of compulsory acquisition of any such undertaking as is referred
to in clause (a), or of any premises or properties used for any such undertaking and
without which it cannot be carried on or can be carried on only with difficulty or only
after a considerable time
• To borrow moneys, where the moneys to be borrowed together with the moneys already
borrowed by the company, (apart from temporary loans obtained from the company's
bankers in the ordinary course of business) will exceed the aggregate of the paid-up
capital of the company and its free reserves
• To contribute, to charitable and other funds not directly relating to the business of the
company or the welfare of its employees, any amounts the aggregate of which will, in
any financial year, exceed fifty thousand rupees, or five per cent of its average net
profits during the three financial years immediately preceding, whichever is greater.
6. To sell, lease or otherwise dispose of the undertaking (Section 180, Sub –
section 1, clause a, and sub – section 3, 4):
• The Consent of Company in General meeting by way of special resolution is required to sell,
lease or otherwise dispose of the whole or substantially whole of the undertaking of the
company. Where, the company owns more than one undertaking, than sell, lease or
otherwise dispose of the whole or substantially the whole of any of such undertakings
require such consent.
• “Undertaking” shall mean an undertaking in which the investment of the company exceeds
twenty per cent of its net worth as per the audited balance sheet of the preceding financial
year or an undertaking which generates twenty per cent of the total income of the company
during the previous financial year.
• The expression “substantially the whole of the undertaking” in any financial year shall
mean twenty per cent or more of the value of the undertaking as per the audited balance
sheet of the preceding financial year.
7. • To borrow money (Section 180, Sub – section 1, clause c, and Sub – section
2):
• The Consent of Company in General meeting by way of special resolution is required to
money, where the money to be borrowed, together with the money already borrowed by the
company will exceed aggregate of its paid-up share capital and free reserves, apart from
temporary loans obtained from the company’s bankers in the ordinary course of business.
• The expression “temporary loans” means loans repayable on demand or within six months
from the date of the loan such as short-term, cash credit arrangements, the discounting of bills
and the issue of other short-term loans of a seasonal character, but does not include loans
raised for the purpose of financial expenditure of a capital nature.
• Every special resolution passed by the company in general meeting shall specify the total
amount up to which monies may be borrowed by the Board of Directors.
• No debt incurred by the company in excess of the limit imposed by clause (c) of sub-section (1)
shall be valid or effectual, unless the lender proves that he advanced the loan in good faith
and without knowledge that the limit imposed by that clause had been exceeded.
8. • Limit on Political Contribution (Section 182, Sub – section 1)
• A company, other than a Government company and a company which has been in
existence for less than three financial years may contribute any amount directly or
indirectly to any political party. The aggregate of the amount which may be so
contributed by the company in any financial year shall not exceed seven and a half per
cent of its average net profits during the three immediately preceding financial years.
No such contribution shall be made by a company unless a resolution authorising the
making of such contribution is passed at a meeting of the Board of Directors and such
resolution shall be deemed to be justification in law for the making and the acceptance
of the contribution authorised by it.