• Pratham Dave

COMPANIES ACT, 2013: POWERS OF BOARD AND ITS RESTRICTIONS

Updated: Sep 30



INTRODUCTION:


The Governing Body of the Company is the Board of Directors, who are in charge of the day-to-day operations of the company day-to-day operations. Certain rights are granted to the Directors or the Board for the company's business activities to run smoothly. Moreover, some restrictions are also there to function the company in an organized manner.


POWERS OF BOARD:


As per Section 179 of The Companies Act, 2013, the following are the powers of the board of directors:

  • The Board of Directors has the authority to entertain all such powers delegated to it by the company.

  • The Board of Directors has the authority to act on all the matters charged to it by the company.

Board authority is subject to other provisions.


While exercising the board of directors' authority, the board must obey the rules and conditions of the following:


· The Memorandum of Association

· The Companies Act, 2013

· The Articles of Association

· Or Any regulation made by the company during the general meetings


The company's authority, in particular, can be defined as the powers of the board. However, the board's power can be limited, if necessary, by the Companies Act, the Memorandum of association, and the Articles. Shareholder resolutions can potentially restrict the board's authority.


In General Meeting, the Company Exercises Power’

The board of directors is not permitted to exercise any power or make any decisions intended to be exercised or made in a General Meeting.


Acts passed by the board are not rendered invalid by new regulations’

As per Section 179 of the Companies Act, 2013, resolutions taken at a General Meeting cannot nullify provisions adopted by the board of directors previous to the resolution.


At Board Meetings, power is performed through passing resolutions.’

Certain board powers can only be exercised by calling a board meeting. This is done in accordance with Section 175, The Companies Act 2013. As a result, the board of directors can only exercise the following authorities by approving a resolution at board meetings:


· to make calls on shareholders for unpaid dividends on their shares;

· to authorize the repurchase of securities under Section 68;

· to issue securities, including debentures, in or out of India;

· to borrow funds;

· to invest the company's funds;

· to make loans, guarantee loans, or offer security for loans;

· to approve the financial statement as well as the board's report;

· to diversify the company's business;

· to sanction a merger, amalgamation, or rebuilding;

· to take over a corporation or acquire a controlling or significant position in another;


In addition, in reference to Section 117 of the Companies Act 2013, a copy of every board resolution must be filed with the Registrar within 30 days of the resolution's passage.


Furthermore, Rule 8 of the Companies Rules 2014 has granted the board additional authority. Resolutions that can be passed at board meetings include:


1. Contributing to politics

2. Appointing or dismissing key management staff.

3. Appointment of internal and secretarial auditors


The Delegation of powers of boards’

By approving a resolution in a board meeting, the Board of Directors may delegate powers such as investing money, making loans, and providing guarantees or security:

· Managing Director