Section 179 of the Act and Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014 lay down the provisions in respect of powers of the Board. They are described as under:
(i) BoD is entitled to exercise the same powers as the company is authorized: According to Section 179 (1), the Board shall be entitled to exercise all such powers as the company is authorized to exercise; and to do all such acts and things which the company is authorized to do.
In fact, the Board of Directors of a company enjoy wide-ranging powers; virtually all the powers for managing the affairs of the company except where the given matters require approval of shareholders in general meetings. In other words, the Board is empowered to exercise all such powers which shall secure the interests of the company and the shareholders.
(ii) Placing of restrictions on exercising of powers by the Board [Provisos to Section 179 (1)]:
The exercise of powers by the Board of Directors is not unbridled or unrestricted. It is provided that while exercising such power or doing such act or thing, the Board shall be subject to the provisions contained in that behalf in the Companies Act, 2013, or in the memorandum or articles, or in any regulations which are not inconsistent with the Act or memorandum or articles and are duly made thereunder. This will include regulations made by the company in general meeting.
Further, the Board shall not exercise any power or do any act or thing which is directed or required, whether under the Companies Act, 2013 or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting.
(iii) Prospective effect of regulation made in general meeting [Section 179 (2)]: Any regulation made by the company in general meeting shall not invalidate any prior act of the Board which would have been valid if that regulation had not been made.
Thus, a regulation made by a company in general meeting cannot have retrospective effect and therefore, cannot invalidate prior acts of the Board if they were otherwise validly executed earlier.
(iv) Powers of Board to be exercised by means of resolutions [Section 179 (3)]: Following powers are required to be exercised by the Board of Directors by means of the resolutions passed at a duly convened Board meeting:
to make calls on shareholders in respect of money unpaid on their shares;
to authorize buy-back of securities under Section 68;
to issue securities, including debentures, whether in India or outside India;
to borrow monies; Note: By way of Explanation Il, it is clarified that in respect of dealings between a company and its bankers, the exercise of the power by the company specified in clause (d) above shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise. This does not refer to the actual day-to-day operation on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of.
to invest the funds of the company. [Section 186 (5) requires this power to be exercised by a Board resolution which is passed with the consent of all the directors present at the Board meeting];
to grant loans or give guarantee or provide security in respect of loans. [Section 186 (5) requires this power to be exercised by a Board resolution which is passed with the consent of all the directors present at the Board meeting];
to approve financial statement and the Board’s report;
to diversify the business of the company;
to approve amalgamation, merger or reconstruction;
to take over a company or acquire a controlling or substantial stake in another company;
other matters as prescribed in Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014. These matters, also to be exercised only by means of resolutions passed at the meetings of the Board, are:
(1) to make political contributions;
(2) to appoint or remove key managerial personnel (KMP);
(3) to appoint internal auditors and secretarial auditor.
Note: It is to be noted that the above list is not exhaustive. There are certain other powers which are also to be exercised by the Board of Directors at a duly convened board meeting.
Making of contributions to political parties under Section 182
Filling of casual vacancy under Section 161 (4) when the office of a director appointed in the general meeting falls vacant before the expiry of his term in the normal course.
Approving of transactions with related parties as provided under Section 188.
Giving of loans or making of investment in the shares of other body corporates as provided under Section 186. In this case, besides passing the resolution at a board meeting, consent of all the directors present at the meeting is also required.
Appointing a person as a managing director who is also holding office of managing director or manager in another company as provided under Section 203. This power is to be exercised with the consent of all the directors present at the meeting.
(v) Permission to BoD to delegate some of its powers [First Proviso to Section 179 (3)]: The Board may, by a resolution passed at a meeting, delegate the powers specified in clauses (d) to (f) above (i.e. borrowing of monies, investing of funds and granting of loans or giving of guarantee or providing of security in respect of loans). The delegation may be made on such conditions as may be specified and to the following:
1. any committee of directors,
2. the managing director,
3. the manager or any other principal officer of the company, or
4. the principal officer of the branch office (if the company has a branch office).
