All the powers that a company is vested with can be exercised by the board of directors of the company, subject to the applicable law.
The powers of the directors can be exercised either in a board meeting by passing a resolution in the meeting itself or by circulation or by way of delegation to various committees constituted by the board or to the appropriate officials of the company. The powers of the board of directors under various provisions of the Indian Companies Act, 1956 may be grouped under four heads:
I. Powers to be exercised by Resolutions Passed at Board’s Meeting:
ADVERTISEMENTS:
According to section 292, the following powers of the company can be exercised only by means of resolutions passed at the meeting of the Board:
(a) The power to make calls.
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(b) The power to issue debentures.
(c) The power to borrow money otherwise than on debentures.
ADVERTISEMENTS:
(d) The power to invest the funds of the company.
(e) The power to make loans.
(f) The power to authorize the company to buy-back its securities.
The Board of directors may, by a resolution passed at a meeting, delegate the following powers to any committee of directors, the managing director, the manager or any other principal officer of the company or in the case of a branch office of the company, a principal officer of branch office:
ADVERTISEMENTS:
(a) The power to borrow money otherwise than on debentures.
(b) The power to invest the funds of the company.
(c) The power to make loans.
II. Other Powers Exercisable only at Board Meeting:
Besides the powers specified in section 292, there are certain other powers which can be exercised only at the meetings of the Board:
(a) The power to fill casual vacancies in the Board (Sec. 292).
(b) Sanctioning of a contract in which a director is interested (Sec. 297).
(c) Receiving of notice of disclosure of interest of a director in a contract or an arrangement (Sec. 299).
(d) Power to appoint the first auditors of the company, and to fill any casual vacancy in the office of auditors, unless such vacancy has arisen by resignation of the auditor (Sec. 224).
(e) Power to recommend rate of dividend to be declared at the AGM (subject to approval of the shareholders).
(f) The power to make political contributions (Sec. 293A).
(g) Power to invest in shares of any other body corporate (Sec. 372A).
(h) The power to make a declaration of solvency in case of proposal for buy-back of shares, and in case of proposal for voluntary winding up of the company.
III. Powers exercisable with the unanimous consent of all the directors present and voting at Board Meeting:
(a) Appointing a person as managing director who is managing director or manager of another company.
(b) Appointing a person as manager who is managing director or manager of another company.
(c) The power to sanction inter-corporate loans/investments or giving of guarantee or providing security under section 372A.
IV. Powers to be exercised in the General Meeting:
The board of directors cannot exercise the following powers except with the consent of the company in the general meeting (Sec. 293).
(a) Sale, lease or disposal of the whole or substantially the whole of the undertaking of the company except sale or lease of property by a company whose business ordinarily is to sell or lease properties.
(b) Grant of any concession regarding payment of debts owed by directors by remitting a part of the debt or giving him more time to repay the debt except in the case of renewal or continuance of an advance made by a banking company to its directors in the ordinary course of business.
(c) Investment of the amount of compensation received by the company in respect of the compulsory acquisition of any property otherwise than in trust securities.
(d) Borrow money which will make the total borrowings in excess of the aggregate of the paid-up capital and free reserves of the company except temporary loans obtained by the company from its bankers in the ordinary course of its business.
(e) Contribution to charitable and other funds, not directly relating to the business of the company or the welfare of its employees, of amount exceeding Rs. 50,000 in the aggregate or 5 per cent of the average net profits of the company for the last three financial years, whichever is higher. Net profits for this purpose are to be calculated as per the provisions of Section 349 and 350 of the Companies Act.
The restrictions on the powers of the Board of directors imposed by Section 293 do not apply to a private company.