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POWERS OF THE BOARD OF DIRECTORS

Courtesy/By: Yamini Bansal | 2021-01-30 14:02     Views : 257

GENERAL POWERS OF THE BOARD:

In general all the powers exercisable by the company as per the provisions of the Companies Act, 2013 are deemed to be the powers exercisable by the board of directors unless those powers are reserved for the shareholders by restrictions contained in the Act and the memorandum and articles of the company. Thus, directors are empowered to do whatever the company is authorized to do.

In Jagdish Prasad v. Pt. Paras Ram (1942), it was held that shareholders cannot interfere in the exercise of powers delegated to the board of directors.

In Automatic Self Cleansing Filter Syndicate Co. Ltd. V. Cuninghame (1906), the court held that directors are agents of the whole corporation comprising shareholders also and if the whole body of shareholders has entrusted directors with particular power then just a simple majority could not intervene in the exercise of it.

However, in Al-Amin Seatrans Pvt. Ltd. V. Vessel MV Loyal Bird (1995), it was held by the court that until and unless express power to institute the suit is conferred on the directors, they have no authority to institute the suit on behalf of the company and such powers can be conferred on the directors only by passing a resolution in that respect.

Although, Companies Act has divided the powers between the two organs of the company- (i)shareholders and (ii)directors still there is a scope of a clash between the two, and shareholders cannot assume any power which is conferred on the directors by the articles. But in certain exceptional cases, shareholders are competent to act even on matter delegated to the board, which are:

  • Directors acting mala fide: When directors acted maliciously or arbitrarily that is they themselves are the wrongdoers and their personal interest conflicts with their duty in a way that they cannot redress the wrong done to the company then shareholders can intervene.
  • Incompetency of the Board: When all the directors become interested in a transaction, where there is no validly appointed director, then such cases show that the board has become incompetent and the majority of shareholders can exercise the powers which are vested in the board.
  • Deadlock: When on account of deadlock in management of the company, the general body of shareholders has the power to intervene and to take necessary action.
  • Residual powers: The majority of shareholders can exercise the residuary powers in general meetings. They can validate certain acts of the directors by an ordinary resolution.

 

STATUTORY POWERS OF THE BAORD:

As by section 179(3) of the Companies Act, 2013 and Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014 certain powers can be exercised by the board through passing a board resolution at a duly convened board meeting, namely:

  • Making calls on unpaid shares;
  • Authorizing the buyback of the securities;
  • Borrowing the money ;
  • Investing the funds of the company.
  • Diversifying the business of the company;
  • Approving merger, amalgamation, or reconstruction;
  • Making political contribution;
  • Appointing or removing key managerial personnel etc.

 

OTHER POWERS OF THE BOARD:

  • In case of public company filing of the casual vacancy (section 161);
  • Sanctioning of the contract in which the director is interested (Section 184);
  • Declaration of interim dividend and to recommend final dividend;
  • Appointing the first directors of the company;
  • Approving corporate social responsibility rules (Section 68) etc.

 

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.

Courtesy/By: Yamini Bansal | 2021-01-30 14:02