Companies Act Section 179 — Powers of Board
CHAPTER XII MEETINGS OF BOARD AND ITS POWERS
Commercial / Corporate
Summary
Sub-section (1) states that the Board of Directors of a company has the authority to exercise all powers and do all acts that the company itself is authorised to do. However, when doing so, the Board must follow the rules set out in the Companies Act, the company's memorandum or articles, and any regulations made under them, including regulations passed by the company in a general meeting. Additionally, the Board cannot exercise any power or do any act that the Act, the memorandum or articles, or any other rule says must be done by the company in a general meeting.
Sub-section (2) provides that if the company in a general meeting makes a regulation, that regulation cannot invalidate any action the Board took before the regulation was made, if that action would have been valid without the regulation.
Sub-section (3) lists the specific powers that the Board must exercise only through resolutions passed at Board meetings. These powers are: making calls on shareholders for unpaid money on their shares; authorising buy-back of securities under section 68; issuing securities, including debentures, in or outside India; borrowing money; investing company funds; granting loans or giving guarantees or security for loans; approving financial statements and the Board's report; diversifying the company's business; approving amalgamation, merger, or reconstruction; taking over a company or acquiring a controlling or substantial stake in another company; and any other matter that may be prescribed.
Under the first proviso to sub-section (3), the Board may, by a resolution passed at a meeting, delegate the powers listed in clauses (d) to (f) — borrowing money, investing funds, and granting loans or giving guarantees or security — to a committee of directors, the managing director, the manager, or any other principal officer of the company, or in the case of a branch office, the principal officer of that branch, on such conditions as the Board specifies.
Under the second proviso to sub-section (3), for a banking company, accepting deposits from the public in the ordinary course of business, where the deposits are repayable on demand or otherwise and withdrawable by cheque, draft, order, or otherwise, is not considered borrowing money. Similarly, placing money on deposit by a banking company with another banking company on conditions the Board prescribes is not considered making loans under this section. Explanation I clarifies that clause (d) on borrowing does not apply to borrowings by a banking company from other banking companies, the Reserve Bank of India, the State Bank of India, or any other banks established by or under any Act. Explanation II clarifies that in dealings between a company and its bankers, exercising the power to borrow under clause (d) means the arrangement the company makes with its bankers for borrowing money by way of overdraft, cash credit, or otherwise, and not the actual day-to-day operations on those accounts through which the arrangement is used.
Sub-section (4) states that nothing in this section affects the right of the company in a general meeting to impose restrictions and conditions on how the Board exercises any of the powers listed in this section.
Official Text
(1) The Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do:
Provided that in exercising such power or doing such act or thing, the Board shall be subject to the provisions contained in that behalf in this Act, or in the memorandum or articles, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting:
Provided further that the Board shall not exercise any power or do any act or thing which is directed or required, whether under this Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting.
(2) No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made.
(3) The Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely:—
(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 monies;
(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:
Provided that the Board may, by a resolution passed at a meeting, delegate 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, the principal officer of the branch office, the powers specified in clauses
(d) to
(f) on such conditions as it may specify:
Provided further that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise, or the placing of monies on deposit by a banking company with another banking company on such conditions as the Board may prescribe, shall not be deemed to be a borrowing of monies or, as the case may be, a making of loans by a banking company within the meaning of this section. Explanation I.—Nothing in clause (d) shall apply to borrowings by a banking company from other banking companies or from the Reserve Bank of India, the State Bank of India or any other banks established by or under any Act. Explanation II.—In respect of dealings between a company and its bankers, the exercise by the company of the power specified in clause (d) 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 and not 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.
(4) Nothing in this section shall be deemed to affect the right of the company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified in this section.