SECTION 179, COMPANIES ACT,2013

The board of directors is the highest authority in any company. According to Section 179, Companies Act
2013, the power of directors of a company – are entitled to make any and all decisions, and thus
exercise all the power, which the company has authority to enact.

According to Section 179(1), Companies Act 2013, the powers of the board of directors are as follows.

• The Board of Directors can exercise all such powers for which the company is authorized to exercise.

• The Board of Directors can take all actions on matters in which the company has the authority to do.

• All the powers for managing the affairs of the company except where the given matters require
approval of shareholders in general meetings.

Power of Board subject to other Provisions

While using the power vested in the board of directors, the board must adhere to the rules and
provisions of the following –

• The Companies Act - Statutory provisions that outline what can and cannot be done by the board.

• The Memorandum of Association - The company’s foundational documents that set specific
restrictions and conditions.

• The Articles of Association

• Any Regulation, made by the company during general meetings - Specific decisions reserved for the
general meeting of shareholders.

It is provided that while exercising such power or doing such act or thing, the Board shall be subject to
the provisions contained on that behalf in the Companies Act, 2013, or in any regulations which are not
inconsistent with the Act or memorandum or articles and are duly made thereunder. The Board shall not
exercise any power or do any act or thing which is directed or required, to be exercised or done by the
company in general meeting.

The Companies (Meetings of Board and its Powers) Rules, 2014 provide detailed procedures for board
meetings and the exercise of powers. These rules ensure that board meetings are conducted properly,
with appropriate notice, quorum, and documentation. Key aspects include:

• Notice of Meetings: Proper notice must be given to all directors.

• Quorum Requirements: A minimum number of directors must be present for the meeting to be valid.

• Minutes and Resolutions: Accurate recording of decisions and resolutions passed during the meetings.

Power Exercised by Company in General Meeting

 • The board of directors is not allowed to exercise any power or take any decisions, which are
specifically to be exercised or a decision to be taken in a General Meeting.

New Regulations Do Not Invalidate Acts made by the Board

• According to Section 179, Companies Act 2013, any resolutions that are passed in a General Meeting
cannot invalidate any provisions that the board of directors made prior to the resolution.

Power Exercised by Passing Resolution at Board Meetings

There are also certain powers of the board that those resolutions can only be passed by calling a board
meeting. This is done as per Section 175, Companies Act 2013. Thus, the Board of Directors can exercise
the following powers, only by passing a resolution in the meetings of the Board:

• Make calls on shareholders in respect of money unpaid on their shares

• To authorise the buy-back of securities and shares under section 68

• Issue securities and shares, including debentures, whether in India or outside India;

• To borrow monies

• To invest the funds of the company

• To grant loans or give guarantees or provide security in respect of loans.

• Approve the financial statement and the Board’s report

• Approve amalgamation/merger

• Diversify the business

• Take over a company

In addition to this, Rule 8 of Companies Rules 2014 has given certain more powers to the board. Namely,
resolutions that can be passed at board meetings:

• Making political contributions

• Appointing or removing key managerial personnel.

• Appointing internal auditors and secretarial auditors.

The Delegation of Powers of the Board

The Board of Directors may, by a delegate the powers such as investing monies, granting loans, giving
guarantee or security by passing a resolution in the board meeting:

• Committee of Directors
• Managing Director

• Manager or any other principal officer of the company, or

• Any other principal officer of the company

• The principal officer of a branch office

Shareholder Protection

While the board has significant authority, the limitations and requirements for certain decisions to be
approved in general meetings protect shareholders’ interests. This checks and balances system ensures
that shareholders retain control over major corporate changes and financial commitments.

Imposing restrictions and conditions by the shareholders

In accordance with provisions of Section 179(4), the company through the general meeting has powers
to impose restrictions and conditions on the exercise by the Board of any of the powers specified.

Exemption to Banking companies

When directors are acting malafid their conduct is such that they are acting for their benefit at the
expense of the interests of the company. When all the directors are interested in a particular transaction
incompetent to act due to the absence of a quorum. In such a case, shareholders shall decide through a
majority in the general meeting whether to entertain that transaction or not. When there happens to be
a deadlock in the management. Because the directors are not on talking terms or unwilling to act; thus,
paving the way for the shareholders to ensure the running of the company.

Conclusion

Section 179 of the Companies Act, 2013, is crucial in delineating the powers and duties of the board of
directors. This section specifies the board's authority, emphasizes the need for collective decision-
making, and outlines the procedures for delegating powers, thereby fostering effective corporate
governance. It allows the board to make prompt and strategic decisions while maintaining transparency
and accountability, ensuring efficient company operations, and safeguarding shareholders' interests. As
the business landscape evolves, Section 179's principles and provisions offer a robust foundation for
responsible and effective board governance. For directors and corporate governance professionals,
comprehending and complying with Section 179 is vital to operating within the legal framework,
achieving strategic goals, and maintaining shareholder and stakeholder trust and confidence.

Reeba Joy

[email protected]