The board of directors has the power to manage the company's affairs. Section 179 of the Companies Act, 2013 sets out the powers and the restrictions.
The general powers
The board has the power to:
- Make calls on shareholders for unpaid money on shares
- Issue debentures
- Borrow money
- Invest the company's funds
- Approve financial statements
- Recommend dividend
- Appoint officers
The restrictions
Some powers can be exercised only with the approval of the shareholders at a general meeting:
- Selling or disposing of the company's undertaking
- Investing in another company
- Borrowing money beyond the paid-up capital and free reserves
- Creating a charge on the company's assets
- Making a loan or giving a guarantee
These matters require a special resolution under Section 180.
The practical points
The board should check whether a proposed action requires shareholder approval. If it does, the board should convene a general meeting and obtain the special resolution. The board should not exercise a power that requires shareholder approval without it, because the action may be invalid.
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