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Board
to meet once in every three months
In the case of
every company, a meeting of its Board of directors shall be held at least
once every three months and at least four such meetings must be held every
year.
Notice
of meetings
Notice of every
meeting of the Board of directors of a company shall be given in writing
to ever director for the time being in India, and at his usual address in
India to every other director.
Every officer of
the company whose duty it is to give notice as aforesaid and who fails to
do so shall be punishable with fine which may extend to one hundred
rupees.
Quorum
for meetings
The quorum for a
meeting of the Board of directors of a company shall be one-third of its
total strength (any fraction contained in that one-third being rounded off
as one), or two directors, whichever is higher.
Provided that where
at any time the number of interested directors exceeds or is equal to
two-thirds of the total strength, the number of the remaining directors,
that is to say, the number of the directors who are not interested,
present at the meeting being not less than 2 shall be the quorum during
such time.
Interested director
means any director whose presence cannot, by reason of his being
interested in some manner in the subject matter of discussion be counted
for the purpose of forming a quorum at a meeting of the Board, at the time
of the discussion or vote on any matter.
Procedure
where meeting adjourned for want of quorum
If a meeting of the
Board could not be held for wand of quorum, then, unless the articles
otherwise provide, the meeting shall automatically stand adjourned till
the same day in the next week, at the same time and place, or if that day
is a public holiday, till the next succeeding day which is not a public
holiday, at the same time and place.
Passing
or resolutions by circulation
No resolution shall
be deemed to have been duly passed by the Board or by a committee thereof
by circulation, unless the resolution has been circulated in draft,
together with the necessary papers, if any, to all the directors, or to
all the members of the committee, then in India (not being less in number
than the quorum fixed for a meeting of the Board of committee, as the case
may be), and to all other directors or members at their usual address in
India, and has been approved by such of the directors as are then in
India, or by a majority of such of them, as are entitled to vote on the
resolution.
Validity
of acts of directors
Acts done by a
person as a director shall be valid, notwithstanding that it may
afterwards be discovered that his appointment was invalid by reason of any
defect or disqualification or had terminated by virtue of any provision
contained in this Act or in the articles.
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Board's
powers and restrictions thereon
General
powers of Board
Subject to the
provisions of this Act, 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.
However, the Board
shall not exercise any power or do any act or thing which is directed or
required, whether by this or any other Act or by the memorandum or
articles of the company or otherwise, to be exercised or done by the
company in general meeting.
Certain
powers to be exercised by Board only at meeting
The Board of
directors of a company shall exercise the following powers on behalf of
the company, and it shall do so only by means of resolutions passed at
meetings of the Board:-
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the power to
make calls on shares holders in respect of money unpaid on their
shares
-
the power to
issue debentures
-
the power to
borrow moneys otherwise than on debentures
-
the power to
invest the funds of the company
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the power to
make loans
However, the Board
may, by a resolution passed at a meeting delegate to any committee of
directors, the managing director, or the manager of the company or any
other principal officer of the company or in the case of a branch office
of the company, a principal officer of the branch office, the powers
specified in clauses (c), (d) and (e), to the extent specified in the
resolution and subject to such conditions as may be imposed.
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 withdrawable by
cheque, draft, order or otherwise or the placing of moneys on deposit by a
banking company with another banking company on such conditions as the
Board may prescribe, shall not be deemed to be borrowing of moneys or
making of loans by a banking company for the purpose of these provisions.
These provisions
also do not 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.
In respect of
dealings betwwen a company and its bankers, the exercise by the company of
its powers to borrow money otherwise than on debentures 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 of overdrafts, cash credit or other accounts.
Every resolution
delegating the power referred to in clause (c) ( the power to borrow
moneys otherwise than on debentures ) shall specify the total amount
outstanding at any one time up to which moneys may be borrowed by the
delegate.
Every resolution
delegating the power referred to in clause (d) (the power to invest the
funds of the company ) shall specify the total amount up to which the
funds may be invested, and the nature of the investments which may be
made, by the delegate.
Every resolution
delegating the power referred to in clause (e) (the power to make loans )
shall specify the total amount up to which loans may be made by the
delegate, the purposes for which the loans may be made, and the maximum
amount of loans which may be made for each such purpose in individual
cases.
Nothing in this
section 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 above.
Restrictions
on powers of Board
The Board of
directors of a public company, or of a private company which is a
subsidiary of a public company, shall not, except with the consent of such
public company or subsidiary in general meeting :-
-
sell, lease or otherwise dispose
of the whole, or substantially the whole, of the undertaking of the
company, or where the company owns more than one undertaking, of the
whole, or substantially the whole, of any such undertaking
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remit, or give time for the
re-payment of, any debt due by a director except in the case or
renewal or continuance of any advance made by a banking company to its
director in the ordinary course of business
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invest, otherwise than in trust
securities, the amount of compensation received by the company in
respect of compulsory acquisition of any such undertaking as is
referred to in clause (a), or of any premises or properties used for
any such undertaking and without which it cannot be carried on or can
be carried on only with difficulty or only after a considerable time
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borrow moneys, where the moneys
to be borrowed together with the moneys already borrowed by the
company, (apart from temporary loans obtained from the company's
bankers in the ordinary course of business) will exceed the aggregate
of the paid-up capital of the company and its free reserves
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contribute, to charitable and
other funds not directly relating to the business of the company or
the welfare of its employees, any amounts the aggregate of which will,
in any financial year, exceed fifty thousand rupees, or five per cent
of its average net profits during the three financial years
immediately preceding, whichever is greater.
The resolutions
under clause (d) and (e) above must specify the total amount upto which
the Board may borrow or the total amount which may be contributed in a
financial year.
Temporary loans
mean loans repayable on demand or within 6 months from the date of the
loan such as short term cash credit arrangements, the discounting of bills
and the issue of other short term loans of a seasonal character, but does
not include loans raised for the purpose of financial expenditure of a
capital nature.
Any resolution
passed by the company permitting any transaction such as is referred to in
clause (a) may attach such conditions to the permission as may be
specified in the resolution, including conditions regarding the use,
disposal or investment of the sale proceeds which may result from the
transaction:
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 withdrawable
by cheque, draft, order or otherwise, shall not be deemed to be a
borrowing of moneys by the banking company within the meaning of clause
(d).
No debt incurred by
the company in excess of the limit imposed by clause by clause (d) shall
be valid or effectual, unless the lender proves that he advanced the loan
in good faith and without knowledge that the limit imposed by that clause
had been exceeded.
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