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Detailed Analysis Of Section 179 Of Companies Act, 2013

According to section 179 of the Companies Act, 2013, the powers of director of a company entitled to make any and all decisions and thus exercise all the power, which the company has authority to enact. The board of directors is the highest authority in any company and will be entrusted with all the powers conferred upon them by the company.

Meaning of important terms:


To put it simply, the "director" is the highest ranking executive in the company and is responsible for overseeing and managing its operations. A company's board of directors is often in charge of overseeing all aspects of the administration of the business's operations. The "Board of Directors" is the collective name for these groups of directors. The team of directors is responsible for safeguarding the interests of the company's stakeholders and other members in an ideal corporate governance model.

It is important to note that unless otherwise specified in a board resolution meeting, the directors do not operate in a solo role. It implies that the directors must collaborate with one another. Any director's work completed in their own capacity is not obligated to the company.

Board of Directors:

Company, because it is a manufactured person with no free will, it needs human action in order to operate. Therefore, the individuals in charge of overseeing a company's operations are referred to as directors, and as a group, they are called the "Board of Directors." Section 2(10) of the 2013 Act provides a definition for the term. It specifies that a company's "Board" or "Board of Directors" is the collective body of the company's directors.

A Board of Directors is mandated for each corporation by Section 149 of the 2013 Act. Individuals will serve as directors on the board. Moreover, it stipulates the minimum number of directors that a company must have three for a public business and two for a private one. The minimum number for a one-person business is one. Moreover, a maximum of fifteen directors is provided for in this provision.


Generally speaking, the company's Articles of Association either specifically state or infer the powers granted to the directors. The Board of Directors alone is authorised to use the authority indicated in the articles after it has been granted to them. It is important to remember that the shareholders have no authority to command or guide the board in the exercise of their authority. As long as the board stays within the established parameters when using this authority.

The director once appointed has almost total power over the operations of company.

The powers of directors are co-extensive with the powers of company itself:

  • The powers of directors are to be exercised in accordance with the Memorandum of Association and Articles of Association.
  • Board of directors are not competent to the acts that shareholders are required to do in general meetings.
  • Act in accordance with the provisions of Company Law and follow any regulation made during general meetings.
There are exceptional cases with intervention of shareholders, in the following situations, general meeting is competent to act on matters delegated to the board:
  • When directors have behaved dishonestly.
  • When directors lose their ability to act for a legitimate reason.
  • When there is a deadlock or the directors are unwilling to take action, the shareholders have the authority to step in.
  • The residual powers of a firm are vested in the general meetings of shareholders.
Power exercised by passing resolution at board meetings:
  • To make calls on shares.
  • To approve the repurchase of shares in accordance with Companies Act of 2013 Section 68.
  • To issue debt instruments, such as debentures.
  • To take out a loan.
  • To make investments with company funds.
  • To make loans, pledge loyalty, or offer security with regard to shares.
  • Accept the board's report and the financial statements.
  • Spread out the company's operations.
  • Accept a merger, de-merger, reconstruction, or amalgamation.
  • The acquisition of a business or the taking over of a significant portion of another business.
Powers exercised after approval from general meeting:
  • The following powers are listed in Section 180 of the 2013 Act and can only be used by the Board with the approval of the general meeting:
  • To dispose of the company's endeavours in whole or in part by selling, leasing, or in any other way.
  • Investing in trust securities in a different way.
  • To take out a loan for the business's needs.
  • To extend time or forego the director's debt repayment.

The title of the lessee or purchaser is impacted when the director violates the restrictions imposed by the sections, unless he operated with due care and attention and in good faith. Businesses whose regular operations include leasing or selling real estate are exempt from this provision.

Power to constitute an Audit Committee:
The authority to establish an audit committee is granted to the board of directors by Section 177 of the 2013 Act. It is important to remember that the committee needs to consist of three directors minimum, two of whom should be independent. Additionally, a majority of the committee's members must be independent directors. The audit committee's chairperson and members must to be capable readers and could understand the financial statements. The board's written terms of reference, as stipulated by the audit committee, must be followed.

Nomination and Remuneration Committee:
Under Section 178 of the 2013 Act, the Board of Directors may establish the Stakeholder Relationship Committee and the Nomination and Remuneration Committee. Three or more non-executive directors are needed for the Nomination and Remuneration Committee, with at least half of them needing to be independent.

When the board of directors is made up of more than a thousand shareholders, holders of debentures, or holders of any other kind of security, the board may additionally form the Stakeholders Relationship Committee. This committee is required to consider and address the shareholder issues.

Power to make contribution to charitable and other trust:
Section 181 gives the company's Board of Directors the authority to make contributions to legitimate charity and other funds. In any event, when the total contribution above 5% of the firm's average net profit for the most recent fiscal years, the company must first obtain approval in a public meeting.

Power to make contribution to National Defence Fund:
Under Section 183 of the 2013 Act, the Board of Directors is authorised to contribute to the National Defence Fund or any other fund that has been authorised by the Central Government for the purpose of National Defence. The amount of the contribution might be as high as the business deems appropriate. It is required that the total contribution made during the relevant financial year be disclosed in the profit and loss statement.

Additionally, the board now has some additional authority thanks to Rule 8 of the Companies Rules of 2014.
Resolutions that can be approved during board meetings specifically include:
  • Contributing to politics
  • Choosing or dismissing important managers.
  • Designating secretarial and internal auditors

Restriction on powers of board:

  • Section 180(1)(a): Sell or lease of an undertaking:
    Without the shareholders' prior consent, the Board is not permitted to sell, lease, or otherwise dispose of all or a significant portion of the company. The same clause applies if there are multiple undertakings. If the company's primary activity is the sale or leasing of real estate, then the provisions of this section do not apply.The resolution will be approved via mail-in ballots. Undertaking, as used in this section, refers to an endeavour in which the company has invested more than twenty percent of its net worth or in which, according to the most recent audited balance sheet, twenty percent of its income was earned.
  • Section 180(1)(b): Invest other than in trust securities:
    States that the Board may not invest the amount of compensation obtained through the forced acquisition of an undertaking resulting from a merger or amalgamation unless the shareholders have given their prior consent.Section 180(1)(c) allows you to borrow more money than your paid-up capital and free reserves. Without the shareholders' prior consent, the board is not allowed to borrow more money if the total amount previously borrowed exceeds the company's paid-up share capital, free reserves, and securities premium. Temporary loans taken out in the regular course of business from the company's bankers are not regarded as borrowing, though.
  • Section 180(1)(d) Set a time limit for the board to return director loans:
    States that the board cannot return director loans or grant a period of time for their repayment without the shareholders' consent.

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