PROVISIONS RELATING TO THE POWERS AND DUTIES OF THE BOARD OF DIRECTORS (COMPANIES ACT, 2013)

PROVISIONS RELATING TO THE POWERS AND DUTIES OF THE BOARD OF DIRECTORS (COMPANIES ACT, 2013)

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WRITTEN BY: MS. NATASHA JAIN, LL.B, STUDENT AT NEW LAW COLLEGE, BHARATI VIDYAPEETH DEEMED UNIVERSITY & RESEARCH WRITER AT LAW AUDIENCE:

I. INTRODUCTION:

The term “director” in Companies Act, 2013 is defined under Section 2(34) as “a director appointed to the board of a company”[1].  As per chapter 11, Section 149 of the Companies Act, 2013 it is compulsory for every company to have a board of directors[2]. Every Company shall have a board of directors consisting of individuals as directors[3]. A board of directors is a renowned group of people who together see the activities and management of an organization. Every public company must have a board of directors[4]. The board of directors is both the members of internal and external and should be a representative of both management and shareholder interests.

II. POWERS OF THE BOARD OF DIRECTORS:

Section 179 of the Companies Act, 2013 deals with the provisions related to the exercise of powers of the board of directors of a company. This section came into force on 1st April, 2014.

a) Powers of Company is Power of Board [Section 179(1)]:

According to the Section 179 (1) of Companies Act, 2013 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 authorized to exercise and do[5]. 

“While doing such act or a thing or maybe exercising the powers, the board shall be subject to the provisions contained in that behalf:

  1. In the Companies Act of 2013, or
  2. In the Memorandum, or
  3. In the Articles, or
  4. In any Regulations, not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting.[6]

b) Act Done by Board of Directors is not invalidated by new regulation [Section 179(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. It means restrictions made by the members on the power of board shall not have the retrospective effect but have prospective effect i.e. prior act done by the board of directors cannot be invalidated by the members[7].

c) Powers exercised only by passing resolutions at board meeting [Section 179(3)]:

As per the Section 179(3) of the Companies Act, 2013, the board of directors of a company shall exercise the following powers on behalf of the Company by means of resolutions passed at the meetings of the board, namely:

“(a) if any share of the company is not fully paid then, the board makes calls to shareholders in respect of unpaid money.

(b) under Section 68, the board has the power to authorize a buyback of securities.

(c) the board has power 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 a guarantee or provide security in respect of loans.

(g) to approve the 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.[8]

III. DUTIES OF THE BOARD OF DIRECTORS (SECTION 166):

The duties and responsibilities of the board of directors are given under Section 166 of the Companies Act, 2013 and are mentioned below:

“(1) A director of a company shall act in accordance with the articles of the company.

(2) A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members, best interests of the company, its employers, the shareholders, and the community and for the protection of the environment.

(3) A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgement.

(4) A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.

(5) A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.

(6) A director of a company shall not assign his office and any assignment so made shall be void.

(7) If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.”[9]

IV. CONCLUSION:

Consequently, in respect of the powers and duties of the board of directors and in every sense this new act of Companies Act, 2013 is undoubtedly a very advanced and innovatory statute. The director needs to be more set now to escape any serious situations against them or even against the company. The director must be completely aware of the business of the company and he must attend all the board meetings for the welfare of the company. In passing company supremacy the Companies Act, 2013 has played its role very well.

[1] Section 2(34), The Companies Act, 2013 (India).

[2] Section 149 (1), The Companies Act, 2013 (India).

[3] Ibid.

[4] Section 149 (4), The Companies Act, 2013 (India).

[5] Section 179 (1), The Companies Act, 2013 (India).

[6] Proviso 1 to Section 179 (1), The Companies Act, 2013 (India).

[7] Section 179 (2), The Companies Act, 2013 (India).

[8] Section 179 (3), The Companies Act, 2013 (India).

[9] Section 166, Clauses 1 to 7, The Companies Act, 2013 (India).

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