Page 302 - DMGT407Corporate and Business Laws

Unit 12: Management of Companies

Besides the powers specified in s.292, there are certain other powers also which can be exercised Notes
only at the meeting of the board. These are: (i) The power of filling casual vacancies in the Board
(s.262); to appoint additional directors (s.260); and to appoint alternate directors (s.313) (ii)
sanctioning of a contract in which a director is interested [s.297]. (iii) the power to recommend
the rate of dividend to be declared by the company at the Annual General Meeting, subject to the
approval by the shareholders.
In the following cases, not only that the powers be exercised at the Board’s meeting but also that
every director present and entitled to vote must consent thereto: (1) The power to appoint a
person as managing director or manager, who is already managing director or manager of
another company (Ss.316 and 386). (2) The power to invest in any shares and debentures of any
other body corporate (s.372).

Restrictions on powers of directors. Section 293 provides that the Board of Directors of a public
company or a private company which is a subsidiary of a public company cannot exercise the
following powers without the consent of the shareholders in general meeting:
1. Sell, lease or otherwise dispose of the whole, 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.
However, this restriction does not apply to the case of a company whose ordinary business
is to sell or lease properly.
2. Remit or give time for the repayment of any debt due by a director except in the case of
renewal or of continuance of an advance made by a banking company to its director in the
ordinary course of business.
3. Invest, otherwise than in trust securities, the amount of compensation received by the
company in respect of compulsory acquisition of any fixed assets of the company.
4. Borrow money exceeding the aggregate of the paid-up capital of the company and its free
reserves. “Borrowing’ does not include temporary loans obtained from the company’s
bankers in the ordinary course of business.
5. Contribute in any year, to charitable and other funds not directly relating to the business
of the company or the welfare of its employees, any amount exceeding ` 50,000 or 5% of
its average net profit for the last three financial years, whichever is greater.
However, contributions of National Defence Fund or any other fund approved by the Central
Government for the purpose of national defence are exempted from the above provisions. Any
amount may be contributed without obtaining the sanction of the company is general meeting.

Did u know? The Companies Act does not expressly empower companies to borrow money.
Therefore, most of the companies expressly provide for such borrowing powers in the
memorandum.

In such a case, where memorandum authorises the company to borrow, the Articles provide as
to how and by whom these powers shall be exercised. It may also fix up the maximum which can
be borrowed by the company.
Self Assessment

Fill in the blanks:
10. The Board may exercise all powers of the company and can do all such acts and things that
the ………………. can do.

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