What are the powers of Board of Directors of a Company in India?

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What is the exact number of Board of Directors to conduct the meetings of the Company?

Quorum is the minimum number of directors to be present to proceed with a meeting  for conducting a legally valid business transactions.  The directors cannot held a meeting unless the quorum of the directors is present.  Maintenance of quorum in the meetings is not directory, but is mandatory.  Decisions taken by the lesser number than the quorum in a meeting is void.

Fixation of quorum is provided under Section 287(2) of the Companies Act, 1956. The Section fixed the quorum as one-third of the total strength of the Board or two directors, whichever is higher.  Here the total strength means total strength of the Board of directors of the company after deducting the number of Directors, whose positions are vacant at that time.  Another criteria is that, if the number of interested directors exceeds or equal to two-thirds of total strength, the number of non-interested directors should not be less than two, be the quorum at that time.  Interested directors means if he has any direct or indirect interest in any discussion, or vote or any matter i.e. in any contract or arrangement involved by the company.  Therefore, disinterested directors are not counted for the purpose of quorum in making decisions and business transactions.  Quorum should be the disinterested directors of the Board.  Section 300 of Companies Act, 1956 bars the voting of interested directors on contracts or arrangement; however, this section is not applicable for private company.

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Another important thing is that, quorum should be present at every stage of meeting of that particular transaction, otherwise, the business transacted is void. Regulation 49 of Table A contemplates that no business transaction can be done in any general meeting unless the quorum is present.

Few changes under Companies Act 2013,

Quorum for meetings of Board of public company:

As per section 103 (1) of 2013, quorum for meetings of public company will depend on number of members presented on the date of meeting. The required quorum on various situations is as follows:

  1. 5 members if number of members present not exceeded 1000
  2. 15 members if number of members exceeded one thousand but is within 5000
  3. 30 members if number of members exceeded 5000 in numbers.

Quorum for meetings of Board of Private Company  (Section 174):  As stated above in Section 287.

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Powers of Board of Directors:

1. Powers that can be exercised only at Board Meetings.  They are:

  •  Powers to make calls to shareholders for unpaid money on their shares.
  • Power to authorize the buy-back of shares.
  • Power to issue debentures
  • Power to borrow money otherwise than in the form of debentures.
  • Power to invest funds of company.
  •  Power to make loans.
  • Power to make donations to political parties
  • Power to constitute audit committee
  • Power to fill casual vacancies in the office of directors
  • Disclosure of interest by a director
  • Power to make declaration of solvency under Section 488 (1)

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2. Powers of Board  that can be exercised with the consent of company in general meeting (section 293 (1) of Act, 1956):

  •  Sell, lease or otherwise dispose the undertaking of the company.
  • Remit or granting time for repayment of debt due  by the director, provided by a banking company to its director in the course of business
  • Invest the compensation amount received from any compulsory acquisition of any undertaking of the company after the commencement of Act
  • To borrow money if (amount to be borrowed and already borrowed money) exceeds aggregate of the paid-up capital and its free reserves.
  • To contribute to ‘bona fide’ charitable and other funds is subjected to certain limits as contemplated under section 181 of Act, 2013.  However, as per section 293 of the 1956 Act, such power should be exercised only in the general meeting if the company is a public company or subsidiary of public companies

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Adv. Anitha Gutti

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