- The Board of Directors of a company is primarily an oversight board. The main motive of Board of Directors is to ensure that the interest of non- controlling shareholders is protected.
- This paper is divided under two parts. The first part is about the corporate governance provisions related to meetings of BOD using statutes and Indian case laws and the other part is about restrictions of the powers of Board of Directors.
- Board meetings are very important for the effective management of a company. As per section 173(1) of the Companies Act, 2013, the 1st meeting of Board of Directors has to be held within 30 days of the incorporation. There have to be at least four meetings in a year with a gap between the consecutive meetings not being more than 120 days.
In case of OPC, small company, or dormant company, at least one meeting should be held in each half of the calendar year with the gap between them not being less than 90 days.
- As per section 173(2), directors are required to participate in the board meetings as a person, through video conferencing, or through audio visual means. However, as per rule 4, there are certain restrictions on the matters that can be dealt with in meetings through video conferencing, or through audio visual means. The following are the matters which cannot be included:
- The approval of the annual financial statements
- The approval of the Board’s report
- The approval of the prospectus
- The Audit Committee Meetings for consideration of accounts, and
- The approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.
Restrictions on the powers of Board of Directors:
- According to section 179(3), the following powers can be exercised by the board of directors on behalf of the company by means of a resolution passed at the meetings of the board:
- Making calls on shareholders with respect to money unpaid on their shares.
- Authorizing buyback of securities under section 68.
- Issuing securities, debentures, in or outside India.
- To borrow monies.
- To invest fund of the company.
- To grant loans or to give guarantee or provide security in respect of loans.
- Approving financial statement and board’s report.
- To diversify the business of the meeting.
- Approving amalgamation, merger, and reconstruction.
- Taking over a company or acquiring control or substantial stake in other companies.
- Any other matter which may be prescribed.
- In addition to the powers provided under section 179(3) of the Act, the board of directors shall exercise the following powers only by the means of resolutions passed at the meeting of the boards:
- Making political contribution
- Appointment and renewal of Key Managerial Personnel (KMP)
- Noting of Appointment(s) and Removal(s) of one level below KMPs
- Appointing internal orders and secretarial auditor
- Noting of disclosure of director’s interest or shareholding
- Buying or selling investments held by the company (other than trade investments), constituting 5% or more of the paid-up share capital and free reserves of the investee company
- Inviting or accepting or renewing public deposits or other related matters.
- Renewing and changing the terms of Public Deposits
- Approving quarterly, half-yearly, or annual financial results or statements.
- Section 180 of the Companies Act, 2013 states restrictions on the powers of the Board and states that Approval of Shareholders (Special Resolution) is required to exercise the following powers by the Board of the Company:
- Matters related to sale, lease, or otherwise disposal of the undertaking
- Investing otherwise in trust securities the amount of compensation received as a result of any merger or amalgamation
- Borrowing in excess of the paid-up share capital and free reserves
- Remit or give the time to the repayment of any debt due to a director.
