Meetings of Board - Boards powers and restrictions thereon

Board to meet once in every three months
In the case of every company, a meeting of its Board of directors shall be held at least once every three months and at least four such meetings must be held every year.

Notice of meetings
Notice of every meeting of the Board of directors of a company shall be given in writing to ever director for the time being in India, and at his usual address in India to every other director.

Every officer of the company whose duty it is to give notice as aforesaid and who fails to do so shall be punishable with fine which may extend to one hundred rupees.

Quorum for meetings
The quorum for a meeting of the Board of directors of a company shall be one-third of its total strength (any fraction contained in that one-third being rounded off as one), or two directors, whichever is higher.

Provided that where at any time the number of interested directors exceeds or is equal to two-thirds of the total strength, the number of the remaining directors, that is to say, the number of the directors who are not interested, present at the meeting being not less than 2 shall be the quorum during such time.

Interested director means any director whose presence cannot, by reason of his being interested in some manner in the subject matter of discussion be counted for the purpose of forming a quorum at a meeting of the Board, at the time of the discussion or vote on any matter.

Procedure where meeting adjourned for want of quorum
If a meeting of the Board could not be held for wand of quorum, then, unless the articles otherwise provide, the meeting shall automatically stand adjourned till the same day in the next week, at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday, at the same time and place.

Passing or resolutions by circulation
No resolution shall be deemed to have been duly passed by the Board or by a committee thereof by circulation, unless the resolution has been circulated in draft, together with the necessary papers, if any, to all the directors, or to all the members of the committee, then in India (not being less in number than the quorum fixed for a meeting of the Board of committee, as the case may be), and to all other directors or members at their usual address in India, and has been approved by such of the directors as are then in India, or by a majority of such of them, as are entitled to vote on the resolution.

Validity of acts of directors
Acts done by a person as a director shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in this Act or in the articles.

Board's powers and restrictions thereon

General powers of Board
Subject to the provisions of this Act, 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 authorised to exercise and do.

However, the Board shall not exercise any power or do any act or thing which is directed or required, whether by this or any other Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting.

Certain powers to be exercised by Board only at meeting
The Board of directors of a company shall exercise the following powers on behalf of the company, and it shall do so only by means of resolutions passed at meetings of the Board:-

1. the power to make calls on shares holders in respect of money unpaid on their shares
   
2. the power to issue debentures
   
3. the power to borrow moneys otherwise than on debentures
   
4. the power to invest the funds of the company
   
5. the power to make loans
   

However, the Board may, by a resolution passed at a meeting delegate to any committee of directors, the managing director, or the manager of the company or any other principal officer of the company or in the case of a branch office of the company, a principal officer of the branch office, the powers specified in clauses (c), (d) and (e), to the extent specified in the resolution and subject to such conditions as may be imposed.

Acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise or the placing of moneys on deposit by a banking company with another banking company on such conditions as the Board may prescribe, shall not be deemed to be borrowing of moneys or making of loans by a banking company for the purpose of these provisions.

These provisions also do not apply to borrowings by a banking company from other banking companies or from the Reserve Bank of India, the State Bank of India or any other banks.

In respect of dealings betwwen a company and its bankers, the exercise by the company of its powers to borrow money otherwise than on debentures shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day-to-day operation of overdrafts, cash credit or other accounts.

Every resolution delegating the power referred to in clause (c) ( the power to borrow moneys otherwise than on debentures ) shall specify the total amount outstanding at any one time up to which moneys may be borrowed by the delegate.

Every resolution delegating the power referred to in clause (d) (the power to invest the funds of the company ) shall specify the total amount up to which the funds may be invested, and the nature of the investments which may be made, by the delegate.

Every resolution delegating the power referred to in clause (e) (the power to make loans ) shall specify the total amount up to which loans may be made by the delegate, the purposes for which the loans may be made, and the maximum amount of loans which may be made for each such purpose in individual cases.

Nothing in this section be deemed to affect the right of the company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified above.

Restrictions on powers of Board
The Board of directors of a public company, or of a private company which is a subsidiary of a public company, shall not, except with the consent of such public company or subsidiary in general meeting :-

1. sell, lease or otherwise dispose of the whole, or 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
2. remit, or give time for the re-payment of, any debt due by a director except in the case or renewal or continuance of any 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 such undertaking as is referred to in clause (a), or of any premises or properties used for any such undertaking and without which it cannot be carried on or can be carried on only with difficulty or only after a considerable time
4. borrow moneys, where the moneys to be borrowed together with the moneys already borrowed by the company, (apart from temporary loans obtained from the company's bankers in the ordinary course of business) will exceed the aggregate of the paid-up capital of the company and its free reserves
5. contribute, to charitable and other funds not directly relating to the business of the company or the welfare of its employees, any amounts the aggregate of which will, in any financial year, exceed fifty thousand rupees, or five per cent of its average net profits during the three financial years immediately preceding, whichever is greater.

The resolutions under clause (d) and (e) above must specify the total amount upto which the Board may borrow or the total amount which may be contributed in a financial year.

Temporary loans mean loans repayable on demand or within 6 months from the date of the loan such as short term cash credit arrangements, the discounting of bills and the issue of other short term loans of a seasonal character, but does not include loans raised for the purpose of financial expenditure of a capital nature.

Any resolution passed by the company permitting any transaction such as is referred to in clause (a) may attach such conditions to the permission as may be specified in the resolution, including conditions regarding the use, disposal or investment of the sale proceeds which may result from the transaction:

The acceptance by a banking company, in the ordinary course of its business, of deposits of money from the public, repayable on demand, or otherwise, and withdrawable by cheque, draft, order or otherwise, shall not be deemed to be a borrowing of moneys by the banking company within the meaning of clause (d).

No debt incurred by the company in excess of the limit imposed by clause by clause (d) shall be valid or effectual, unless the lender proves that he advanced the loan in good faith and without knowledge that the limit imposed by that clause had been exceeded.

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