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Section 179 of Companies Act

Indian company law is derived from the Companies Act 2013. On August 29, 2013, it was ratified by the president, effectively replacing the Companies Act of 1956. The Act was implemented gradually. This act's first section becomes operative on August 30, 2013.

Under Section 179 of the act, the Board of Directors of a firm is granted a number of authorities. One of a company's most important parts is the Board of Directors, or Boards (BoD), as they are more commonly known. They are essential to the overall administration and control of the company. The Act clarifies the responsibilities and powers of the Board of Directors of the Company through Section 179 of the act. It states that the director must act independently when making decisions that are in the best interests of the company.

A director's main responsibility is to declare any conflicts of interest and as part of that duty, they have to avoid engaging in discussions concerning them. It is the duty of the Board of Directors to ensure that the organization has enough policies and processes in place to manage risks and maintain an appropriate level of accountability and openness. The Companies Act of 2013 aims to grant directors the power to establish member conduct rules, internal controls, and financial reporting systems.

The Board is responsible for establishing the organization's strategic direction, keeping an eye on the company's financial situation, and making crucial decisions about corporate policy. Along with acting consistently in the best interests of shareholders, they also have an obligation to verify that the business is conducting its operations in accordance with all existing rules and regulations.

Furthermore, the directors also supervise the senior executives' performance within the organization. When decisions are being made about things like mergers and acquisitions, etc, they are crucial.

In conclusion, a director's function is essential to any business's success.

Powers Of Board of Directors are as follows:

Under the Companies Act 2013, there are various powers specified by law that are given to the Board of Directors of the company.
  • Decision-making authority: The Board of Directors has the power to make decisions on behalf of the company. They are in a position to make important choices and steer the company in the right direction because it is their responsibility to provide the business with strategic direction. The company has to run in a way that meets the needs of all of its stakeholders and conforms with all laws and regulations.

    Consequently, the directors now possess the power to approve or disapprove important business choices, such as whether to proceed with a merger or acquisition or approve or disapprove the organization's financial objectives.
     
  • Authority to act on behalf of the company: The company's fiduciary is the board of directors. Stated differently, they possess the power to act on behalf of the company as an agent and maintain a rapport founded on confidence and trust. The director acts as an agent for the benefit of the company. Consequently, they are able to sign contracts and other legal paperwork on the business's behalf. Permission to exercise such authority is granted by the Company's Articles of Association or by decisions made by the Board of Directors.
     
  • Authority to designate and dismiss directors: The organization's Board of Directors has the power to appoint and remove additional directors. To do this, adherence to the company's articles of incorporation and the Companies Act's standards is required. As per Section 152 of the Act, the directors utilize their voting power to execute this authority. In addition to the power of appointment, the directors may also remove someone.
     
  • Authority to assign: The Board of Directors has the authority to assign certain tasks and obligations to other members of the organization. A director may assign duties in relation to particular commercial transactions or the supervision of particular divisions. The Articles of Association and Companies Act of 2013 must be followed when making these assignments.
     
  • Authority to approve dividends: The directors possess the power to authorize or disapprove dividends that are to be paid to shareholders. When choosing whether to pay dividends, one must evaluate the company's financial success and ability to do so. Dividends can only be paid out of the company's profits, and the Board of Directors must authorize such payouts.
     
  • Authority to approve financial statements: The financial accounts of the company may be approved by the directors. Financial statements such as income, cash flow, and balance sheets are included in this group. These financial statements, which have to be prepared in accordance with accounting regulations, have to fairly and accurately depict the company's financial situation.
     
  • Authority to run the business: The Board of Directors of a firm is in charge of managing the enterprise. Effective company operations, strategic decision-making, and business decision-making are a few instances of management authority. The directors exercise of this power must be compliant with their fiduciary duties, which include acting in good faith and the company's best interest.

More about Section 179 of Companies Act, 2013

Section 179(1): The first part of the regulation gives the directors instructions on agency principles. It states that the director will have the authority to carry out the duties and use the powers that the corporation has been given permission to. The directors' agency and fiduciary functions are activated in this way. They represent the business.

Within this Section are two provisos.
  • The first one describes the limitations on the board's use of its power. This section states that when the Board of Directors exercises its authority, the Companies Act, the 2013 Memorandum of Association, the Articles of Association, and any regulations created at general meetings shall all be assessed.
     
  • The second proviso to this provision states that the Board shall abstain from carrying out any act or matter that is mandated by the Companies Act, Memorandum of Association, and Articles of Association, or that is to be done by the company in the general meeting.

Section 179(2) Further stated in Section 179(2) of the Companies Act, 2013 is that a regulation passed by the company at its general meeting shall not void an act of the Board of Directors, provided that the act would still have been lawful had the regulation not been passed.

The power dynamics between the directors and shareholders are reflected in this clause. Within a firm, there is a protracted power struggle between the directors and shareholders.
Section 179(3) The authority granted to the Board of Directors to act on behalf of the firm by making resolutions during board meetings is outlined in Section 179(3).
  1. Authority to summon stockholders to account for money owed on their shares: The power that directors have over unpaid shares´┐Ża privilege conferred by the Companies Act of 2013 is a crucial part of corporate governance. It enables the director to demand that the shareholders pay any outstanding balances on their shares from them. Usually, calls are made by the company to get payments from its shareholders. The share money is paid in two installments, known as calls, after the initial payment at the time of issuance.
     
  2. Authority to approve the repurchase of securities: Under Section 68 of the Companies Act of 2013, a business may repurchase its own securities with approval from its board of directors and shareholders. This authority, which is an essential instrument for managing the organization's capital structure, is vested in the Boards. By assisting the company in giving its owners their surplus capital back, it raises shareholder value. The conditions for the buyback of shares are specified in Section 62 of the Companies Act of 2013.
     
  3. Authority to Borrow: The Board of Directors is authorized to borrow money on the company's behalf by this clause. Before using this ability, the board must adopt a resolution explaining the rationale behind the borrowing, the amount to be borrowed, the terms and circumstances of the borrowing, and any security that would need to be provided to the creditors. The financial advisors to the corporation must provide their views before such a resolution may be approved. The articles of association and the company's borrowing policy set the parameters for how this authority may be employed.
     
  4. Power to invest funds of company: According to the Companies Act of 2013, the Board of Directors has the power to invest company funds. It is essential that the BOD exercise caution when carrying out this function because there is a certain level of risk involved. A thorough evaluation of the investment's nature, risk, and potential returns must be done before the money is invested. Similarly, the resolution approving the use of company assets for investment purposes must outline the objective of the investment, the total amount to be allotted, the expected return, and any risks involved.

Conclusion:
The Companies Act of 2013 and its implementing rules confer certain powers upon a company's board of directors. These powers have been granted to them in order for them to properly manage and operate the company. Directors should act in the best interests of the organization when exercising their authority. Directors have a fiduciary duty to act in the best interests of the company. The interests of the business and its stakeholders should always come first. They must use every effort to gather information, assess the dangers, and draw well-informed decisions. In addition, the directors are in charge of upholding the law and ensuring that moral behavior is encouraged.

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