MANAGEMENT AND CONTROL OF COMPANIES - II – POWER AND DUTIES OF DIRECTORS

MANAGEMENT AND CONTROL OF COMPANIES - II – POWER AND DUTIES OF DIRECTORS

The Board of directors of a company shall be entitled to exercise all such powers as the company is authorized to exercise and do. 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 – Section 291

Powers to be exercised only at Board Meetings – Section 292(1)

• Power to make calls on shareholders in respect of money unpaid on their shares
• Power to authorize the buy-back as per the  provision to section 77A (b)( 2) Section 292 (1)(aa)
  
  
• Power to issue debentures Section 292(1)(b)  
• Power to borrow moneys otherwise than on debentures Section 292(1) (c)
• Power to invest the funds of the company; and Section 292(1) (d)
•  Power to make loans - Section 292(1)(e)

Other Powers to be exercised at Board Meeting

• Power to form opinion about solvency of company in respect of Buy – back of shares – Section 77A
• Power to fill up casual vacancy –Section 262
• Power to constitute Audit Committee – Section 292A
• Power to make donation to political parties – Section 293A(2)
• Power to accord sanction for specified contracts in which one or more directors are interested – Section 297(4)
• Disclosure of interest by director – Section 299(1)
• Power to receive notice of disclosure of directors’ shareholdings – Section 308(2)
• Power to purchase of shares or debenture of other companies – Section 372A
• Power to appoint a person as its manager if he is the manager or managing director of other company – Section 386(2)

Powers of the Board exercisable with the approval of the company in general meeting – Section 293(1)

• Sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the company
• Remit, or give time for the repayment of, any debt due by a director
• Invest, otherwise than in trust securities
• Borrow moneys where the moneys to be borrowed, together with the moneys already borrowed by the company (apart from temporary loans), exceed the aggregate of the paid-up capital of the company and its free reserve
• Contribute to charitable and other funds not directly relating to the business of the company exceed twenty-five thousand rupees or five per cent, of its average net profits as determined in accordance with the provisions of sections 349 and 350 during the three financial years immediately preceding, whichever is greater.

Loan to Director – Section 295(1)

No company shall, without obtaining the previous approval of the Central Government in that behalf directly or indirectly, make any loan to or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by -

•  any director of the lending company, or of a company which is its holding company or any partner or relative of any such director;
•  any firm in which any such director or relative is a partner;
•  any private company of which any such director is a director or member;
•  any body corporate at a general meeting of which not less than twenty-five per cent of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or
•  any body corporate, the Board of directors, managing director  or manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

Any contravention Section 295(1) shall be punishable either with fine which may extend to Five Thousand Rupees or with simple imprisonment for a term which may extend to six months

Boards Sanction for contracts in which Directors are interested – Section 297

(a) for the sale, purchase or supply of any goods, materials or services; or

(b) after the commencement of this Act, for underwriting the subscription of any shares in, or debentures of, the company:

In the case of a company having a paid-up share capital of not less than rupees one crore, no such contract shall be entered into except with the previous approval of the Central Government.

Position of Interested Director – Section 300

Interested director not to participate or vote in Board's proceedings.

Duties of Board if Directors –

Statutory Duty

• To attend Board Meeting – Section 283(1)(g)

• Not to contract without Boards consent – Section 297

• Not to disclose Interest – Section 299, 300

• To make disclosure of appointment or relinquishing the office – Section 305

• To make disclosure of Shareholding – Section 308

• To convene general meetings – Section 165, 166, 169

• To disclose transfer of property – Section 319

• File declaration of solvency – Section 77A

• Declaration of solvency in case of Members voluntary Winding up – Section 488

• File return of Allotment – Section 75

Liability for Statutory Defaults and Violations

Penalty – Section 59, Section 69(5), Section 71(3), Section 73(2), Section 207, Section 300.

Criminal Liability:

• Section 44(4)
• Section 58A(6)(B)
• Section 58A(10)
• Section 63
• Section  68
• Section 73(16)
• Section 105
• Section 202(1)
• Section 207
• Section 209A (8)
• Section 210(5)
• Section 211(8)
• Section 217(5)
• Section 221(4)
• Section 250(9)
• Section 293A(5)
• Section 295(4)
• Section 308(3)
• Section 372A
• Section 407(2)(C )
• Section 488(3)

Compounding of offences – Section 621A

Any offence punishable whether committed by a company or any officer thereof not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by the Central Government on payment or credit, by the company or the officer to the Central Government of such sum as that the Government may prescribe:

The sum prescribed shall not, in any case, exceed the maximum amount of the fine which may be imposed for the offence so compounded