CHAPTER XII

RESTRICTIONS ON POWERS OF BOARD

(Section 180)

Section 180 is applicable to all companies i.e. Public as well as Private.

So now onwards even Private companies have to seek the approval of their members if they are intending to borrow monies in excess of their paid up share capital and free reserves. 

SPECIAL RESOLUTION passed is to be filed with ROC in FORM NO. MGT-14.

Applicability :

To sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company

To invest (otherwise than in trust securities) amount of compensation received by Company as a result of any merger or amalgamation

RESTRICTIONS ON POWERS OF BOARD:

To borrow money where the money to be borrowed + money

already borrowed(except temporary loans obtained from the company’s bankers in the ordinary course of business) > aggregate of its paid-up share capital and free reserves

To remit any debt due from a director. OR To give time for the repayment of debt due

from a director

RESTRICTIONS ON POWERS OF BOARD:

Even though Special Resolution is NOT passed in General Meeting –

  the title of a buyer or other person who buys or

takes on lease any property, investment or undertaking , in good faith;

OR the sale or lease of any property of the company

where the ordinary business of the company consists of, or comprises, such selling or leasing

These TRANSACTIONS WILL BE VALID.

VALIDITY OF TRANSACTION IN

ABSENSE OF SPECIAL RESOLUTION:

(i) “Undertaking” shall mean an undertaking Where investment of company exceeds 20% of its net

worth as per the audited balance sheet of the preceding financial year

OR Which generates 20% of total income of the company

during the previous financial year. (ii) “Substantially the whole of the undertaking”

in any financial year shall mean 20% or more of the value of the undertaking as per the audited balance sheet of the preceding financial year

UNDERTAKING :