Section 180 of the Companies Act, 2013 restricts powers of the Board of Directors to certain extent. The Board of Directors may exercise particular powers only with the consent of the company given by way of special resolution passed in general meeting of the company.
(a) To sell, lease or otherwise dispose of the undertaking;
(b)To invest otherwise in trust securities the amount of compensation received by it as a result of any merger or amalgamation;
(c) To borrow money; and
(d) To remit, or give time for the repayment of, any debt due from a director.
This provision replaces the earlier provision of Section 293 of the Companies Act, 1956. The Section 293 of the Companies Act 1956 reads as “The Board of Directors of a … company… shall not except with the consent of … company… in general meeting… … …”
This is clear, earlier provision do not ask for special resolution. The requirements of section 293 satisfy by passing an ordinary resolution. In case of borrowing money, companies usually move motion for passing an ordinary resolution in their Annual General meeting. When new provision comes into force on 12th September 2013 annual general meeting of many companies has already held or at least notices for motion of ordinary resolution relating to borrowing powers was send.
When come to new provision of Section 180, this requires companies to pass a special resolution in general meeting and in effect, force companies for extra – ordinary general meeting.
Now, present general circular 04/2014 dated 25/03/2014 simply say, “the resolution passed under section 293 of the Companies Act, 1956 prior to 12.09.2013 with reference to borrowings (subject to the limits prescribed) and / or creation of security on assets of the company will be regarded as sufficient compliance of the requirements of section 180 of the Companies Act, 2013 for a period of one year from the date of notification of section 180 of the Act.”
This eliminate requirement of extra – ordinary general meeting for the purposing of borrowings. Now the companies are required to pass such a special resolution in next Annual General meeting.
The word of caution is; such special resolution under section 180 of the Companies Act, 2013 must be passed in a general meeting (or an annual general meeting) to be held before 12th September 2014.
Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.