One simple solution for cost effective and efficient method to pass a resolution is by passing it by circulation. Section 175 of the Companies Act 2014 the resolution shall be circulated in draft together with all necessary papers to all directors (or members of committee) in same manner as notice. The resolution shall be passed when approved by majority of directors (or members) who is entitled to vote. When one third or more directors require that it must be decided in a meeting, it shall be decided in meeting. Every resolution passed by circulation must be noted in next board meeting and made part of minutes of that meeting. Rule 5 of these Rules adds, a resolution in draft form may be circulated to the directors together with the necessary papers for seeking their approval, by electronic means which may include E-mail or fax.
I have discussed power of Board under the Companies Act 2013 earlier in detail. According to Section 179(3) the Board shall exercise following powers only by means of resolution passed in its meeting:
- make calls on shareholders in respect of money unpaid on their shares;
- to authorise buy-back of securities under section 68;
- to issue securities, including debentures, whether in or outside India;
- to borrow monies;
- to invest the funds of the company;
- to grant loans or give guarantee or provide security in respect of loans;
- to approve financial statement and the Board’s report;
- to diversify the business of the company;
- to approve amalgamation, merger or reconstruction;
- to take over a company or acquire a controlling or substantial stake in another company;
- any other matter which may be prescribed.
In addition to the powers specified under sub-section (3) of section 179 of the Act, According to Rule 8 of the Companies (Meeting of Boards and its powers) Rules 2014; the following powers shall also be exercised by the Board of Directors only by means of resolutions passed at meetings of the Board.-
- to make political contributions;
- to appoint or remove key managerial personnel (KMP);
- to take note of appointment(s) or removal(s) of one level below the Key Management Personnel;
- to appoint internal auditors and secretarial auditor;
- to take note of the disclosure of director’s interest and shareholding;
- buy, sell investments held by the company (other than trade investments), constituting five percent or more of the paid up share capital and free reserves of the investee company;
- to invite or accept or renew public deposits and related matters;
- to review or change the terms and conditions of public deposit;
- to approve quarterly, half yearly and annual financial statements or financial results as the case may be.
The Board may, by a resolution passed at a meeting, delegate to any committee of directors, the managing director, the manager or any other principal officer of the company or in the case of a branch office of the company, the principal officer of the branch office, the powers specified in clauses (d) to (f) on such conditions as it may specify.
Clause (d) which deals with power to borrow money needs many explanations. Nothing in this clause (d) shall 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 established by or under any Act. In respect of dealings between a company and its bankers, the exercise by the company of the power specified in clause (d) 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 on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of.
Please note: This blog post is not a professional advice. I welcome your comments and feedback. Readers may share this post on social media by using buttons given here.