CHAPTER XII RESTRICTIONS ON POWERS OF BOARD (Section 180)
Applicability : • 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.
RESTRICTIONS ON POWERS OF BOARD: • 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
VALIDITY OF TRANSACTION IN ABSENSE OF SPECIAL RESOLUTION: • Even though Special Resolution is NOTpassed 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.
UNDERTAKING : • (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