Section 180 of the Companies Act, 2013
Section 180 of the Companies Act, 2013 outlines the restrictions on powers of the Board of Directors. It ensures that certain key decisions by the Board are taken only with the approval of the company by a special resolution.
🔹 Section 180 – Restrictions on Powers of the Board
The Board of Directors of a company shall exercise the following powers only with the consent of the company by a special resolution:
(a) To sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company.
"Undertaking" means an undertaking where:
The investment of the company exceeds 25% of its net worth, OR
It generates 25% or more of the total income of the company.
"Substantially the whole of the undertaking" means 90% or more of the value of the undertaking.
(b) To invest otherwise than in trust securities the amount of compensation received from any merger/amalgamation.
(c) To borrow money, where the money to be borrowed (together with existing borrowings) exceeds the aggregate of paid-up share capital, free reserves, and securities premium.
This excludes temporary loans obtained from the company’s bankers in the ordinary course of business.
(d) To remit or give time for the repayment of any debt due from a director.
🔸 Important Notes:
These restrictions do not apply to private companies, unless specifically stated.
Special resolution = approval of at least 75% of members present and voting.
🔹 Penalty for Contravention:
If the Board exercises any power in contravention of this section, such acts are invalid, and the company or director may be liable as per the applicable provisions of the Act.
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