Section 179 Board Powers: The Eleven Matters

Section 179 board powers is the provision that sets the outer boundary of what a company's board may do, and then names the decisions it can take in only one way: by a resolution passed at a meeting. The general grant in sub-section (1) is wide. The list in sub-section (3) is the part that matters in practice, because a decision on that list taken by circulation, by a single director, or by an officer without a valid delegation is a decision taken outside the section. This guide covers the general power, the eleven listed matters, the three that can be delegated, and where the resolution ends up. It is not investment advice.

What does section 179 board powers actually grant?

Sub-section (1) is a general grant with two limits attached to it by provisos.

The first proviso subjects the Board, in exercising any such power, to the provisions in that behalf in the Act, in the memorandum or articles, or in any regulations not inconsistent with them and duly made under them, including regulations made by the company in general meeting.

The second proviso is the harder boundary: the Board shall not exercise any power or do any act or thing which is directed or required, whether by the Act, by the memorandum or articles, or otherwise, to be exercised or done by the company in general meeting.

Sub-section (2) then protects what has already been done. No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made. Shareholders can narrow the Board going forward. They cannot unwind a valid past act by passing a regulation after it.

Sub-section (4) says the same thing from the other side: nothing in the section affects the right of the company in general meeting to impose restrictions and conditions on the Board's exercise of any power specified in the section.

The eleven matters in sub-section (3)

These are exercisable on behalf of the company only by means of resolutions passed at meetings of the Board.

Clause (k) is open ended by design, so the working list is eleven in the Act plus whatever rules add.

Which three powers can be delegated, and to whom

The first proviso to sub-section (3) allows the Board, by a resolution passed at a meeting, to delegate the powers specified in clauses (d) to (f), on such conditions as it may specify, to:

• any committee of directors
• the managing director
• the manager
• any other principal officer of the company
• in the case of a branch office of the company, the principal officer of the branch office

So borrowing, investing and lending or guaranteeing can move down. Approving the financial statement, authorising a buy-back, approving a merger or acquiring a controlling stake cannot: they are not inside the (d) to (f) range the proviso names.

The delegation itself has to be by a Board resolution passed at a meeting. A delegation made outside a meeting does not satisfy the proviso.

The banking carve outs

Three separate provisions take ordinary banking activity outside the section, and they are worth keeping apart because they do different jobs.

The second proviso says that a banking company accepting deposits from the public in the ordinary course of its business, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise, or placing monies on deposit with another banking company on conditions the Board may prescribe, is not to be deemed a borrowing of monies or a making of loans within the meaning of the section.

Explanation I takes clause (d) off 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.

Explanation II deals with a company and its own bankers. The clause (d) power means the arrangement made with the bankers for borrowing by way of overdraft or cash credit or otherwise, and not the actual day to day operation on those accounts. A board authorises the facility. It does not have to resolve on each drawdown.

Where the resolution goes after the meeting

This is the part that connects section 179 to the public record, and it has a twist.

Section 117(1) requires a copy of every resolution in respect of matters specified in section 117(3), together with the explanatory statement under section 102 if any, to be filed with the Registrar within thirty days of passing. Section 117(3)(g) brings resolutions passed in pursuance of section 179(3) inside that requirement.

Then the proviso to clause (g), inserted by Act 21 of 2015, section 9, with effect from 29 May 2015, provides that no person shall be entitled under section 399 to inspect or obtain copies of such resolutions. The resolution is filed, and then walled off from the ordinary public inspection route.

A further proviso to clause (g) disapplies the clause entirely for a resolution passed to grant loans, or give guarantee or provide security in respect of loans under section 179(3)(f) in the ordinary course of business by a banking company, by a prescribed class of non-banking financial company registered under Chapter IIIB of the Reserve Bank of India Act, 1934 (2 of 1934), or by a prescribed class of housing finance company registered under the National Housing Bank Act, 1987 (53 of 1987).

Section 117: filing of resolutions covers the filing obligation, the penalty and the full clause list.

Section 179 against section 180

The two sections are consecutive and they answer different questions. Section 179 asks how a decision must be taken. Section 180 asks whose decision it is at all.

Borrowing appears on both lists, which is exactly the point. The Board resolves to borrow under section 179(3)(d). Past the section 180 ceiling the members have to agree first. Section 180 restrictions on board powers covers that ceiling.

Reading this against a company's disclosures

For a listed company the practical trace of section 179 board powers is the board meeting itself: the intimation before it, the outcome after it, and the resolutions that reach the Registrar.

• How to read board meeting intimation covers the advance notice a listed company gives the exchanges.
• Section 180 restrictions on board powers covers the special resolution ceiling.
• Section 186 loans and investments covers the aggregate limits on the clause (e) and (f) powers.
• Section 117 filing of resolutions covers what happens to the resolution after it is passed.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.