More about Directors Corporate Law

Removal of Directors

The following authorities are responsible for the process of removal of directors from the board of directors.

The company in general meeting

A company can remove a director from the board before his term of office expires. They can pass a resolution in a general meeting upon special notice. However, there are certain exceptions :
  • This does not apply to a director appointed by the Central Government.
  • This does not apply to companies who have adopted two-thirds of its directors by the principle of proportional representation.
  • Directors appointed by financial institutions under an agreement like IDBI, IFCI under their respective acts.
  • Directors that have been appointed by the Board for Industrial and Financial Reconstruction.
Removal by the Government 
A director can be removed from office under advice from Central Government. The Central Government chooses to use this power on the recommendation of the Company Law Board/National Company Law Tribunal.
Removal by Company Law Board/National Company Law Tribunal 
The Company Law Board or the National Company Law Tribunal may remove a director from the board. If found guilty of any inappropriate conduct like fraud, harassment, oppression or any other justifiable cause, he will be removed. The terminated director cannot assume the position of director in any other company for the next five years.

Powers of Board of Directors

The board of directors is the highest authority in any company. According to Section 179, Companies Act 2013, the power of directors of a company – entitled to make any and all decisions, and thus exercise all the power, which the company has authority to enact.

Power of Directors

According to Section 179, CA 2013, the powers of the board of directors are as follows.
  • Board of Directors can exercise all such powers for which the company is authorised.
  • Board of Directors can take all actions on matters in which the company has authority.

  • Power of Board subject to other Provisions’

    While using the power vested in the board of directors, the board must adhere to the rules and provisions of the following –
    1. The Companies Act
    2. The Memorandum of Association
    3. The Articles of Association
    4. Any Regulation, made by the company during general meetings.
Specifically, one can say that the authority of the company is the powers of the board. However, if necessary the power of the board can be restricted by the Companies Act, the Memorandum, the Articles. Resolutions passed by shareholders can also limit the powers of the board.

Power Exercised by Company in General Meeting

The board of directors are not allowed to exercise any power or take any decisions, which are specifically to be exercised or a decision to be taken in a General Meeting.

New Regulations Do Not Invalidate Acts made by the Board

According to Section 179, Companies Act 2013, any resolutions that are passed in a General Meeting cannot invalidate any provisions that the board of directors made prior to the resolution.

Power Exercised by Passing Resolution at Board Meetings

There are also certain powers of the board that those resolutions can only be passed by calling a board meeting.  This is done as per Section 175, Companies Act 2013. Thus, the board of directors can exercise the following powers, only by passing a resolution in the meetings of the board:
  • Make calls on shareholders
  • Authorise the buyback of securities and shares
  • Issue securities and shares
  • Borrow monies
  • Investing the funds
  • Grant loans
  • Approve the financial statement
  • Approve amalgamation/merger
  • Diversify the business
  • Take over a company
Also, in accordance with Section 117, CA 2013, a copy of every board resolution must be submitted with the Registrar within 30 days of the passing of the resolution.
In addition to this, Rule 8 of Companies Rules 2014 has given certain more powers to the board. Namely, resolutions that can be passed at board meetings:
  1. Making political contributions
  2. Appointing or removing key managerial personnel.
  3. Appointing internal auditors and secretarial auditors.

The Delegation of Powers of the Board

The Board of Directors may delegate powers such as investing monies, granting loans, giving guarantee or security by passing a resolution in the board meeting:
  1. Committee of Directors
  2. Managing Director
  3. Manager
  4. Any other principal officer of the company
  5. The principal officer of a branch office

Restrictions of Powers of the Board

In accordance with provisions of Section 179, the company can impose restrictions and conditions on the power of the board of directors. Moreover, the shareholders are responsible for imposing restrictions and conditions of the power of the board. Thus, the shareholders pass an ordinary resolution at a general meeting to do this.
                          

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