What the board can do under ss.179–180, and what needs the members

The board runs the company — but not everything. Section 179 of the Companies Act 2013 gives directors every power the company itself holds, then says eleven decisions must be taken by a resolution passed at a board meeting. Only borrowing, investing and lending can be handed to a committee or officer. Section 180 then takes four decisions away from the board unless members approve by special resolution (a resolution where votes in favour are at least three times the votes against, s.114(2)): selling the undertaking, borrowing beyond paid-up capital plus free reserves, parking merger compensation outside trust securities, and forgiving a director's debt — each needs the members' special resolution. Locating a decision on this two-section map is the first step in checking whether the board had the power to take it.

Legal basis: Companies Act 2013, ss.179–180.

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The general grant and its two boundaries

Section 179(1) opens wide: "The Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do." Then come the two provisos that fence the field. First, the board acts "subject to the provisions contained in that behalf in this Act, or in the memorandum or articles, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting" — charter and member-made regulations bind. Second, "the Board shall not exercise any power or do any act or thing which is directed or required, whether under this Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting" — what the statute reserves to members (acts the Act or the articles require the company to do in general meeting, such as the special-resolution decisions in s.180) the board cannot touch. Section 179(2) protects reliance: "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." And s.179(4) preserves the members' leash: nothing affects "the right of the company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified in this section".

The eleven board-meeting-only powers and the delegation window

Section 179(3) lists powers exercisable "by means of resolutions passed at meetings of the Board, namely:— (a) to make calls on shareholders in respect of money unpaid on their shares; (b) to authorise buy-back of securities under section 68; (c) to issue securities, including debentures, whether in or outside India; (d) to borrow monies; (e) to invest the funds of the company; (f) to grant loans or give guarantee or provide security in respect of loans; (g) to approve financial statement and the Board's report; (h) to diversify the business of the company; (i) to approve amalgamation, merger or reconstruction; (j) to take over a company or acquire a controlling or substantial stake in another company; (k) any other matter which may be prescribed". A buyback, securities issue or approval of financial statements that is not the subject of a resolution passed at a Board meeting does not meet the s.179(3) requirement.

Only clauses (d) to (f) — borrow, invest, lend/guarantee — may leave the boardroom: "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". Delegation itself needs a board-meeting resolution with stated conditions; everything else on the eleven-list never delegates. Banking companies get two carve-outs (ordinary-course public deposits are not "borrowing", inter-bank placements are not "loans"), and Explanation II measures borrowing power by the sanctioned arrangement — "overdraft or cash credit or otherwise" — "not the actual day-to-day operation" on those accounts.

The four special-resolution ceilings: undertaking, merger money, borrowing, director debts

Section 180(1) moves four powers upstairs to the members. Clause (a): selling, leasing or disposing "of the whole or substantially the whole of the undertaking of the company" — with statutory math in the Explanation: an "undertaking" is one absorbing over "twenty per cent. of its net worth as per the audited balance sheet of the preceding financial year" or generating "twenty per cent. of the total income … during the previous financial year", and "substantially the whole" means "twenty per cent. or more of the value of the undertaking as per the audited balance sheet of the preceding financial year". Clause (b): investing merger/amalgamation compensation "otherwise in trust securities". Clause (c): borrowing where the total "will exceed aggregate of its [paid-up share capital, free reserves and securities premium], apart from temporary loans obtained from the company's bankers in the ordinary course of business" — with "temporary loans" meaning "repayable on demand or within six months", covering cash credit and bill discounting but excluding "loans raised for the purpose of financial expenditure of a capital nature". Clause (d): to "remit, or give time for the repayment of, any debt due from a director" — this needs the members' special resolution.

Three refinements protect commerce. The borrowing resolution "shall specify the total amount up to which monies may be borrowed" (s.180(2)) — the resolution must name the ceiling. Bona fide buyers are safe: s.180(3) preserves "the title of a buyer or other person who buys or takes on lease any property, investment or undertaking … in good faith", and ordinary-course sellers (a property developer selling inventory) never trigger clause (a) at all. And the undertaking-sale consent "may stipulate such conditions as may be specified in such resolution, including conditions regarding the use, disposal or investment of the sale proceeds" (s.180(4)) — members can set conditions on the use of the sale money, but the sub-section does not authorise any reduction of capital except as the Act provides.

A worked scenario: the borrowing that breached two sections at once

A private company with paid-up capital plus free reserves plus securities premium of eight crore carries existing borrowings of six crore and signs a fresh five-crore term loan on the MD's signature alone. Two failures stack. Under s.179(3)(d), borrowing needs a board-meeting resolution — the MD's signature is not one — and the power was never delegated by a meeting resolution either. Under s.180(1)(c), eleven crore of total borrowing exceeds the eight-crore aggregate, so a member special resolution naming the ceiling was required before signing. Under s.180(5), debt above the clause (c) limit is not "valid or effectual" unless the lender proves it "advanced the loan in good faith and without knowledge that the limit imposed by that clause had been exceeded".

The interplay clause: s.179(4)'s standing leash

Section 179(4) is the quiet counterpart to s.180's ceilings: even where no special resolution is statutorily required, "the company in general meeting" may "impose restrictions and conditions on the exercise by the Board of any of the powers specified in this section". For example, members could cap borrowing below the s.180 threshold or require Board-meeting approval for guarantees above a stated value, by imposing restrictions and conditions in general meeting.

How the powers file should read

A defensible ss.179–180 file has six layers: the s.179(1) authority check against Act, memorandum, articles and member regulations; the s.179(3) routing — which of the eleven powers is exercised, with the board-meeting minutes evidencing it; the delegation resolution with conditions where (d)–(f) leave the room; the s.180 threshold math (twenty-per-cent undertaking tests, borrowing aggregate vs temporary-loan carve-out); the special resolution with its s.180(2) borrowing ceiling; and the good-faith buyer protection assessment on any undertaking disposal. Each layer should be traceable to the sub-section cited above.

What to do now

Next step: before any borrowing, investment, loan or guarantee, confirm it is approved by a resolution passed at a Board meeting, or validly delegated by one, under s.179(3). If total borrowings would exceed paid-up share capital, free reserves and securities premium (apart from temporary bank loans), obtain a members' special resolution that names the borrowing ceiling first (s.180(1)(c) and s.180(2)).
Deadline: the Act sets no calendar deadline for this; the timing rule is that consent comes before the Board exercises the power (s.180(1): "only with the consent of the company by a special resolution").
Consequence: debt above the s.180(1)(c) limit is not valid or effectual unless the lender proves good faith and no knowledge of the breach (s.180(5)).

Have a CA review your facts before you act or file.

Frequently asked questions

Can the board exercise every company power?
Yes, except what the Act, memorandum, articles or member regulations reserve to the general meeting (s.179(1) provisos) — and prior valid board acts survive later member regulations (s.179(2)).

Which powers need a board-meeting resolution?
The eleven in s.179(3): calls, buyback, securities issue, borrowing, investing, loans/guarantees, financial statements, diversification, merger approval, takeovers — plus prescribed matters.

Can borrowing power be delegated?
Only clauses (d)–(f) (borrow, invest, lend/guarantee), and only "by a resolution passed at a meeting" to a committee, MD, manager, principal officer or branch head, "on such conditions as it may specify".

When does borrowing need members' consent?
When total borrowings exceed paid-up capital plus free reserves plus securities premium, excluding ordinary-course temporary bank loans — by special resolution naming the ceiling (s.180(1)(c) + s.180(2)).

What counts as selling \"substantially the whole\" undertaking?
Twenty per cent or more of the undertaking's value per the last audited balance sheet, where the undertaking crosses the twenty-per-cent net-worth-or-income test (s.180(1)(a) Explanation).

Can the board forgive a director's loan?
No — remitting or rescheduling "any debt due from a director" needs a member special resolution (s.180(1)(d)).

Is a good-faith buyer affected by a missing s.180 consent?
s.180(3)(a) preserves the title of a buyer or lessee who acts in good faith, and s.180(3)(b) covers sales or leases where the company's ordinary business consists of selling or leasing. Separately, s.180(5) protects a good-faith lender against the borrowing limit.

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