General powers of the Board
The Board of directors of a company is entitled to exercise all such powers, and to do all such acts and things, as the company is authorized to exercise and do. However, wherever the law requires authorization by the members in a general meeting, the directors can do such act only on receiving such authorization.

Certain powers to be exercised by Board only at meeting. The Board of directors of a company shall exercise the following powers on behalf of the company, and it shall do so only by means of resolutions passed at meetings of the Board: -

1. The power to make calls on shareholders in respect of money unpaid on their shares

2. The power to issue debentures

3. The power to borrow moneys otherwise than on debentures

4. The power to invest the funds of the company

5. The power to make loans

However, the Board of Directors may delegate the aforesaid powers by a resolution to a committee of directors, the managing director, the manager or any other principal officer of the company.

Restrictions on powers of the Board
The Board of directors of a public company, or of a private company which is a subsidiary of a public company, shall not, except with the consent of such public company or subsidiary in general meeting exercise the following powers: -

1. Sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the company, or where the company owns more than one undertaking, of the whole, or substantially the whole, of any such undertaking

2. Remit, or give time for the repayment of, any debt due by a director except in the case of renewal or continuance of an advance made by a banking company to its director in the ordinary course of business

3. Invest, otherwise than in trust securities, the amount of compensation received by the company in respect of the compulsory acquisition of any such undertaking or of any premises or properties used for any such undertaking

4. Borrow moneys, where the money to be borrowed, together with the moneys already borrowed by the company (apart from temporary loans obtained from the company's bankers in the ordinary course of business), will exceed the aggregate of the paid-up capital of the company and its free reserves

5. Contribute to charitable and other funds not directly relating to the business of the company or to the welfare of its employees, any amounts the aggregate of which will, in any financial year, exceed Rs. fifty thousand rupees] or five per cent of its average net profits. during the three immediately preceding financial years, whichever is greater.

Loans to directors

No company, without obtaining the previous approval of the Central Government in that behalf can make any loan to: -

1. Any director of the company

2. Any director of a company which is its holding company or any partner or relative of any such director

3. Any firm in which any such director or relative is a partner

4. Any private company of which any such director is a director or member

5. Any body corporate at a general meeting of which not less than twenty-five per cent of the total voting power may be exercised or controlled by any such director, or by two or more such directors together

6. Any body corporate, the Board of directors, managing director or manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

Similarly, no company can give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by any of the aforesaid categories of persons.

The above provisions do not apply to: -
1.Any loan made, guarantee given or security provided by a private company unless it is a subsidiary of a public company, or by a banking company

2. Any loan made by a holding company to its subsidiary

3. Any guarantee given or security provided by a holding company in respect of any loan made to its subsidiary

Board's sanction to be required for certain contracts in which particular directors are interested

A company cannot enter into any transaction with the following persons for purchase, sale or supply of any goods or services or for underwriting the issue of shares or debentures of the company except with the consent of the Board of directors of company: -

1. A director of the company or his relative

2. A firm in which such a director or relative is a partner

3. Any other partner in such a firm

4. A private company of which the director is a member or director

In case of a company having a paid-up share capital of not less than rupees one crore, no such contract shall be entered into except with the previous approval of the Central Government.

These provisions are not applicable to the following transactions: -

1. The purchase of goods and materials from the company, or the sale of goods and materials to the company, by any director, relative, firm, partner or private company as aforesaid for cash at prevailing market prices

2. Any contract or contracts between the company on one side and any such director, relative, firm, partner or private company on the other for sale, purchase or supply of any goods, materials and services in which either the company or the director, relative, firm, partner or private company, as the case may be, regularly trades or does business provided the value of the transaction does not exceed Rs. 5000/-

3. In the case of a banking or insurance company any transaction in the ordinary course of business of such company with any director, relative, firm, partner or private company as aforesaid.

In all the above cases consent of the Board must be at a meeting of the Board of Directors by resolution and must be obtained either before undertaking the transaction or within three months from its date.

Disclosure of Interests by Director
Every director of a company who is in any way concerned or interested in a contract or arrangement entered into or to be entered into by the company, must disclose the nature of his concern or interest at the first meeting in which the matter was taken into consideration.

In case he became interested after the board had considered the matter, he must bring it to the notice of the board at the first meeting of the Board held after the director becomes concerned or interested in the contract or arrangement.

Such notice shall must be renewed at the end of each financial year. in which it is given, but may be renewed for further periods of one financial year at a time.

The above provisions do not apply to any contract or arrangement entered into or to be entered into between two companies where any of the directors of the one company or two or more of them together holds or hold not more than two per cent of the paid-up share capital in the other company.

Interested director not to participate or vote in Board's proceedings
A director who is interested in any matter cannot participate or vote in connection with that matter. He will also not be considered for determining quorum for the meeting.

This provision is not applicable to: -

1. A private company which is neither a subsidiary nor a holding company of a public company

2. A private company which is a subsidiary of a public company, in respect of any contract or arrangement entered into, or to be entered into, by the private company with the holding company thereof

3. Any contract of indemnity against any loss which the directors, or any one or more of them, may suffer by reason of becoming or being sureties or a surety for the company

4. Any contract or arrangement entered into or to be entered into with a public company, or a private company which is a subsidiary of a public company, in which the interest of the director aforesaid consists solely (i) in his being a director of such company and the holder of not more than qualification or (ii) in his being a member holding not more than two per cent of its paid-up share capital

5. A public company, or a private company which is a subsidiary of a public company, in respect of which a notification by the Central Government is issued to the extent specified in the notification.

Remuneration of directors.The remuneration payable to the directors of a company, including any managing or whole-time director, shall be determined, either by the articles of the company, or by a resolution or, if the articles so required, by a special resolution, passed by the company in general meeting.

The remuneration payable to any such director determined as aforesaid shall be inclusive of the remuneration payable to such director for services rendered by him in any other capacity except where the services are rendered in a professional capacity and where the Central Government is of the opinion that the director possesses the requisite qualifications.

A director may receive remuneration by way of a fee for each meeting of the Board, or a committee thereof, attended by him:

A director who is either in the whole-time employment of the company or a managing director may be paid remuneration either by way of a monthly, payment or at a specified percentage of the net profits of the company or partly by one way and partly by the other. Such remuneration cannot exceed five per cent of the net profits for one such director, and if there is more than one such director, ten per cent for all of them except with the approval of the Central Government.

A director who is neither in the whole-time employment of the company nor a managing director may be paid remuneration either by way of a monthly, quarterly or annual payment with the approval of the Central Government or by way of commission if the company authorizes such payment by special resolution.

The remuneration paid to such director, or where there is more than one such director, to all of them together, cannot exceed: -

1. One per cent of the net profits of the company, if the company has a managing or whole-time director or a manager

2. Three per cent of the net profits of the company, in any other case:

The company in general meeting may, with the approval of the Central Government, authorize the payment of such remuneration at a rate exceeding one per cent or, as the case may be, three per cent.

If any director receives any remuneration in excess of the limit prescribed by this section or without the prior sanction of the Central Government, where it is required, he must refund such sums to the company and until such sum is refunded, hold it in trust for the company.

The company cannot waive the recovery of any sum refundable to it under unless permitted by the Central Government.

No director of a company who is in receipt of any commission from the company and who is either in the whole-time employment of the company or a managing director shall be entitled to receive any commission or other remuneration from any subsidiary of such company.

The special resolution referred to above shall not remain in force for a period of more than five years; but may be renewed, from time to time, by special resolution for further periods of not more than five years at a time. No renewal can be done earlier than one year from the date on which it is to come into force.

Provision for increase in remuneration to require Government sanction
In the case of a public company, or a private company which is a subsidiary of a public company, no increase of the remuneration to any director including a managing or whole-time director can be effected unless the approval of the Central Government is obtained or the increase is within limits specified in Schedule XIII where it is applicable.

Approval of the Central Government is not required for increase in the sitting fees of directors i.e. fees for attending board meetings provided the sitting fees are within the limits specified.