Restrictions on authority of directors

Restrictions on authority of directors:

(1) The board of directors of a public company, or of a private company receiving loans from any bank or financial institution, shall not, except with a special resolution being adopted by the general meeting of shareholders, do or cause to be done the following act:

• (a) selling, donating, gifting, leasing or otherwise disposing of more than seventy percent of one or more undertakings being operated by it;

• (b) borrowing money, where the money to be borrowed will exceed the aggregate of the paid-up capital of the company and its free reserves, apart from any loans and faculties with a term of fewer than six months obtained by it from a bank or financial institution in the ordinary course of a business transaction;

• (c) Making a contribution, donation or gift in a sum exceeding fifty thousand rupees in one financial year or a sum exceeding one percent of the average net profits of the company during the last three financial years, whichever is the lesser, except the contribution, donation, gift etc. made for the welfare of its employees or for the promotion of its business.

    Provided, however, that:

• (i) Nothing contained in Clause (a) shall affect the title of a buyer who buys any property or undertaking of a company on payment of the prevailing market price from a company which is solely engaged in the business of buying and selling of movable and immovable properties.

• (ii) The provision of Clause (b) shall not be applicable to the acceptance by a company carrying on banking or financial transaction or insurance business of deposits or insurance premium from the general public in the ordinary course of its business transaction.

(2) The general meeting may specify appropriate terms and conditions while giving approval for the purposes of Sub-section (1).