Author: Romit Jain, Student at Dharmashastra National Law University, Jabalpur
Co-Author: Shivam Dubey, Student at Dharmashastra National Law University, Jabalpur
“A company is a legal entity and does not have any physical existence.” It needs to act only through natural persons, acting on its behalf, called Directors to run its affairs. They are officers of the company, hired by the company to direct its affairs. He is duly appointed by the company to control the company’s business and, authorized by the Articles to contract in the company’s name and, on its behalf.
The powers of the directors have the same scope as of the company itself. Once the directors are elected and get the control, they almost have the total power over the operations of the company, until they are removed. There are two limitations upon their powers, firstly, the Board is not competent to do what the shareholders are required to do in the general meeting as required by the articles and memorandum2 and secondly, their powers are subject to the provisions of the Act, memorandum and articles and other regulations, not inconsistent therewith, made by the company in the general meeting.
The powers of the directors are restricted to an extent by the Companies Act, 2013 to avoid any kind of mismanagement in the company or any kind of corrupt practices. The shareholders limit the powers of the board of directors as some crucial decisions of the company are left to be decided by a special resolution which includes the shareholders’ involvement.
The researcher here aims to research on the powers of board of directors, thereby the limitations on their powers and how this affects the smooth functioning of the company and to analyze the effectiveness of these limitations.