Restriction on Powers of the Board of Directors-Section 293 of the Indian Companies Act 1956

There are some restrictions in the powers of Directors of a Company. The directors cannot take complete business decisions without the consent of the shareholders. The agenda of the matters should be discussed in the Annual General Meeting (AGM) or Extra Ordinary General Meeting (EGM). Meeting should be conducted by completing statutory guidance related to quorum, notice period etc. Extra Ordinary General Meeting (EGM) with short term notice should be conducted with the consent of shareholders as prescribed in the Companies Act.

As per Section 293 of Indian Companies Act 1956 the following are some of the restrictions on the powers of the Board of Directors. It provides that the board of directors of a public company or of a private company which is a subsidiary of a public company cannot exercise these powers except with the consent of the Members of the company in General Meeting.

(a) Sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company;

(b) Remit or give time for the repayment of any debt due by the directors;

(c) Invest, otherwise than in trust securities, the amount of compensation received by the company in respect of the compulsory acquisition, of any undertaking or properties;

(d) Borrow money (apart from temporary loans obtained the company's bankers in the ordinary courses of business) in excess of the aggregate of the paid up capital of the company and its free reserves i.e. reserves not set apart for any specific purpose;

(e) Contribute to charitable and other funds not directly relating to the business of the company or welfare of its employees, any amounts the aggregate of which will, in any financial year, exceed fifty thousand rupees or five percent of its average net profit as determined in accordance with the three financial years immediately proceeding, whichever is greater.

Statutory limit and restriction is there under section 293A of Indian Companies Act, 1956 for political contribution or donation to political parties. But the amount within the limit can be contributed or donated as per the provisions of Companies Act, 1956.