Section 180. Restrictions on powers of Board
(1) The Board of Directors shall exercise the following powers only with the consent of the company by a special resolution, namely:—
(a) to 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.
Explanation.—“Undertaking” means an undertaking in which the investment of the company exceeds twenty per cent. of its net worth as per the audited balance sheet of the preceding financial year or which generates twenty per cent. of the total income during the previous financial year. “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.
(b) to invest otherwise in trust securities the amount of compensation received as a result of any merger or amalgamation;
(c) to borrow money where the money to be borrowed, together with money already borrowed, will exceed the aggregate of 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.
Explanation.—“Temporary loans” means loans repayable on demand or within six months from the date of the loan, such as short-term, cash credit arrangements, discounting of bills and other short-term seasonal loans, but does not include loans raised for capital expenditure.
(d) to remit, or give time for repayment of, any debt due from a director.
(2) Every special resolution relating to clause (c) shall specify the total amount up to which money may be borrowed by the Board.
(3) Nothing in clause (a) affects the title of a bona fide buyer or lessee or the sale or lease of property where the ordinary business of the company consists of such selling or leasing.
(4) A special resolution consenting to a transaction under clause (a) may stipulate conditions regarding use, disposal or investment of sale proceeds, but shall not authorise reduction of capital except in accordance with the Act.
(5) No debt incurred in excess of the limit under clause (c) shall be valid or effectual unless the lender proves that he advanced the loan in good faith and without knowledge that the limit had been exceeded.
