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CS Executive · Company Law and Practice · Board Composition and Powers of the Board

Himalaya Foods Ltd's members pass an ordinary resolution in general meeting imposing a restriction on the Board's power to invest the company's funds. Six months earlier, the Board had validly made an investment that the new restriction would have prohibited. What is the legal position under section 179?

The restriction is valid for future Board action, while the earlier investment stays valid. Section 179(4) preserves the general meeting's right to restrict Board powers, and section 179(2) provides that a later regulation does not invalidate a prior Board act that was valid when done.

  1. AThe restriction is valid for future Board action, and the earlier investment remains valid because it would have been valid without the regulationCorrect
  2. BThe restriction is void because the company in general meeting cannot restrict Board powers
  3. CThe restriction is valid and it invalidates the earlier investment from the date of the investment
  4. DThe restriction is valid only if the Central Government approves it

Explanation

Section 179(4) preserves the company's right in general meeting to impose restrictions and conditions on the Board's powers. Section 179(2) states that no regulation made in general meeting invalidates a prior Board act that would have been valid without it. So the restriction operates prospectively and the earlier investment stands.

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