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

Kaveri Textiles Ltd has two undertakings. Undertaking A generates 25% of the company's total income in the previous financial year. The Board wishes to sell the whole of Undertaking A to an unrelated buyer. What approval is needed before the Board can proceed?

The Board needs a special resolution of the company in general meeting. Undertaking A generates more than twenty per cent of total income, so it is an undertaking under the Act, and disposing of the whole of it is a restricted power that needs members' special resolution.

  1. AA special resolution of the company in general meetingCorrect
  2. BA Board resolution passed by circulation only
  3. CAn ordinary resolution of the members
  4. DNo further approval, because the company owns more than one undertaking

Explanation

An undertaking includes one that generates twenty per cent of the company's total income in the previous year. Undertaking A at 25% qualifies. Selling the whole of it requires the consent of the company by special resolution. An ordinary resolution is not enough.

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