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CS Professional · Corporate Restructuring, Valuation and Insolvency · Types of Corporate Restructuring

Krishna Agro Producer Company's Board of Directors proposes to expand by acquiring a small processing unit as part of its ordinary business. A single director, Mr. Rao, wants to complete the acquisition on his own authority, saying he leads the group of directors that favours it. Under Section 378R, what is the correct position?

The Board must exercise the power through a resolution passed at its meeting. Section 378R lists ordinary-course acquisition of property as a Board power, and its Explanation says a director or group of directors not constituting the Board cannot exercise Board powers.

  1. AMr. Rao may act alone if the acquisition is in the ordinary course of business
  2. BA group of directors that does not constitute the Board may act for the Board if it holds a majority of members
  3. CThe Board must exercise the power by means of a resolution passed at its meeting, and a director or group not constituting the Board cannot exercise itCorrect
  4. DOnly the general meeting can ever approve acquisition of property

Explanation

Section 378R(2)(h) includes acquisition or disposal of property in the ordinary course of business among Board powers. Section 378R(3) requires these powers to be exercised by a Board resolution passed at its meeting, and the Explanation bars a director or group not constituting the Board from exercising them. Mr. Rao's solo action therefore fails, and the group's support is irrelevant.

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