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CS Executive · Company Law and Practice · Meetings of Board and its Committees

Orion Steels Ltd's general meeting passes a regulation restricting the Board's power to enter certain contracts. Earlier, the Board had already entered a contract that was valid before the regulation was made. Which statement is correct under section 179?

The earlier contract remains valid, because no regulation made in general meeting invalidates a prior Board act that would have been valid otherwise. At the same time, the company retains the right to impose restrictions and conditions on how the Board exercises its powers in future.

  1. AThe earlier contract becomes invalid from the date of the regulation
  2. BThe earlier contract stays valid, and the company may impose restrictions on the Board's future exercise of its powersCorrect
  3. CThe company in general meeting cannot impose any restriction on the Board
  4. DThe earlier contract needs ratification by the Tribunal

Explanation

Section 179(2) provides that no regulation made by the company in general meeting invalidates a prior Board act that would have been valid had the regulation not been made. Section 179(4) preserves the right of the company in general meeting to impose restrictions and conditions on the Board's exercise of its powers. Hence the prior act stands while future exercise can be restricted.

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