Skip to content

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

Sagar Steels Ltd. in general meeting passes a regulation restricting the Board's borrowing power. Earlier, the Board had borrowed from a bank, which would have been valid without the regulation. Which statement is correct under section 179?

The earlier borrowing remains valid, while the restriction operates going forward. Section 179(2) protects prior Board acts that would have been valid without the regulation, and section 179(4) preserves the company's right in general meeting to impose restrictions and conditions on the Board's powers.

  1. AThe earlier borrowing becomes invalid as the regulation overrides it retrospectively
  2. BThe earlier borrowing stays valid, and the company in general meeting may still impose restrictions and conditions on the Board's powers for the futureCorrect
  3. CThe company cannot restrict the Board's powers once the Board has exercised them
  4. DThe regulation is void because section 179 powers cannot be restricted by shareholders

Explanation

Section 179(2) says no regulation made in general meeting invalidates a prior Board act that would have been valid without it. Section 179(4) preserves the company's right in general meeting to impose restrictions and conditions on the powers listed in the section. Both hold together, so the past act stands and future exercise is restricted.

Did you get it right without looking?

One question tells you little. A timed set on Board Composition and Powers of the Board shows your real accuracy, how long you take and where you lose marks.

Practise Board Composition and Powers of the BoardFree diagnostic mock

More Board Composition and Powers of the Board questions