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CS Professional · Strategic Management and Corporate Finance · Raising of Funds from Debt and Procedural Aspects

The articles of Kaveri Agro Ltd authorise the Board to borrow money, but the members in general meeting pass a resolution restricting the Board from borrowing beyond a stated limit. Which statement follows from Section 179?

The restriction is valid. Section 179(4) provides that nothing in the section affects the right of the company in general meeting to impose restrictions and conditions on the Board's exercise of its listed powers, which include the power to borrow monies.

  1. AThe restriction is invalid because borrowing is a Board power under Section 179(3)
  2. BThe restriction is valid because the company in general meeting may impose restrictions and conditions on the Board's exercise of its powersCorrect
  3. CThe restriction is valid only if the Registrar approves it
  4. DThe restriction applies only to borrowings made after the next AGM

Explanation

Section 179(4) preserves the right of the company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified in that section. Borrowing is one of those powers. Having Board power under Section 179(3) does not shield it from such restrictions. No Registrar approval is mentioned.

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