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Restriction on the Power of Directors

Restriction on the Power of Directors

Following are the restrictions

(1) Permission in the general meeting – Without the approval in the general meeting of the company, the board of directors of any parent company or its subsidiary private company cannot do the following work, so they are called restrictions on the rights of the board of directors (i) company To sell, lease or otherwise give up the whole or almost the whole of the business of.

(ii) to liquidate the debt of a director in full or to take more time for payment, this rule shall not apply to the renewal or continuation of advances made by a banking company to a director in the course of ordinary business. (iii) the amount of compensation received by the company, which has been paid by the company to the essential property of the building, property or undertaking.

to invest in anything other than trust securities. (iv) To take rights loan out of the sum of the company’s paid-up capital and general fund. Short term loans are not included in this loan. Here short term loans mean such loans which are payable on demand or due within 6 months.

(2) Contributions to political parties The Board of Directors of a public company, after the commencement of this Act, shall, without the consent of the company, make any financial donations, funds or other funds not directly connected with the business of the company or the welfare of the employees. in a year that exceeds the average profit of ₹ 50,000 or the net profits of the 3 financial years preceding that year. The Board of Directors can give this amount for the purpose of giving charity. In case of violation of this, the company can be fined 5 times the amount of the donation and the guilty rights of the company can be punished with imprisonment up to 6 months and 5 times the amount of the donation.

(3) Giving donations to the National Security Fund – The Board of Directors of the company or the person exercising its powers or the general body may make a suitable amount to the National Security Fund or a fund recognized by the Central Government created by the National Security Fund. But this amount should be shown in the profit and loss account of the same year.

(4) Right not to remove a member – The Board of Governors cannot remove a member by changing its articles, even if a special resolution has been passed in the extraordinary assembly after that.

(5) Termination of rights – If the voluntary winding up of the company starts, then all the rights of the directors will automatically cease. They will have only the right to inform the registrar of the appointment of the appointed liquidator.

(6) On winding up by the creditors, the rights of the directors cease to exist when the liquidator is appointed on the voluntary winding up of the creditors. If the Inquiry Committee so desires, it may

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