'Law'gical Bite Animated Series | CA. Punarvas| Pillars of Corporate Democracy

Summary

This video explores the power dynamics between the Board of Directors and shareholders in a company. It explains that while the board handles day-to-day operations and has extensive powers as outlined in the Companies Act 2013, shareholders have significant control in crucial areas like appointing and removing directors and auditors. Through examples and legal references such as Sections 179, 169, and 128, the video highlights the balance of authority between the two groups. Ultimately, the board is more powerful in daily operations, while shareholders hold influence over major decisions, ensuring a system of corporate democracy.

Takeaways

• 😀 A company is a separate legal entity with capital provided by shareholders and management vested in the Board of Directors.
• 😀 According to Section 179 of the Companies Act 2013, the Board of Directors is generally more powerful than shareholders, but there are exceptions.
• 😀 The Companies Act grants shareholders certain powers, such as the ability to remove directors in a general meeting (Section 169).
• 😀 The Memorandum of Association (MOA) outlines a company's external charter, while the Articles of Association (AOA) detail internal regulations.
• 😀 Powers like borrowing money and granting loans are vested with the Board of Directors, and these require a board meeting resolution (Section 179(3)).
• 😀 Shareholders cannot interfere with the Board's powers regarding day-to-day operations, such as borrowing money or making investments.
• 😀 Certain corporate decisions, such as selling an undertaking, require both Board and shareholder approval (Section 180).
• 😀 The Companies Act is supreme, meaning it overrides both the MOA and AOA (Section 6).
• 😀 Shareholders are not entitled to access the company's books and accounts, as this power is reserved for the Board of Directors (Section 128(3)).
• 😀 Shareholders have the power to appoint and remove directors (Section 152(2), 160) and appoint auditors to check the Board's work, but they cannot inspect the accounts directly.
• 😀 The Board of Directors manages daily operations, while shareholders retain power over key decisions like director appointments and audits, making them crucial in maintaining corporate democracy.

Q & A

What is a company according to the script?

A company is a separate legal entity where capital is provided by shareholders and management is vested with the board of directors.

Who is more powerful, the Board of Directors or the shareholders?

The Board of Directors is more powerful in day-to-day operations, as the Companies Act grants them significant control over business activities. However, shareholders have power in important decisions like appointing directors and approving auditors.

Which section of the Companies Act 2013 provides clarity on the powers of the Board of Directors and shareholders?

Section 179 of the Companies Act 2013 provides clarity on the powers of the Board of Directors and shareholders.

What powers are exclusively vested with the Board of Directors?

Powers like borrowing money, investing funds, and granting loans are exclusively vested with the Board of Directors, which must act through a board meeting resolution.

What can shareholders do under the Companies Act?

Shareholders can remove directors, approve or disapprove major company decisions, and appoint auditors, as well as vote on significant matters such as selling company undertakings.

Can shareholders interfere with the Board of Directors' power over daily operations?

No, shareholders cannot interfere with the daily operational powers of the Board of Directors. The Companies Act limits shareholders’ involvement to specific areas like appointments and approvals.

What does Section 180 of the Companies Act 2013 state regarding board and shareholder approvals?

Section 180 requires both the Board of Directors and shareholders' approval for certain decisions, such as selling a company undertaking or a small branch.

In case of an issue not specifically addressed by the Companies Act, who has the final say?

If the Act is silent on an issue, Section 179 comes into play, and the Board of Directors is given the authority, as it is considered the 'brain' of the company.

Does the Memorandum of Association (MOA) or Articles of Association (AOA) override the Companies Act?

No, the Companies Act always overrides both the MOA and AOA. Section 6 of the Companies Act confirms that the Act is supreme.

Are shareholders entitled to access the company's financial records?

No, shareholders are not automatically entitled to access the company’s accounts. Only directors have the right to access and control the company’s financial records under Section 128.