Which board powers need shareholder approval?

What does section 180 restrict?

Section 180 of the Companies Act, 2013 restricts a handful of the board's powers by requiring the members to approve them first. Section 180(1) provides that the board can exercise the listed powers only with the consent of the company by special resolution.

These are the decisions large enough that the Act does not leave them to the board alone. Where section 179 empowers the board, section 180 fences a few of those powers behind a shareholder vote.

Which powers need a special resolution?

Section 180(1) lists four powers. Each one can be exercised by the board only after the members pass a special resolution.

How is the borrowing limit computed?

The board can borrow up to the total of the company's paid-up share capital, free reserves, and securities premium. Once existing borrowings plus the proposed borrowing cross that total, the board needs a special resolution to go further.

Temporary loans obtained from the company's bankers in the ordinary course of business are left out of the count. These are loans repayable on demand or within six months, other than loans raised to finance capital expenditure, so an ordinary working-capital line does not trip the limit.

What counts as selling the undertaking?

Selling substantially the whole of an undertaking turns on a 20% test. The explanation to section 180(1)(a) defines an undertaking as one where the investment exceeds 20% of the company's net worth, or one that generates 20% of its total income, on the last audited balance sheet. Substantially the whole means 20% or more of the value of that undertaking.

So a disposal is caught not by a vague sense of size but by the 20% thresholds. Below them, the sale is ordinary board business; at or above, it needs the members' special resolution.

Which companies does section 180 bind?

Section 180 applies to every company, private or public. A private company should treat the section as applying and pass a special resolution for the listed powers unless a specific notification exempts it, rather than assume it is outside the section.

The requirement is a members' decision, so it runs through a general meeting with the special-resolution notice and majority, not a board meeting alone.

How do I confirm approval is needed?

1. Check the proposed act against the four powers in section 180(1).
2. For borrowing, add existing and proposed borrowings and compare with paid-up capital plus free reserves plus securities premium.
3. Exclude temporary ordinary-course bank loans from that count.
4. For a disposal, apply the 20% net worth or income test to see if it is substantially the whole undertaking.
5. Pass a special resolution with a three-fourths majority under section 114 before the board acts.

Where do companies go wrong?

• Borrowing past the section 180(1)(c) limit on a board resolution alone.
• Counting a temporary working-capital loan toward the borrowing limit, or the reverse.
• Treating section 180 as not applying to a private company.
• Passing the approval as an ordinary resolution instead of a special one.
• Misjudging a disposal by feel rather than the 20% net worth or income test.

Where are section 180 changes published?

Changes to these restrictions come as MCA amendments to the Companies Act and as MCA notifications that adjust exemptions for particular classes of company. For the board powers these restrictions limit, read our section 179 board powers guide. Complied AI keeps MCA updates in one feed so you can open the notification behind an exemption change and read section 180 next to it.