Board room or board of director’s room is in a real sense a brain of the company. Just like a brain helps to manage our body functioning, so the board of director run the company.
Lawmaker always tweaking the laws related to board structuring and their decision-making power. In big corporate houses, a major chunk of board structure is outsider, not the owner of the company. They are professional minds who are expert in their domain.
Decision making process:
How the board of directors think and take decision usually don’t face investor or regulatory review. But whatever they do, that has to be recorded in the minutes of the meeting in the form of the resolution which is called board resolution.
Our law maker always requires and reinforces that board resolution or other resolutions which are passed at Annual General Meeting (AGM) or Extra Ordinary General Meeting (EGM) must contain the notes or some kind of explanatory statement to sate the reason and thought-process to arrive at the decision.
The Indian Companies Act, 2013 delineates some of the decisions or key issue which could be decided by the board of directors. These matters have been codified under section 179.
The followings are some of the business, decision on which can be taken by the board of directors:
- Demand the call money unpaid on the shares from the shareholders of the company.
- To buy-back the shares of the company.
- Raise the funds through shares or debenture.
- To take loan.
- To invest the funds of the company.
- To approve the financial statements and the Board’s report.
- To diversify the business of the company.
- To approve amalgamation, merger or reconstruction.
- To acquire another company.
- To make political contribution.
- Appointment of directors, company secretary, first auditor of the company.
- To appoint internal or secretarial auditor of the company.
All these decisions can be taken by the board of directors only by means of the board resolution passed at the board meeting.
Sometimes, due to the criticalness of the transaction, a committee is formed to decide the matter in depth. This can be done because all the directors are not the expert in all the fields, therefore board of directors amongst themselves create the small committee which can analyse the assigned work in more detail. This process is called delegation of the power which has been taken by almost all the large companies.
The decision which has been discussed over even can not be taken independently too. If the transaction significantly affects the company then even these matters such investment decision are also considered by the shareholder at the general meeting as per section 180 of the Companies Act, 2013.
Nevertheless, for private limited companies none of the matters cited earlier are not required to be placed before shareholder as stated in the notification issued on 5th June 2015.
At the end, every board will have its problems making decisions as will any group that is made up totally of leaders; however, with a little intervention the board can make the best decisions possible. A board that works as a team will be able to handle any tough decision without any conflict. By fostering good team building skills into the board room, your board of directors can work smoothly together and create a successful cooperative.