Section 179 of the Companies Act, 2013—
If you’ve ever sat in a board meeting and wondered, “Do we actually have the authority to do this?”—you’re already dealing with Section 179, whether you realize it or not.
Most directors, especially in private companies and startups, don’t wake up thinking about sections of the Companies Act. Decisions just need to be taken—loans signed, investments approved, and accounts finalized. And that’s exactly why Section 179 of the Companies Act, 2013, matters so much. It quietly decides who has the power to act and how that power must be exercised.
Let’s break this down in plain language, the way it actually plays out in real companies.
Why Section 179 Is the Real Power Centre of a Company
On paper, shareholders own the company.
In reality, the company moves because the Board of Directors moves.
Every major business decision—borrowing money, investing surplus funds, approving financial statements, entering into mergers—comes back to the Board. And the legal authority for all of this comes from one place:
Section 179 of the Companies Act.
That’s why this section:
- Defines all powers, which are exercised by the board
- Outlines the powers of the Board of Directors
- Forms the backbone of corporate decision-making
Without Section 179, directors would have titles—but no real authority.
What Section 179 Actually Says (In Simple Terms)
Section 179 says something very straightforward:
The Board of Directors of a company shall be entitled to exercise all such powers and do all such acts as the company itself is authorized to do.
In human language:
👉 If the company can do something, the Board can do it on the company’s behalf.
But—and this is important—this power is not unlimited.
The Board’s authority is always subject to:
- The Companies Act, 2013
- The Memorandum of Association
- The Articles of Association
- Decisions taken by shareholders in general meetings
This balance is what keeps power from being misused.
Section 179(1): The General Authority of the Board
Section 179(1) is the foundation.
It confirms that the Board controls the company’s affairs unless the law specifically says otherwise.
This means:
- Running daily operations → Board
- Making strategic decisions → Board
- Executing contracts → Board
If a power is not reserved for shareholders, it usually sits with the board.
Section 179(3): Where Things Get Serious
This is the part that actually causes compliance issues in practice.
Section 179(3) lists certain decisions that cannot be taken casually. These decisions must be approved by a board resolution passed at a properly convened board meeting.
Why? Because these decisions can change the future of the company.
Decisions That Require a Board Resolution
Under Section 179(3), the Board must pass a resolution to:
- Borrow money
- Invest company funds
- Grant loans or provide guarantees
- Approve financial statements and the Board’s Report
- Diversify the business
- Approve mergers or amalgamations
- Acquire or take over another company
- Sell or dispose of substantial undertakings
This is where the law clearly outlines the powers of the Board of Directors—and the process they must follow.
Why the Law Insists on Board Resolutions
From experience, here’s the real reason.
These decisions:
- Involve large sums of money
- Affect creditors and investors
- Can’t be reversed easily
By forcing a board resolution, the law ensures:
- Decisions aren’t taken by one individual
- There’s collective responsibility
- A clear paper trail exists
This is exactly why Section 179 forms the backbone of corporate decision-making.
Is Section 179(3) Applicable to Private Companies?
Yes. Absolutely.
This is one of the biggest misconceptions.
Even private companies—family-run, promoter-driven, or closely held—must comply with Section 179 unless a specific exemption exists.
That means:
- Proper Board meetings
- Formal resolutions
- Recorded minutes
Ignoring this doesn’t make the decision invalid immediately—but it does create serious risk later.
Delegation of Powers Under Section 179
Now, here’s the practical relief.
The Board doesn’t need to handle everything personally.
Section 179 allows the Board to delegate certain powers to:
- Managing Director
- Whole-time Director
- Committees
- Senior officers
But delegation must be
- Clearly authorised
- Limited in scope
- Properly recorded
In real life, borrowing and investment powers are almost always delegated—but with caps.
Section 179 vs Section 180—A Quick Reality Check
These two sections are often confused.
Here’s the simplest way to remember it:
- Section 179: What the Board can do
- Section 180: When shareholders must also approve
So, the Board may approve borrowing—but if limits under Section 180 are crossed, shareholder consent becomes mandatory.
Think of Section 180 as a safety lock.
How Articles of Association Affect Section 179
Even if Section 179 allows the Board to act, the Articles of Association (AOA) can impose extra conditions.
If the Articles say:
- Certain approvals are required
- Limits are imposed
The Board must follow them.
In practice, many disputes arise not because Section 179 was violated but because the Articles were ignored.
A Real-World Example: Borrowing a Term Loan
Let’s keep this practical.
A company wants to take a ₹15 crore bank loan.
What usually needs to happen:
- Check borrowing limits under Section 180
- Pass a Board resolution under Section 179(3)
- Obtain shareholder approval if required
- Authorise signatories
Miss the board resolution, and the loan documentation itself can become questionable.
This happens more often than people admit.
Common Mistakes I See Again and Again
From real compliance reviews, these stand out:
- Decisions taken “informally” without resolutions
- Backdated minutes to cover gaps
- Assuming private companies are exempt
- Delegating powers without limits
These don’t look serious—until a due diligence, audit, or dispute exposes them.
Why Section 179 Is About Governance, Not Control
Section 179 isn’t designed to slow businesses down.
It exists to:
- Protect directors
- Protect shareholders
- Protect the company itself
Clear authority clear process = confident decision-making.
Is Section 179 Relevant for Startups?
More than ever.
Early-stage companies often ignore board processes. But the moment:
- Investors come in
- Banks lend money
- Due diligence starts
Section 179 suddenly becomes very real.
Good governance is easiest when built early.
Final Thoughts: Section 179 Gives Power—With Structure
Section 179 of the Companies Act, 2013, doesn’t just hand power to the Board.
It tells the Board how to use that power responsibly.
It:
Defines all powers, which are exercised by the board
- Outlines the powers of the Board of Directors
- Forms the backbone of corporate decision-making
When followed properly, it creates confidence.
When ignored, it creates silent legal risk.
And if you ever feel unsure about Board powers, resolutions, or compliance under Section 179, don’t guess.
If you ever feel lost navigating company law provisions, governance rules, or practical compliance questions, the team at CallMyCA.com is always ready to guide you with real clarity and human support.
