Companies Act 2013 Section 298
Companies Act 2013 Section 298 governs the powers of the Board of Directors to manage company affairs and delegate authority.
Companies Act 2013 Section 298 outlines the powers vested in the Board of Directors to manage the company’s business and affairs. It empowers the Board to exercise all such powers and do all such acts and things as the company is authorized to do, except those requiring shareholder approval. This section is fundamental in corporate governance as it defines the scope of authority for directors in decision-making and management.
Understanding Section 298 is crucial for directors, shareholders, company secretaries, and legal professionals. It helps clarify the limits and extent of board powers, ensuring compliance with statutory provisions and safeguarding the interests of the company and its stakeholders.
Companies Act Section 298 – Exact Provision
This provision grants the Board of Directors comprehensive authority to manage the company’s affairs within the framework of the Companies Act. It allows the Board to act on behalf of the company, except where the Act or the company’s articles require shareholder approval or other specific procedures.
Empowers the Board to manage company affairs.
Subject to limitations imposed by the Act or articles.
Excludes powers reserved for shareholders.
Enables delegation of authority within the Board.
Forms the basis of corporate decision-making.
Explanation of Companies Act Section 298
This section states that the Board of Directors holds all powers to act on behalf of the company unless restricted by law or the company’s constitution.
Applies primarily to the Board of Directors.
Mandates the Board to exercise company powers.
Allows delegation of powers to committees or officers.
Prohibits Board from acting beyond statutory or constitutional limits.
Ensures shareholder reserved matters remain with shareholders.
Purpose and Rationale of Companies Act Section 298
Section 298 strengthens corporate governance by clearly defining the Board’s authority, promoting efficient management and accountability.
Clarifies the scope of Board powers.
Protects shareholder rights by reserving certain powers.
Ensures transparent and accountable management.
Prevents unauthorized actions by directors.
When Companies Act Section 298 Applies
This section applies whenever the Board exercises powers to manage company affairs, except where the Act or articles specify otherwise.
Applicable to all companies with a Board of Directors.
Triggers on Board meetings and decisions.
Excludes matters requiring shareholder approval.
No exemptions for private or public companies.
Legal Effect of Companies Act Section 298
Section 298 creates a statutory duty for the Board to manage the company within legal limits. It restricts directors from exceeding their authority and mandates compliance with the Act and articles. Non-compliance can lead to invalidation of decisions and legal consequences. The section interacts with MCA rules on board meetings, resolutions, and disclosures.
Establishes Board’s management authority.
Imposes compliance with statutory limits.
Non-compliance may invalidate Board actions.
Nature of Compliance or Obligation under Companies Act Section 298
Compliance under Section 298 is mandatory and ongoing. Directors must ensure all decisions are within their powers and consistent with the Act and articles. The company secretary and officers assist in maintaining governance standards. This section influences internal governance frameworks and delegation policies.
Mandatory and continuous compliance.
Responsibility lies with the Board and officers.
Impacts internal delegation and governance.
Stage of Corporate Action Where Section Applies
Section 298 is relevant at multiple stages of corporate action, especially during Board meetings and decision-making processes.
Board decision and meeting stages.
Delegation of authority to committees or officers.
Ongoing management and operational activities.
Not applicable at incorporation or shareholder approval stages.
Penalties and Consequences under Companies Act Section 298
While Section 298 itself does not prescribe specific penalties, acting beyond Board powers can lead to consequences under other provisions. Directors may face penalties for unauthorized acts, including fines, disqualification, or liability for damages. The company may also suffer invalidation of decisions.
Potential fines for unauthorized acts.
Director disqualification in severe cases.
Invalidation of Board resolutions.
Example of Companies Act Section 298 in Practical Use
Company X’s Board decided to enter a new business line without shareholder approval, relying on Section 298. Since the articles permitted such decisions by the Board, the action was valid. However, when Director X attempted to sell a major asset reserved for shareholder approval, the act was challenged and declared invalid.
Board can act within powers granted by the Act and articles.
Shareholder reserved matters require proper approval.
Historical Background of Companies Act Section 298
Section 298 replaces similar provisions in the Companies Act, 1956, consolidating Board powers under the 2013 Act. It was introduced to clarify and modernize the scope of director authority and align with global corporate governance standards.
Replaces Companies Act, 1956 provisions on Board powers.
Introduced for clarity and modernization.
Reflects global governance best practices.
Modern Relevance of Companies Act Section 298
In 2026, Section 298 remains vital for digital governance, enabling Boards to act efficiently using MCA portal filings and e-governance tools. It supports compliance trends including ESG and transparent decision-making.
Supports digital board resolutions and filings.
Enables governance reforms and transparency.
Crucial for compliance with evolving corporate norms.
Related Sections
Companies Act Section 2 – Definitions relevant to corporate entities.
Companies Act Section 166 – Duties of directors.
Companies Act Section 173 – Board meetings.
Companies Act Section 179 – Powers of the Board.
IPC Section 447 – Punishment for fraud.
SEBI Act Section 11 – Regulatory oversight for listed companies.
Case References under Companies Act Section 298
- Shanti Prasad Jain v. Kalinga Tubes Ltd. (1965 AIR 1535)
– Board’s powers must be exercised within the company’s articles and law.
- ICICI Bank Ltd. v. Official Liquidator (2005) 3 SCC 530
– Directors’ authority is subject to statutory and constitutional limits.
Key Facts Summary for Companies Act Section 298
Section: 298
Title: Powers of the Board of Directors
Category: Governance, Directors
Applies To: Board of Directors of all companies
Compliance Nature: Mandatory, ongoing
Penalties: Fines, disqualification, invalidation of acts
Related Filings: Board resolutions, MCA filings
Conclusion on Companies Act Section 298
Companies Act Section 298 is a cornerstone provision defining the powers of the Board of Directors. It empowers the Board to manage the company’s affairs effectively while ensuring compliance with the law and the company’s constitution. This balance protects the company’s interests and promotes sound corporate governance.
Directors must understand their authority limits and exercise powers responsibly. Section 298 supports transparent decision-making and accountability, which are essential for investor confidence and sustainable business growth in India’s evolving corporate landscape.
FAQs on Companies Act Section 298
What powers does Section 298 grant to the Board of Directors?
Section 298 grants the Board all powers to manage the company’s affairs, except those reserved for shareholders or restricted by law or the company’s articles.
Can the Board delegate its powers under Section 298?
Yes, the Board can delegate powers to committees or officers, provided such delegation complies with the Companies Act and the company’s articles.
Does Section 298 apply to all types of companies?
Yes, Section 298 applies to all companies with a Board of Directors, including private and public companies.
What happens if the Board acts beyond its powers under Section 298?
Actions beyond the Board’s powers may be invalidated, and directors may face penalties, including fines or disqualification under other provisions.
Is shareholder approval required for all Board decisions under Section 298?
No, shareholder approval is required only for matters specifically reserved by the Act or the company’s articles; otherwise, the Board can act independently.