Facts
1. Section 297 of companies act is attracted in my case. Just for a quick reference to the section 297.. it states about obtaining consent of the board of directors, for entering into certain contracts in which particular directors are interested and in my case the client has a paid up capital of more than Rs 1 crore. Hence my client will need a prior approval from the Central Government.
2. The client has not taken the prior approval..However the Board Of directors have passed adequate resolutions and have gone ahead with the transactions
3. The client does not fall in any of the exemptions/relaxations available in the provision.
Our understanding
1. The consequences are as follows:
2. A residuary section for penalty ie section 621 is applicable ie Rs 500 and Rs 50 per day if a continuing default
3. The Board Of Directors is not deemed to vacate the office of director
4. Compounding of offences is possible
Query
1. What are the other consequences if the prior approval of Central Government is not taken?
2. The consequences do not seem to be very serious like vacating of Director’s office or lifting of corporate veil etc
3. Please enlighten me with serious consequences too
Thanks and regards,
Nikhil
CAclubindia
