Declaration for Compliance of Section 297 to CS

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MANISH (Querist)
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21 August 2009 Could you please provide format for declaration by company for compliance of Section 297 of Co Act to Company Secretary.

What are contracts to which section 297 applies?

Ankur Garg

Ankur Garg (Expert)
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21 August 2009 Hi,

Applicability of section 297

Section 297 of the Act embodies the principles of good faith and fiduciary relationship of a director and enjoins upon him certain statutory obligations. Section 297(1) states that a company cannot enter into contracts with the specified persons without the consent of the Board. These types of contracts are:—

(a) sale, purchase or supply of any goods or materials or services;

(b) underwriting the subscription of any shares in or debentures of the company.

Non-applicability of section 297

Section 297 does not apply in the following cases:—

1. Contracts between two public limited companies.

2. Contracts between a company registered under the Companies Act and a company incorporated outside India.

3. Contract between company and a private company of which the relative of a director is a member or a director.

4. Contracts for sale, purchase or lease of immovable property.

5. Contract for employment of a director as managing director or whole-time director.

6. Transaction of a loan made to a director by the company, since it is not a sale or purchase of goods or a contract to render services.

7. The Central Government's approval under the proviso is not applicable to a Government company in respect of contracts with another Government company.

8. Professional services rendered by solicitors/advocates or by firms of solicitors and advocates.

9. Contracts entered into by the company with a dealer on a 'principal to principal' basis, provided the dealer does not acquire the same on agency basis.

Regards

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Ankur Garg

Ankur Garg (Expert)
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21 August 2009 Persons covered u/s 297

The followings are the persons with whom a company cannot enter into contracts without the consent of the Board of directors and prior approval of the Central Government is required in case if the paid up capital of a company is not less than Rupees One Crore:—
(i) director of the company;
(ii) relative of such director;
(iii) a firm in which such director is a partner;
(iv) a firm in which relative of such director is a partner;
(v) any other partner of such firm in which such director is a partner;
(vi) any other partner of such firm in which relative of such director is a partner;
(vii) a private company in which such director is a member or director.

Exemptions in certain cases

The prior consent of the Board or Central Government will not be required in the following circumstances:—

(i) Contract for purchase of goods from the company or sale of goods to the company, which are for cash at prevailing market prices.

(ii) Contract for sale or purchase of goods and services in which the company or other party regularly does business but upto Rs. 5,000 in a year during the period of the contract.

(iii) Any transaction of a Banking/Insurance Company in the ordinary course of business of such company with the specified persons.

Ankur Garg

Ankur Garg (Expert)
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21 August 2009 Sorry I forgot to post declaration. Here it is:

TO WHOMSOEVER IT MAY CONCERN

I, Rajesh Verma, Company Secretary of the company, on behalf of ABC private Limited, do hereby confirm that the company has complied with all the provisions of Section 297 of the Companies Act, 1956 and further the company has also complied with all the legal and statutory formalities in this regard.

For ABC Private Limited

Company Secretary

Dated:
Place:

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