Disclosure of interest by Directors

This query is : Resolved

Deepika Bhardwaj (Querist)
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19 February 2009 Dear Professionals

According to section 299 every director is required to disclose his nature of interest in a contract entered into or to be entered into by or on behalf of company.

But Sub section 6 of said second says that whenever there is a contract or arrangement between 2 companies, section 299 will not be applicable if holding of one Director or combined holding of more than one director does not exceed 2% in other company.

Query:

If A, B, C are the Directors of the public company and individual holding of A,B &C in another public company is less than 2% but combined holding of A,B, & C exceeds the limit of 2%.

Then in that case disclosure is required under sec 299 (6) by all the three drs A,B,C.

& Section 300 restricts the interested director to vote if they are interested.

Are all drs A,B,C restricted to vote acc. to section 300 even if individual holding is less than 2%.

Whereas Section 300(2)(d)(ii) says that section 300 will not be applicable if the director is holding is not more than 2% shares in other company. Is this section talks abt the individual holding of director.

Thanks & regards
Deepika Bhardwaj

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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19 February 2009 Since combined holding of all the directors put together is more than 2% you have comply with the above sections 299 and 300.

The idea of the companies act is that the directors should not take a decission favourable to them. Therefore the setion aims at safegaurdig the company.

Deepika Bhardwaj

Deepika Bhardwaj (Querist)
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19 February 2009 thanks sir

So in that case all drs A,B,C who are interested in the contract by virtue of their combined holding as mentioned in Section 299(6) are restricted to vote under section 300 even if section 300(2)(d)(ii) talks abt individual holding.

Deepika Bhardwaj

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