What is the interested director

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ramana (Querist)
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20 June 2013 Hi, Experts

Plz give me clarification what do mean by interested director, i am confusing this question, what is interested director
Plz give me briefly able to understand and give examples also, Plzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

Ajay Mishra

Ajay Mishra (Expert)
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20 June 2013 Hi

For interested directors, go to the following link:

https://www.psalegal.com/upload/publication/assocFile/ENewslineDecember2012.pdf

Section 299 casts a duty on a director for disclosure embedded in many provisions of the Companies Act, 1956. Accordingly, every director of a company who is, in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the Board of directors.

Ajay Mishra

Ajay Mishra (Expert)
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20 June 2013
Contracts or arrangements not covered by section 299
Section 299 applies also to contracts other than those entered into at a meeting of the directors. The following types of contracts or arrangements are exempted from the requirement of disclosure of interest by a director:—
(i) In cases where the contract or arrangement entered into or to be entered into is between two companies and where the interest of any director of one company or two or more of them together does not exceed a shareholding of 2% of the paid-up share capital in the other company. [Section 299(6)]
In other words, where a director singly or together with other directors or all the directors holds not more than 2% of the paid up share capital of the company, directors will not be deemed to be interested or concerned in any contract or arrangement of that company with the company in which they hold the office of director. Section 299 will be attracted only where a director or two or more or all of the directors hold more than 2% of the paid up share capital of another company.
If at the date on which the contract or arrangement is entered into, the holding of a director in the other company exceeds 2% but may fall below 2% on the date of the meeting at which the disclosure is required to be made, holding of shares on the date of contract entered into is relevant for the purpose of disclosure under section 299. (Circular No. 4 [8/16(1)/61], dated 19th May, 1961)
(ii) Where some directors have been nominated by a company as stewards of another organisation, disclosure of interest by them is not necessary when a contract with that organisation is being considered.

Ajay Mishra

Ajay Mishra (Expert)
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20 June 2013 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.

ramana

ramana (Querist)
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21 June 2013 Thx Ajay Mishra

what is the difference between sec 297 and 299 under the companies act,

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