Capital requirement under section 297 of the companies act

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Manish Mehra

Associate Company Secretary

32 Points Posted on 07 May 2013

Dear All,

I have a query regarding section 297 of the Companies Act, 1956. As per the said section, where the paid up capital of the Company is Rs. 1.00 Crore or above, in such a case prior approval of CG is required.

Query:

A pvt ltd having paid up capital of Rs. 1.00 lac entered into an 10 years service agreement on 01st June, 2011 with B pvt ltd having paid up capital of Rs. 1.2 Crores. In this case B pvt ltd has to apply for CG for approval and there is no such requirement of A pvt ltd

On 01st August, 2012, the paid up capital of A pvt ltd. raised to Rs. 1.00 Crore. Wether A pvt ltd is required to take CG approval for the contract entered before its capital raised to Rs. 1.00 Crores. If yes, please qoute the provisions or where I can find any reference.

Replies (3)

Rakesh Dhanuka

Company Secretary

414 Points Posted on 07 May 2013

Hi,

Refer commentary to section 297 in Ramaiya, in that its clearly mentioned subsequent increase in paid up capital does not require approval of CG until the expiry of contract. As in your case contract is for 10 years so no need to take any approval of CG until expiry of 10 years.

Others view solicited.

Manish Mehra

Associate Company Secretary

32 Points Posted on 07 May 2013

Dear Rakesh, I do not have Ramaiya available with me. I will be greatful if you can provide me the relevant extract.

P C Agrawal

Registered independent director Past Ch

5233 Points Posted on 21 May 2013

All the applicable provisions have to be checked at the time of entering into contract. Subsequent changes will not make the contract void. Approval of CG is not required for subsequent increase in share capital.