Private limited company (share capital more than 3 crores) and unlisted Public limited company enter into contract covered under section 297. Please clarify is central goverenment approval needed?
Early Responses Appreciated.
8 Replies
Aarush
(Delhi)
(1566 Points)
Replied 11 July 2012
Yes,
board’s sanction to be supported by the PREVIOUS approval of the Central Government, if the company’s paid-up capital is not less than Rs.1 Crore.
Sunil V B
(CFO)
(31 Points)
Replied 11 July 2012
Who has to take the approval pvt ltd company or the public limited(unlisted) company.
Aarush
(Delhi)
(1566 Points)
Replied 11 July 2012
This section applies to: All companies, public and private.
AND
This section does not apply to:
1. Contracts between two public companies
2. Transaction in immovable properties [Letter No. 9/4190-CL-X, dated 27th March, 1990],
3. Contract of employment of a director or managing or whole-time director
4. Contract entered into by the company with a dealer on a principal to principal basis
5. Professional services of the nature given by firms of solicitors and advocates, etc.
6. Indirect interest of a director as provided in section 299. unlike Section 299 this Section does not deal with indirect interest of a director, even though it may be substantial or real.
7. a government company in respect of contracts entered into by it with another Government company
8. A company and a body corporate or a co-operative society in which a director or relative is a member or diretor.
Applicability of the Section is to be determined at the time of entering into the contract. If no permission under this section is required at the time of entering into the contract, subsequent permission is not necessary even though there may be a change of circumstances which would require permission to be taken for a fresh contract.
CS Mitesh Mehta
(Company Secretary)
(17139 Points)
Replied 11 July 2012
Where one of the two companies is a private company and other is public company, public company has to obtain Central Govt. approval.
Sunil V B
(CFO)
(31 Points)
Replied 11 July 2012
how to justify the cost that is being charged is reasonable as both the companies are related.
Shraddha Shukla
(Corporate law Consultant)
(346 Points)
Replied 11 July 2012
take a noting of the directors in the board meeting by presenting the FMV of identical goods and showing comparison. Refer CARO guidelines
Sunil V B
(CFO)
(31 Points)
Replied 11 July 2012
thought over it but nt possible as it is a shared service agreement for accounting of the unlisted public company by private limited company
Mayur Joglekar
(trainee)
(51 Points)
Replied 26 July 2012
IF a holdig company having two subsidary companies and
that two subsidary companies having daily transaction as given in sec 297
and central goverment is not taken for sec 297
all the company holding and subsidary having paid up capital more than 1 crore
In this case what the process/ compliance to be undertaken if the transaction between the companies are continuing from last three years.
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