A limited company has to donate some amount to a government body - a Municipality. One director is related to the Chairman of the Municipality as husband and wife. In such an event, has disclosure of interest to be declared and recorded in the board meeting and is such a payment is correct under Company Law?
I would like to know this answer please any Practising company secretaries viewing this query please respond
Section 297 is applicable only in the cases and prohibits entering into contract with the company only where a director of the company or his relative, a firm in which such a director or relative is a partner, any other partner in such a firm or a private company of which the director is a member or director. This section does not talk of a case where the company deals with a government body. Further, donation to a government body does not involve any case of purchase or sale or supply of goods, material and services and the company will not be directly benefitted through a donation for the common cause. So, I feel no such disclosure is necessary.
I concur with the view of Mr.K.Aravind, especially when the beneficiary is not a company but a government body, whose funds will be used for some public purposes and the company will not get benefits out of the donation.
Please refer section 293(e) if it is a public company. section 297 is applicable only if contract is for purchase, sale or dispose off any movable property and one or more directors are interested anyway in same contract.
CAclubindia
