Provisions of section 297 of ca 1956

Sec 297 – CONTRACTS IN WHICH DIRECTORS ARE INTERESTED

Contracts

Purchase/ Sale / Supply à Goods/ Materials / Services OR

Authority  for Approval 

Board Meeting – Consent at Board Meeting or Convene BM within 3 Months;

Prior approval of CG – If Paid up Capital is 1crore OR more;

File E-Form 24A for Central Government (CG) Approval

NOTE – NO Blanket consent permissible, meaning, every transaction to be considered separately

INTERESTED PERSONS

Just 3 Conditions to attract Sec.297 (All Conditions Mandatory)

1. Whether it is a contract as per this Section
2. Check Paid up Capital to determine the Authority for Approval
3. Find out whether the contract is with the Interested persons

CONTRAVENTION

“Contract becomes VOIDABLE” at the option of the Board of Director, if Paid Up Capital is Less Than `1. Crore;

“629A penalty applies” ie. Penalty where no specificpenalty is provided under the Act. The defaulting company, officer and such other persons shall be imposed fine UPTO Rs. 5000/- and `500 PER Day in case of continuing offence

Note: Director need NOT VACATE u/s 283.

Sec 297 Not Applicable to –

1. Immovable Property Transactions
2. Banking/ Insurance Transactions
3. Market Price Transactions
4. Transactions between 2 PUBLIC LIMITED COMPANIES
5. Transactions in ordinary course of Business for upto Rs 5000 per year
6. Contract of Employment of Director as MD/ WTD

If a public company gives and takes short term loan/advance to/from its private group company, whether sec 297 & 299 applicable?