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Provisions of section 297 of ca 1956

Kirtida (Company Secretary) (24 Points)

07 April 2012

Dear All

I have one query as far as section 297 of companies act is concerned.

A Pvt. Limited co is giving trasportation services to other private limited company where directors are common.

Please let me know the implications of above section.

Thanks & regards

Kirtida

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2 Replies

Mohammed (CS, Mcom, LLB) (852 Points)
Replied 07 April 2012

Sec 297 – CONTRACTS IN WHICH DIRECTORS ARE INTERESTED

Contracts

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

Underwriting of Shares/ Debentures;

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

DIRECTOR	His Relative	-
FIRM	Director or Relative is a Partner	Other Partners of the Firm
PRIVATE COMPANY	Directors is a Member	Director is a Director

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

Whether it is a contract as per this Section
Check Paid up Capital to determine the Authority for Approval
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 –