Resolution or agreement ?

Memorandam & Articles of a private limited company allows business transaction for proft/gains from renting of immovable property inter alia.

The Managing director (who holds majority of shares) lets out a space to the company for rent, for say Rs. 20,000/-

The company, in turn, lets out the same space to other clients for rent (higher rates) for say Rs. 75,000/-

Only a resolution is passed at the board meeting that the company will hire space from the managing director, and in turn, rent out to the clients.

Is a resolution enough or a proper agreement has to be made between the company and the managing director?

Replies (1)

Hi Mihir,

The resolution passed is a compliance and in such a case as the property does not belong to the Company it is always advisable to have a rent agreement entered in this behalf between the company and the Managing Director which would in all cases be a valid proof in this regard since the property has been sub-let.

Thanks & Regards 

Amit Mishra

BSamrish & Co.

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