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Section 297

Ashwin (Information Seeker) (155 Points)

07 August 2012

Dear All,

Greetings of the Day,

I have a query regarding section 297 which is as follows.

Our is a Pvt. Ltd. Company which is providing loan to another Pvt. Ltd company in which directors are intersted by have directorship in both the company.

and providing loan is not a regular business activity of the Company, it is in the business of manufacturing.

Now my question is wheather the provisions of Section 297 are attracted and if the same is covered under the definition of services of the particular section,

if yes then what should be the compliance part on my side.

Thanks & Regards

Ashwin

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4 Replies

(Guest)

Dear Ashwin,

Here, Section 297 will not apply. Only Section 299 & 292 will apply.

As per Section 299, every Director of a company must disclose to its Board of Directors at a meeting of the Board the nature of his / her interest: -

if he / she is any way, whether directly or indirectly, concerned or interested in any contract or arrangement or proposed contract or arrangement entered into or proposed to be enter into, by or on behalf of the company.

GENERAL NOTICE OF INTEREST [SECTION 299 (3)]

Where general notice is given to the Board as regards the interest of a director in any contract or arrangement, it is not effective, unless the director concerned either gives it at a meeting of the Board or takes reasonable steps to secure that it is brought up and read at the next meeting of the Board after it is given. The Notice then gets entered in the minutes of the Board Meeting at which it is given or read. The Notice in Form No. 24AA as prescribed under Companies (Central Government’s) General Rules & Forms, 1956, is also required to be given afresh year after year, so that new directors who may be coming into the Board may be aware of the interest of that particular director. Once a director has given general notice of interest, it is not necessary for him to once again disclose his interest when the matter comes up before the Board.

Nothing in Section 299 is applicable to any contract or arrangement between two companies, if any one or more of the directors of the one company together holds / hold 2% or less of the paid–up share capital in the other company. [Section 299 (6)].

Regards,

Veeral Gandhi

1 Like

CS Smriti Sharma (ACS, B Samrish & Co.) (880 Points)
Replied 07 August 2012

Section 297 is not applicable since it is not a sale or purchase of goods or a contract to render services.

1 Like

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 07 August 2012

Veeral

Section 372A is not applicable for a pure private company. Please correct me if I am wrong.

Regards,

(Guest)

Yes, you are correct Dipjyoti, a private limited company, which is not a subsidiary of a public limited company, stands exempted from the regulatory provisions of Section 372A. I regret the error.