Section 297, Section 299 and Section 300 of the Companies Act,

udit sharma (Company Secretary) (2303 Points)

18 December 2010  

Dear Members

There are two companies, say A Ltd. having 3 Directors Mr. A, Mr.B, and Mr.C,another Company B Pvt. Ltd. having 3 Directors, Mr. A, Mr.D and Mr. E. As evident, one of the Directors of A Ltd. i.e. Mr. A is also a Director of B Pvt. Ltd. Mr. A is also a member of B Pvt. Ltd holding less than 2% of the paid up capital of the Company (B Pvt. Ltd.) 

Now, A Ltd. proposes to enter into a contract for purschase of Goods from B Pvt. Ltd. Provisions of section 297 are applicable in this case. Section 299 of the Companies Act, 1956 is not applicable because as per section 299(6), provisions of section 299 shall not apply in case of contract or arrangement of between 2 companies, wherein Director of one Company either individually or together with one or more Directors of the Company is not holding more than 2% of the paid up capital of the other Company.

Now, Whether Mr. A is entitled to participate in the discussion, or vote on the resolution or shall be counted for the purpose of quorum of the Board Meeting in which the Contract is placed before the Board?

Exemption available under section 300(4) is applicable only in case the Contract is entered or proposed to be entered into with a Public Company or a Private Company which is a subsidiary of a Public Company.

God Bless

Udit Sharma