Section 297 of companies act
This query is : Resolved
24 August 2011
.If two companies ABC PVT LTD & DEF LTD having one common director regularly deals in Sale Purchase Transaction wheather SECTION 297 attracted.
the PVT ltd co simply places order for purchase and the PUBLIC LTD company manufacture the products and deliver it to the Purchaser.
Also the PVT LTD Co is having a paid up Capital more than Rs. 1 crore from October ,2010,So Whether Approval is necessary from RD of ROC?....
SO PLEASE Clarify....
the PVT ltd co simply places order for purchase and the PUBLIC LTD company manufacture the products and deliver it to the Purchaser.
Also the PVT LTD Co is having a paid up Capital more than Rs. 1 crore from October ,2010,So Whether Approval is necessary from RD of ROC?....
SO PLEASE Clarify....
30 August 2011
Please take a combined effect of Sections 297 and 299 of the Companies Act and clearly draw a line as regards:
(a) the facts in the referred matter do not fall within the ambit as defined/prescribed in the exemptions under sub-section 2 of section 297,
However, a plain reading of your query indicates that it falls under clause (b) of sub-section 2 of Section 297
(b) Irrespective of the facts, disclosure requirements under section 299 do apply in case such a director is directly or indirectly concerned or interested in such a contract or transaction.
(c) Further disclosure requirements under section 299 will not be applicable in case holding of such a director is below 2% of the paid up share capital in the pvt. ltd. company.
(d) The approval of the RD is required by the Public Company apart from BOD approval in case matter does not fall under the ambit of exemptions laid down under Section 297-sub section 2.
(a) the facts in the referred matter do not fall within the ambit as defined/prescribed in the exemptions under sub-section 2 of section 297,
However, a plain reading of your query indicates that it falls under clause (b) of sub-section 2 of Section 297
(b) Irrespective of the facts, disclosure requirements under section 299 do apply in case such a director is directly or indirectly concerned or interested in such a contract or transaction.
(c) Further disclosure requirements under section 299 will not be applicable in case holding of such a director is below 2% of the paid up share capital in the pvt. ltd. company.
(d) The approval of the RD is required by the Public Company apart from BOD approval in case matter does not fall under the ambit of exemptions laid down under Section 297-sub section 2.
09 September 2011
Sir Suppose the Director has given General Declaration of his interest in FORM 24 AA u/s 299 & BOD of the PUBLIC LTD Co has passed resolution in each quarter giving consent to all the Translation of the previous Quarter,in that case whether the PVT LTD Co need to get approval from RD,( The PVT CO's Paid up Capital is more Than One Crore& The Director has more than 51% Holding).
09 September 2011
Dear Raj
The intention behind these two sections is that such transactions must be in the knowledge of BOD, the obligation is onerous and putting the directors in a fiduciary relationship. Applicable to all types of companies even the exemptions granted are of such nature as to ensure that the business in ordinary course is not in detrimental to the interests of company interalia and also to avoid any further hardship specially in case of a banking company. Additional approval of the CG in terms of compliance by way of forms prescribed is also meant to give effect the same.
Its' more on the part of a Public company rather than a Private company, even where out of two companies involved one is Private and another is Public Ltd., the compliance is strictly mandatory for a Public Limited Company and by virtue of such a compliance Private Company's compliance becomes inclusive.
The intention behind these two sections is that such transactions must be in the knowledge of BOD, the obligation is onerous and putting the directors in a fiduciary relationship. Applicable to all types of companies even the exemptions granted are of such nature as to ensure that the business in ordinary course is not in detrimental to the interests of company interalia and also to avoid any further hardship specially in case of a banking company. Additional approval of the CG in terms of compliance by way of forms prescribed is also meant to give effect the same.
Its' more on the part of a Public company rather than a Private company, even where out of two companies involved one is Private and another is Public Ltd., the compliance is strictly mandatory for a Public Limited Company and by virtue of such a compliance Private Company's compliance becomes inclusive.
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