Applicability of section 297

This query is : Resolved

SANDEEP CHAWARE (Querist)
Follow

05 March 2012
Transaction between 2 Private Limited Companies.

1) Guarantee Commission for loan facility availed by one company and other company is guarantor.

2) One Director is common (becomes related party transaction)

3) The company who is taking loan is having share capital below 1 Crore and Guarantor company share capital is above 1 Crore

We have a query whether approval from RD will be required for above transaction.

CA Sumat Singhal

CA Sumat Singhal (Expert)
Follow

07 March 2012 Section 297 applies to all companies, public as well as private. However, it does not apply to the contracts where both the parties to the contract are public companies. The section would apply where one of the two companies (being parties to the contract) is a private company and the other is a public company, but in such a case, it will have to be complied with by the public company only.