Mr.A is a director in X ltd and also in Y Ltd. Mr.A has no shareholding in both the Companies.
Being an interested Director, is it required for him to make disclosure under Section 299 of the Companies Act for any contract or arrangement entered into or can he claim exemption under Section 299(6) stating that he has no shareholding in the Company??
16 February 2011
299(6) exempts the applicability of Section 299, to any contract or arragement entered into between two companies where any of the directors of the one company or two or more of them together holds or hold not more than 2% of the paid up share capital in the other company.
So the limit of 2% is not the individual limit. You have to ascertain all the Directors' shareholding in y Ltd and if their combined shareholding exceeds 2% of the paid up capital of y Ltd. then the directors are construed to have interest in the contract or arrangement and the disclosure is required to be made.
Thanks for your reply.But doesn't the section say any of the Directors "(OR)" two or more of them. which means even a director's individual shareholding will qualify for that 2%. Kindly clarify.
16 February 2011
As quoted by Jayashree Mam in first para of her reply, director's individual shareholding will also be taken for determining the shareholding of 2% or more in the other Company.
CAclubindia
