Relating to Director
This query is : Resolved
05 April 2008
Sir
if the company is listed public co. and the company deal with the firm (i.e. sale & Purchase the Raw Material & Finished Goods) which is run by the father of the Director(Relative), but the decission of sale & purchase is not taken at board meeting but is taken by company management i.e. sale & purchase manager.
so what is the responsibility of the director for the same, whether he has to disclose the interest or not required.
Please guide....
if the company is listed public co. and the company deal with the firm (i.e. sale & Purchase the Raw Material & Finished Goods) which is run by the father of the Director(Relative), but the decission of sale & purchase is not taken at board meeting but is taken by company management i.e. sale & purchase manager.
so what is the responsibility of the director for the same, whether he has to disclose the interest or not required.
Please guide....
05 April 2008
WHETHER A LISTED COMPANY OR UNLISTED COMPANY,DISCLOSURE OF INTEREST BY AN INTERESTED DIRECTOR IS A COMPANY'S ACT 1956 REQUIREMENT.
SECTION 297 OF COS. ACT 1956 REQUIRES BOARD'S SANCTION FOR CONTRACTS IN WHICH DIRECTORS(INCL. RELATIVES OF DIRECTORS) ARE INTERESTED.
IF SUCH CO. HAS A PAID UP CAPITAL OF RS. ONE CRORE OR MORE, PREVIOUS CENTRAL GOVT. APPROVAL REQUIRED.
BUT EXCEPTIONS(THIS SECTION DOES NOT APPLY) ARE PROVIDED FOR SUCH SALE/PURCHASE OR SUPPLY OF MATERIAL OR SERVICES CONTRACTS IF
1.THOSE CONTRACTS ARE EXECUTED FOR CASH AT PREVAILING MARKET PRICE.
2.IF BOTH PARTIES( THE COMPANY AND INTERESTED DIRECTOR /RELATIVE) REGULARLY TRADE OR DOES SUCH BUSINESS .
SEC 299 AND SEC 300 REQUIRE INTERESTED DIRECTOR TO DISLOSE HIS INTEREST IN SUCH CONTRACTS TO THE BOARD AND NOT TO PARTICIPATE IN DISCUSSION / VOTING AT SUCH BOARD MEETINGS.
SEC 301 OF COS. ACT REQUIRES MAINTAINING REGISTER OF CONTRACTS IN WHICH DIRECTORS ARE INTERESTED.
RELATED PARTY TRANSACTIONS AS PER ACCOUNTING STANDARDS OF ICAI ARE TO BE REPORTED BY THE COMPANY IN THE ANNUAL REPORT-NOTES ON ACCOUNTS -WHICH IS SIGNED BY STATUTORY AUDITOR OF THE COMPANY ALONG WITH DIRECTORS OF THE COMPANY .
IT IS IMMATERIAL WHO DECIDES AND WHO EXECUTES SUCH TRANSACTIONS IN A COMPANY SET UP.
AS FAR AS LISTED COMPANY' REQUIREMENTS IS CONCERNED , REPORTING IS REQUIRED UNDER SEBI REGULATIONS- UNDER REG 6 AND
REG. 8 .IN EVERY MARCH YEAR END AND AT THE TIME OF BOOK CLOSURE AND DIVIDEND DECLARTION.
THESE REGULATIONS 6 AND 8 DEAL WITH SHARES HELD BY PROMOTERS AND RELATIVES AND CONTROLLING GROUP IN A COMPANY.
IN ANY CASE, EVERY LISTED COMPANY REPORTS AS PER LISTING AGREEMENT CLAUSES 35, 41 AND OTHER CLAUSES OF THE LISTING AGREEMENT ,BY WAY OF A NOTICE TO STOCK EXCHANGES ABOUT BOARD MEETINGS-SENDING AGENDA OF BOARD MEETINGS- ABOUT UNAUDITED RESULTS AND ALSO REPORTS SHAREHOLDING PATTERN OF THE COMPANY (EVERY QUARTER) INCL. PROPMOTER AND NON PROMOTER GROUPS.
THESE BOARD MEETING MINUTES ARE ALSO REPORTED WHICH NECESSRILY CONTAIN DETAILS OF CONTRACTS IN WHICH DIRECTORS ARE INTERESRED.
R.V.RAO
SECTION 297 OF COS. ACT 1956 REQUIRES BOARD'S SANCTION FOR CONTRACTS IN WHICH DIRECTORS(INCL. RELATIVES OF DIRECTORS) ARE INTERESTED.
IF SUCH CO. HAS A PAID UP CAPITAL OF RS. ONE CRORE OR MORE, PREVIOUS CENTRAL GOVT. APPROVAL REQUIRED.
BUT EXCEPTIONS(THIS SECTION DOES NOT APPLY) ARE PROVIDED FOR SUCH SALE/PURCHASE OR SUPPLY OF MATERIAL OR SERVICES CONTRACTS IF
1.THOSE CONTRACTS ARE EXECUTED FOR CASH AT PREVAILING MARKET PRICE.
2.IF BOTH PARTIES( THE COMPANY AND INTERESTED DIRECTOR /RELATIVE) REGULARLY TRADE OR DOES SUCH BUSINESS .
SEC 299 AND SEC 300 REQUIRE INTERESTED DIRECTOR TO DISLOSE HIS INTEREST IN SUCH CONTRACTS TO THE BOARD AND NOT TO PARTICIPATE IN DISCUSSION / VOTING AT SUCH BOARD MEETINGS.
SEC 301 OF COS. ACT REQUIRES MAINTAINING REGISTER OF CONTRACTS IN WHICH DIRECTORS ARE INTERESTED.
RELATED PARTY TRANSACTIONS AS PER ACCOUNTING STANDARDS OF ICAI ARE TO BE REPORTED BY THE COMPANY IN THE ANNUAL REPORT-NOTES ON ACCOUNTS -WHICH IS SIGNED BY STATUTORY AUDITOR OF THE COMPANY ALONG WITH DIRECTORS OF THE COMPANY .
IT IS IMMATERIAL WHO DECIDES AND WHO EXECUTES SUCH TRANSACTIONS IN A COMPANY SET UP.
AS FAR AS LISTED COMPANY' REQUIREMENTS IS CONCERNED , REPORTING IS REQUIRED UNDER SEBI REGULATIONS- UNDER REG 6 AND
REG. 8 .IN EVERY MARCH YEAR END AND AT THE TIME OF BOOK CLOSURE AND DIVIDEND DECLARTION.
THESE REGULATIONS 6 AND 8 DEAL WITH SHARES HELD BY PROMOTERS AND RELATIVES AND CONTROLLING GROUP IN A COMPANY.
IN ANY CASE, EVERY LISTED COMPANY REPORTS AS PER LISTING AGREEMENT CLAUSES 35, 41 AND OTHER CLAUSES OF THE LISTING AGREEMENT ,BY WAY OF A NOTICE TO STOCK EXCHANGES ABOUT BOARD MEETINGS-SENDING AGENDA OF BOARD MEETINGS- ABOUT UNAUDITED RESULTS AND ALSO REPORTS SHAREHOLDING PATTERN OF THE COMPANY (EVERY QUARTER) INCL. PROPMOTER AND NON PROMOTER GROUPS.
THESE BOARD MEETING MINUTES ARE ALSO REPORTED WHICH NECESSRILY CONTAIN DETAILS OF CONTRACTS IN WHICH DIRECTORS ARE INTERESRED.
R.V.RAO
05 April 2008
Thanks R.V. Rao sir,
sir the company is regularly trade but on credit, the transaction is not on cash basis but it is on PREVAILING MARKET PRICE, so what will be your answer for this.
sir the company is regularly trade but on credit, the transaction is not on cash basis but it is on PREVAILING MARKET PRICE, so what will be your answer for this.
06 April 2008
Mr. Rao has dealt with very elaborately with great clarity.
The contract has to be at market prices as well as for cash.Both conditions are to be there simulatneously.
There are people who hold the view that section 297 is applicable only for those contracts which are required to come through Board. That view in my opinion is incorrect. The moment a contract is regarded as interested, sections 297, 299, 300 and 301 will be attracted subject only to exemptions contained therein.
The contract has to be at market prices as well as for cash.Both conditions are to be there simulatneously.
There are people who hold the view that section 297 is applicable only for those contracts which are required to come through Board. That view in my opinion is incorrect. The moment a contract is regarded as interested, sections 297, 299, 300 and 301 will be attracted subject only to exemptions contained therein.
06 April 2008
It means sir in my case director has to show his interest in the board meeting as the contract is at market price but not for casf (it is on credit)
07 April 2008
YES MR. VIJAY, YOU ARE RIGHT.
THNKS TO MR. SRINIVASA RAGHAVAN.I ALWAYS READ SRI SRINIVASA RAGHAVAN'S ANSWERS AND NEVER MISS( REMEMBER HE HOLDS 3 PROF. QUALIFICATIONS OF CA, ICWAI AND C.S). HIS ANSWRS ARE A DELIGHT.
R.V.RAO
THNKS TO MR. SRINIVASA RAGHAVAN.I ALWAYS READ SRI SRINIVASA RAGHAVAN'S ANSWERS AND NEVER MISS( REMEMBER HE HOLDS 3 PROF. QUALIFICATIONS OF CA, ICWAI AND C.S). HIS ANSWRS ARE A DELIGHT.
R.V.RAO
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