Suppose there is a Company say A Ltd. having 3 Directors namely, Mr. A, Mr. B and Mr.C. Now, Mr.B is also a Director in B Pvt.Ltd.
Now, A Ltd. proposes to enter into a contract with B Pvt. Ltd. for purchase of goods. Pursuant to the provisions of section 297 of the Companies Act, 1956 previous consent of the Board of Directors has to be obtained.
On the Board Meeting held on 27.04.2010, the said proposal is placed before the Board for obtaining the consent of the Directors.
Now, My Query is as per section 300 of the Companies Act, 1956 an interested Director shall not participate in the discussion nor shall be entitled to vote on the resolution for approving the contract and neither shall be counted for the purpose of determining a requisite quorum, so ......
(a) If Mr. B is only a Director in B Pvt. Ltd. and is not holding any shares of the said company, can he be considered as interested in the said contract? Will he be entitled to vote on the reolution to be passed for approving the contract with B Pvt. Ltd.?????
(b) Does merely being a Director of B Pvt. Ltd. will bring him under the ambit of the term 'Interested Director' and by virtue of this his presence shall not be coounted for the purpose of forming a quorum?????
In my opinion, only if Mr. B is holding more than 2% of the paid up capital of B Pvt. Ltd., he will be considered as 'Interested Director'.
Request to eminent experts to please throw some light on my query?????? Please.....
16 December 2010
As per Section 300(2)(d) (i) directors holding only qualification shares; or (ii) directors holding upto 2% of paid up share capital are excluded from the ambit of Section 300.
But this exemption is available only when the contract or arrangement entered into or to be entered into is with a Public Company or a Private Company which is a subsidiary of a Public Company.
What about the case when the transaction is proposed to be entered into with an Independent Private Company????
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