297 & 299

855 views 3 replies

S. Satheesh Kumar

Assistant Company Secretary

84 Points Joined July 2009

Dear All,

An Unlisted Public Company be entered into contract with Private limited company under section 297. The quorum of the Board Meeting is not sufficient to pass the resolutions for approving the said contract due to all directors are interested in this proposal under section 299. Therefore, the company is decided to get the approval from its members by general meeting, based on members approval, the Company decided to make an application to Central Government. Whether this procedure is valid or not.

Replies (3)

J. Manivannan

Advocate & IP

242 Points Joined February 2009

As per Ramaiya view:

Dear Mr. Satheesh

Interested directors will not be taken into consideration for the “quorum” of the board meeting as per provisions of section 287. However, where at any time the number of interested director the number of directors exceeds or equal to 2/3rds of total strength of the number of remaining directors, i.e. the number of un-interested directors shall be quorum. In a contingency where all directors are interested (like your case) in a contract, the department expressed the following view:

The remedy in such case seems to increase the board strength by appointing disinterested directors or to co-opt or appoint additional directors if so authorised by the articles who are not interested in the said contract. If this is not found practicable, it would be desirable to place the proposed contract before the general meeting for consent.(letter No. 8/16/(1) 61-PR, dated 09.05.1961).

Thus, based on said department views, your procedure is valid.

Ankur Garg

Company Secretary and Compliance Officer

114788 Points Joined January 2009

Agree with the learned member and your point of view.

One thing to add as now you are going for the shareholders' approval so you may hold the board meeting and pass the necessary board resolution subject to the approval of shareholders. Also approval notice of GM. Mention everything in the commentry of board minutes like interest of directors and necessity to refer the case to the shareholders. This is just to make your board minutes more realistic and up to the standard.

Best Regards