Shabnam Siddiqui (Company Secretary) (152 Points)
13 May 2013Does renting a car from MD to a public company, in which he is a MD, attract section 297? Since in the Act, definition of Services has not been provided. And moreover, it is not the general business of MD to rent a car to anyone.
An early response shall be appreciated.
Thanks
Devendra
(Chartered Accountant)
(4775 Points)
Replied 13 May 2013
According to Section 297 of the Companies Act, 1956, the board's consent is to be obtained. If the paid-up capital is Rs. One crore or more, then the previous approval is also to be obtained where a Director of the Company wants to enter into a contract with the company for the sale, purchase or supply of goods or services.
Therefore, in the above case the said Managing Director will have to follow the above mentioned procedure for providing cars on rent to the Company.
Regards,
Devendra Kulkarni
priti
(consultant)
(37 Points)
Replied 13 May 2013
Yes , you need to obtain 297 approval ,it is a services he is providing to company no matter it is his general business or not
Manish Mehra
(Associate Company Secretary)
(47 Points)
Replied 13 May 2013
Hi all,
Reply to Ms. Shabnam's query: You are right Ms shabnam, renting a car from MD to company is not a normal course of business for Director or for the company. Section 297 applies on such services which falls under business of companies.
Therefore, Section 297 will not be applicable instead section 299 and 301 will be applicable in such transaction.
Reply to Ms. Priyanka's query: Allotting car to Director from Company, generally, will be included in perquisites and forms a part of salary of Director.
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