CS Pooja (Company Secretary) (305 Points)
16 December 2010Dear All,
Please clarify following.
Private Company with a Paid Up Share Capital is Rs. 2 Crores. Whether Sanction of the Central Government is required if this pvt company enters into contarct with public company (Paid up capital more than 1 Crore) and private companies (Paid Up Capital more or less than 1 Crore) in which directors are interested?
Regards,
CS Pooja
udit sharma
(Company Secretary)
(2303 Points)
Replied 16 December 2010
Hi...
1. Private Company having a paid up capital of Rs. 1 Crores or above and proposing to enter into a contract with a Public Company (having a paid up capital of less than Rs. 1 Crores) should obtain (though not mandatory as per the provisions of section 297) the previous consent of the Board of Directors. Such Private Company need not obtain the approval of the Central Government. The reason being the Board should have the knowledge of the Contracts in which the Company is entering, and which Directors of the Company are interested therein.
2. The other party which is a Public Company (having a paid up capital of less than Rs. 1 Crores) and proposing to enter into a contract with a private company in which any of its Director is a Director or member, needs to ontain the previous consent of the Board of Directors and no need to obtain the approval of the Central Government as the paid up capital of the Company is less than Rs. 1 Crores.
3. If your Company which is a Private Company having a paid up capital of Rs. 2 Crores proposes to enter into a contract with a Private Company (having a paid up capital of less than Rs. 1 Crores) in which any Director of the Company is a Director or member needs to obtain:
a) Previous consent of the Board of Directors which has to be accorded only at a duly convened Board Meeting and cant be accorded by way of a Circular Resolution,
b) Previous approval of the Central Government in E-form 24A since the paid up capital exceeds Rs. 1 Crores.
4. The other private Company also needs the consent of the Board of Directors but no approval of the Central Government has to be obtained as the paid up capital does not exceed the prescribed limits.
Hope am able to solve ur query....
God Bless
Udit Sharma
Jaideep
(Service)
(1368 Points)
Replied 16 December 2010
Section 297 is applicable to transaction between of companies. In the cited case CG approval is required.
Plz find attached file for more clarification.
Ajay Mishra
(Company Secretary)
(74337 Points)
Replied 16 December 2010
udit sharma
(Company Secretary)
(2303 Points)
Replied 16 December 2010
Dear Jaideep
The provisions of section 297 of the Companies Act, 1956 have to be complied with only in case of a Contract between two parties wherein one of the parties is a Private/Public Limited Company and the other party is any one of the following:
1. any Director of the Company,
2. any relative of any Director of the Company,
3. any firm in which any Director of the Company or his relative is a partner,
4. any partner of the firm in which any Director of the Company or his relative is a Partner,
5. any private Company in which any Director of the Company is a Director, or
6. any Private Company in which any Director of the Company is a member.
Since the case in question deals with a Contract between the Private Company on one hand and a Public Company on the other hand, the Private Company need not mandatorily comply with the provisions of section 297 as the same are not applicable in the said case. However, will be applicable for the other party which is a Public Limited Company and is proposing to enter into a transaction with a Private Company in which any of its Directors is interested.
God Bless
Udit Sharma
Jayashree S Iyer
(Company Secretary)
(3224 Points)
Replied 16 December 2010
Well said Udit.
Agree with the expert.
Jaideep
(Service)
(1368 Points)
Replied 16 December 2010
| Originally posted by : udit sharma | ||
 |
Since the case in question deals with a Contract between the Private Company on one hand and a Public Company on the other hand, the Private Company need not mandatorily comply with the provisions of section 297 as the same are not applicable in the said case. |
 |
Dear Udit,
As per my understanding, private company needs to comply with the provisions of the Companies Act, 1956.
Also find attach extracts of article for sec 297.
Plz correct me if I am wrong.
udit sharma
(Company Secretary)
(2303 Points)
Replied 16 December 2010
Dear Jaideep
Agreed that the provisions of section 297 are applicable to both Private Companies as well as Public Companies.
But the point i am trying to make here is that if your Company is a Private Company and it proposes to enter into a contract for sale,purchase or supply of goods, materials or services with a Public Company in which a Director of your Company is a Director or member, then the Private Company need not comply with the provisions of section 297 but the the said provisions shall have to be complied with by the other party,which is a Public Limited Company.
Regards
Rajeev kumar Nayak
(ACS)
(283 Points)
Replied 16 December 2010
Agree with Expert Udit.
As per Section 297 contract entered between private company and public company for sale purchase or supply of services, and paid up capital is Rs. 1 crore or more and fall within the provision of 297 , then private company need not to take CG approval, but Public Company is required to take CG approval.
If both are private company having paid up capital of Rs. 1 crore or more, then both Company is required to take CG approval.
further both are public company having paid up capital of Rs. 1 crore or more, then no company is required to take CG approval.
Thanks
Rajeev Nayak
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