A listed company has taken interest free temporary loan from its directors. Disclosure in Caro point 3 is required as parties covered u/s 301?
No, the disclosur is not required.
Becasue the Section 301 is attracted only when the director is intrested in the contracts.
In your case the director has given the Interest free loan to the company.
Company will not give any money as interest to director.
So, director's will not get anything from this contract.
That's why director is not intersted. and section 301 is not applicable.
Ankur Shah (Practicing Company Secretary)
“Guru Gautam” Bungalow, Inside Parshwa Tower,
Nr. Shyamal Cross Road, 132ft. Ring Road,
Satellite, Ahmedabad – 15
Contact: + 91-9427633901
E-mail: ankurjewel @ gmail.com
Blog: csankur.blogspot.com
And a simple logic is that nobody in the world will offer the company interst free loan and at the temporary base.
And your director has given the loan. So, Section 301 is not applicable.
Ankur Shah (Practicing Company Secretary)
“Guru Gautam” Bungalow, Inside Parshwa Tower,
Nr. Shyamal Cross Road, 132ft. Ring Road,
Satellite, Ahmedabad – 15
Contact: + 91-9427633901
E-mail: ankurjewel @ gmail.com
Blog: csankur.blogspot.com
Komal Gupta
(Company Secretary)
(57 Points)
Replied 12 September 2009
Dear Mr. Ankur Shah,
Though the transation does not attract section 297, but section 299 is applicable. Since, the funds floated from Director to the Company, the transaction took place, and it needs to be registered in the register under section 301.
Tks
Miss Komal,
Section 299 uses the word intrested everywhere and in this case Director is not interested.
and if you want to go into detail then checkout the heading of Section 299 which is as follows:
Section 299 DISCLOSURE OF INTERESTS BY DIRECTOR
And If you still not agree with me then provide my company the interest free loan.
and then you will realise that director is not intersted in this case.
If you need further clarification than contact me.
Ankur Shah (Practicing Company Secretary)
“Guru Gautam” Bungalow, Inside Parshwa Tower,
Nr. Shyamal Cross Road, 132ft. Ring Road,
Satellite, Ahmedabad – 15
Contact: + 91-9427633901
E-mail: ankurjewel @ gmail.com
Blog: csankur.blogspot.com
Komal Gupta
(Company Secretary)
(57 Points)
Replied 14 September 2009
Dear Mr. Ankur Shah,
Though I agree that in present case, Directors are not benefitted, but the section says interest of Directors and it covers all transactions and arrangements, whether it is benefitting the Company or not.
Though section 297 is not applicable to the present case, but if we refer that also, it covers sale and purchase of goods. Thereby, whether the transaction flows from Directors to Company or from Company to Directors, section 299, disclosure is required.
Other veiws are solicited
Regards
I would suggest you to read the Rules of Interpretation of Statutes.
Any provision of Act, will be interpretaed with the help of following 4 Questions:
(1) What was the common Law before making of the Act?
(2) What was the mischief and defect for which the Common Law did not provide?
(3) What remedy the Legislator had resolved and appointed to cure the disease of the commonwealth?
(4) The true reason of the remedy?
Now, Applying the 4th rule we can realise that Section 297 & 299 made to prevent the directors from enriching themselves out of the Shareholders money. i.e. entering into contract to supply the goods/service to company above the prevailling market rates.
And the remedy in the case of section 297 or 299 would be that directors should have to get the clean cheat from the other board members before entering into such contract and company shall have to maintain the records of that contract i.e. Register U/S 301.
Now, In the present case, the director doesn't enrich himself by way of any means/mode.
So, that neither Section 297 or 299 will be applicable to the company.
If you need further clarification than contact me
Ankur Shah (Practicing Company Secretary)
“Guru Gautam” Bungalow, Inside Parshwa Tower,
Nr. Shyamal Cross Road, 132ft. Ring Road,
Satellite, Ahmedabad – 15
Contact: + 91-9427633901
E-mail: ankurjewel @ gmail.com
Blog: csankur.blogspot.com
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