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If the circumstances are of urgent necessity the prior approval of the Board is not required but the consent should be obtained within three months by a resolution passed in the board meeting.
But where a company requires the previous approval of central government this relaxation shall not apply. or more are required to obtain prior approval from the Central Government (power delegated to the Regional Director) for entering into contracts covered under section 297. 24 of the companies’ general rules and forms along with a copy of board resolution and copy of agreement to be entered into should be filed. 394AA would be enough and no separate approval under section 297 would be required.
Applies to: · All companies whether public or private · Contract for underwriting subscription of any shares in or debentures of the company · Oral Contracts, if it can be proved by circumstantial evidence · Contract for sale, purchase, supply of any goods, materials or services in which a director or any person connected with a director in any ways mentioned in sub section (1) of Section 297 is interested It does not apply to: · Giving or taking of loan · Contract in respect of immovable goods · Contracts between two public companies · Contract for employment of a director or managing director or whole-time director · Contract for employment of relative of a director · Contract entered into by the company with a dealer on a principal to principal basis · Professional service of the nature given by firms of solicitors and advocates etc.
· Indirect interest of directors as provided under section 299 · Hiring of office premises on rent (as the transaction is an immovable property) · A government company in respect of contracts entered into by it with another government company · Any contract for the sale, purchase or supply of goods, materials or services in which: a). Section 297 mandates to obtain the prior consent of the Board of Directors for contracts (as mentioned above) in which the directors are interested.
Also, if the Central Government’s approval is required, failure to obtain the same would render the transaction void.
Every director who is directly or indirectly interested in the proposed contract, should make a disclosure regarding his interest in form no.
In the case of a proposed contract or arrangement, the disclosure is required to be made by a director under sub-sec.
(1) shall be made at the meeting of the board at which the question of entry into the contract or arrangement is first taken into consideration, or if the director was not, at the date of the meeting, concerned or interested in the proposed contract or arrangement, at the first meeting of the Board held after which he becomes so concerned or interested.
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