Page 163 - DCOM106_COMPANY_LAW

Company Law

Notes holiday passage for children studying outside India or family staying abroad, leave travel
concession. These additional benefits shall be subject to the limits laid down in Schedule XIII.
The expression ‘effective capital’ shall mean the aggregate of the paid-up share capital (excluding
share application money or advances against shares); amount, if any, for the time being standing
to the credit of share premium account, reserves and surplus (excluding revaluation reserve);
long term loans and deposits repayable after one year (excluding working capital loans, overdrafts,
interest due on loans unless funded, bank guarantee, etc. and other short term arrangements) as
reduced by the aggregate of any investments (except in case of investments by an investment
company whose principal business is acquisition of shares, stock, debentures or other securities),
accumulated losses and preliminary expenses not written off.

Sitting Fee (s.310)

The sitting fee payable to a director for each meeting of the Board of Directors or a committee
thereof shall not exceed ceiling prescribed by the Central Government (presently, 5,000). Any
increase in the sitting fee payable to a director shall not require the prior approval of the Central
Govt. if it falls within the prescribed limits.

10.8 Disclosure

Disclosure of interest by directors, Section 299 provides as follows:
1. A director of a company who is in any way concerned or interested in a contract or
arrangement by or on behalf of the company must disclose such concern or interest at the
board meeting at which the contract is discussed. However if the director was not interested
in the contract at the date of the meeting, then he must disclose his interest at the next
board meeting held after he became interested.
2. However, if a director gives a general notice to the board that he is a director or member
of a specified company or firm and is to be regarded as interested in any contract which is
made with, it then this is a sufficient declaration or disclosure of interest. Such a general
notice must, however, be given once every financial year and that too at the board meeting.
3. Non-compliance by a director with the aforesaid requirements will render him liable to a
fine up to 50,000.
4. However, there is an exclusion clause. All contracts and arrangements between two
companies where the interest of a director or director of one company in the other does
not exceed a shareholding of two percent of the paid-up share capital of the other are
excluded from the provisions of s.299.
Section 299 is in accordance with the principle of law that an agent cannot put himself into a
position where his duty and his interest conflict.

10.8.1 Interested Directors not to Participate or Vote in Board’s
Proceedings

Section 300 provides as follows:
“An interested director must not participate in the discussions or exercise his vote on the particular
contract or arrangement in which he is interested. If he does vote, his vote shall be void, nor his
presence count for the purposes of quorum”.

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