Page 165 - DCOM106_COMPANY_LAW

Company Law

Notes 5. If default is made in complying with the above provisions of s.301, then the company, and
every officer of the company who is in default, shall, in respect of each default, be punishable
with fine which may extend to 5000.
6. The above register shall be kept at the registered office of the company, and it shall be
open to inspection. Extracts may be taken from the register and any member of the company
may demand copies thereof. The provisions of s.163 which apply to the register of members
shall apply to the register in which directors are interested.

Task The total strength of the Board of directors of a company is ten. How many directors
are liable to retire by rotation at the next annual general meeting? [Hint: Three] (s. 255,256)

10.8.3 Disclosure of Director’s Interest in Contract Appointing Manager,
or Managing Director

Section 302 states that where a company appoints or varies the terms of appointment of a
manager, managing director, or whole-time director, and any director is directly or indirectly
interested or concerned in the matter, then an abstract of the matter and of the director’s interest
therein should be circulated by the company to its members within 21 days of the date of the
contract or its variation. These contracts must be kept at the registered office of the company,
and must be available for inspection by the members. If the appointment or variation is made
by a resolution of the board, the above provisions will apply to the same.
If default is made in complying with these provisions, then the company, and every officer of
the company who is in default, shall be punishable with fine which may extend to 10,000.

Further, all contracts entered into by a company for the appointment of a manager, managing
director shall be kept at the registered office of the company and shall be open to the inspection
of the members of the company. Extracts may be taken from the register and copies thereof may
be demanded by any member. The provisions of s.163, which applies to the register of members
become applicable here also.
Summary of provision of Section 297 with respect to interested directors:
Particulars Persons in which director is said to Approvals required
be interested
Contracts with 1. Director or relative 1. Approval of the board.
the company 2. A firm in which a director or his 2. In case the PUC of the
relative is a partner. company is 1 crore or more,
3. Any other partner in such a firm then approval of the board
4. A private company of which the and prior approval of the
director is a director or a central government.
member.

Example: R is the managing director of a public company with a paid up capital of
200 lac. He is also a partner of the firm in which the other partners are his wife and two sons.
The company proposes to enter into a contract with the firm for the sale of its products of the
value of 5 lac on credit.
As per s.297 such a contract can be entered only if (i) the consent of board of directors is obtained,
and (ii) the previous approval of the central government is obtained (since the paid up capital is
more than 1 crore).

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