Agreement u/s 297
Smita Katake
(Querist) 05 March 2011
This query is : Resolved
Dear All,
I am in need of an agreement for purchase of goods and sales, u/s 297 of the Companies Act, 1956.
Can anybody provide me draft copy of the agreement.
Regards
A V Vishal
(Expert) 05 March 2011
Procedure to enter into a contract in which any of the directors of the company are interested or concerned
1. Convene Board Meeting after giving notice to all the directors [Section 286] to discuss besides others the following matters.
· Place the terms of contract for consideration.
· Pass a [resolution] approving the contract.
2. Inform the Stock Exchange with which shares of the company are listed about the date of this meeting prior to the board meeting. [Clause 19 of the Standard Listing Agreement]
3.
Inform the said Stock Exchange within 15 minutes of the board Meeting, of the outcome of the meeting by letter or fax.
4.
The interested directors have to disclose the nature of their interest or concern, as per (Section 297) or (Section 299).
5.
Obtain the previous approval of the concerned Regional Director for entering into such contract where the paid-up share capital of the company is not less than rupees one crore. [Proviso to Section 297(1)]
6.
Apply in (e-form No. 24A) along with the following as attachments:-
(1) Certified true copy of the agreement containing particulars of the contract to be entered into:
(2) Certified true copy of the Board Resolution approving the contract and proceeding of the meeting:
(3) Detailed application containing details relating to whether the terms of the contract conform to the prevailing market rates, whether the company has entered into any contract with any other person is respect of sale, purchase or supply of the same kinds of goods, materials or services and whether the terms of such contracts are similar to the terms of the proposed contract. Also give reasons for variation in rates if any.
(4) Certified true copy of Memorandum and Articles of Association of the Company.
(5) Certified true copy of Audited Balance for the last 3 years.
7.
Make the payment of requisite fee prescribed by Companies (Fees on Applications) Rules, 1999
8.
Fees can be paid through Credit Card / by cash / by cheque in favour of “MCA Collection Account ICICI Bank” at the prescribed rates. (Fee Calculator)
9.
Necessary entries in the register to be kept for this purpose in accordance with Section 301 have to be made and the register has to be signed by all the directors present in the next board meeting.
NOTE
The provisions of sections 297, 299 and 300 of the Companies Act are founded on the underlying principle of fiduciary relationship of directors with the company. The object underlying the three sections is that if a director is interested in a contract or arrangement with the company, the other directors must have knowledge of it and they should be enabled to take an unbiased decision which would be in the interest of the company and the terms of the contract or arrangement should be fair and reasonable and not solely beneficial to the interested director.
The contracts to which the provisions of the section apply are the contracts:
(a) for the sale, purchase or supply of any goods, materials or services;
(b) for underwriting the subscription of any shares in, or debentures of, the company.
Section 297 applies to all types of companies. The section applies to public as well as private companies. But it does not apply to Government companies in respect of contracts entered into by it with any other Government company. It also does not apply to foreign companies where they are contracting with a company incorporated in India, because a foreign company is not a 'company' for the purposes of the Companies Act although such a company is a body corporate. Section 297 applies only to companies and not bodies corporate. However, it does not apply to the contracts where both the parties to the contract are public companies. The section would, thus, apply where one of the two companies being parties to the contract is a private company and the other is a public company, but in such a case, it will have to be complied with by the public company.
According to the proviso to sub-section (1) of section 297, in the case of a company having a paid-up share capital of not less than rupees one crore, no contract falling within the purview of sub-section (1) of section 297 shall be entered into except with the previous approval of the Central Government. The proviso, as noted earlier, was inserted by the Companies (Amendment) Act, 1974, with effect from 1 February, 1975. In the original Amendment Bill, 1972, the amount of the paid-up capital proposed was Rs. 25 lakhs.
EXEMPTIONClause (a) of sub-section (2) exempts from sub-section (1) any contract for -
(i) the purchase of the goods and materials from the company; and
(ii) the sale of goods and materials to the company,
by any of the parties specified in sub-section (1) if such purchase or sale transaction is for cash and at prevailing market price.
clause (b) of sub-section (2), any contract or contracts between the company on one side and any director, relative, firm, partner or private company on the other for sale, purchase or supply of any goods, materials or services in which either the company or the director, relative, firm, partner or private company as the case may be, regularly trades or does business, shall not attract the provisions of sub-section (1), including the proviso, if the value of the goods/materials or the cost of the services does not exceed Rs. 5,000 in the aggregate in any year comprised in the period of the contract or contracts.
Clause (c) of sub-section (2) applies to the provision of banking services, or insurance services. It provides that in the case of a banking company or an insurance company 'any transaction' in the ordinary course of business of such company with any director, relative, firm, partner or private company shall not be affected by the provisions of sub-section (1).
A V Vishal
(Expert) 05 March 2011
Procedure to enter into a contract in which any of the directors of the company are interested or concerned
1. Convene Board Meeting after giving notice to all the directors [Section 286] to discuss besides others the following matters.
· Place the terms of contract for consideration.
· Pass a [resolution] approving the contract.
2. Inform the Stock Exchange with which shares of the company are listed about the date of this meeting prior to the board meeting. [Clause 19 of the Standard Listing Agreement]
3.
Inform the said Stock Exchange within 15 minutes of the board Meeting, of the outcome of the meeting by letter or fax.
4.
The interested directors have to disclose the nature of their interest or concern, as per (Section 297) or (Section 299).
5.
Obtain the previous approval of the concerned Regional Director for entering into such contract where the paid-up share capital of the company is not less than rupees one crore. [Proviso to Section 297(1)]
6.
Apply in (e-form No. 24A) along with the following as attachments:-
(1) Certified true copy of the agreement containing particulars of the contract to be entered into:
(2) Certified true copy of the Board Resolution approving the contract and proceeding of the meeting:
(3) Detailed application containing details relating to whether the terms of the contract conform to the prevailing market rates, whether the company has entered into any contract with any other person is respect of sale, purchase or supply of the same kinds of goods, materials or services and whether the terms of such contracts are similar to the terms of the proposed contract. Also give reasons for variation in rates if any.
(4) Certified true copy of Memorandum and Articles of Association of the Company.
(5) Certified true copy of Audited Balance for the last 3 years.
7.
Make the payment of requisite fee prescribed by Companies (Fees on Applications) Rules, 1999
8.
Fees can be paid through Credit Card / by cash / by cheque in favour of “MCA Collection Account ICICI Bank” at the prescribed rates. (Fee Calculator)
9.
Necessary entries in the register to be kept for this purpose in accordance with Section 301 have to be made and the register has to be signed by all the directors present in the next board meeting.
NOTE
The provisions of sections 297, 299 and 300 of the Companies Act are founded on the underlying principle of fiduciary relationship of directors with the company. The object underlying the three sections is that if a director is interested in a contract or arrangement with the company, the other directors must have knowledge of it and they should be enabled to take an unbiased decision which would be in the interest of the company and the terms of the contract or arrangement should be fair and reasonable and not solely beneficial to the interested director.
The contracts to which the provisions of the section apply are the contracts:
(a) for the sale, purchase or supply of any goods, materials or services;
(b) for underwriting the subscription of any shares in, or debentures of, the company.
Section 297 applies to all types of companies. The section applies to public as well as private companies. But it does not apply to Government companies in respect of contracts entered into by it with any other Government company. It also does not apply to foreign companies where they are contracting with a company incorporated in India, because a foreign company is not a 'company' for the purposes of the Companies Act although such a company is a body corporate. Section 297 applies only to companies and not bodies corporate. However, it does not apply to the contracts where both the parties to the contract are public companies. The section would, thus, apply where one of the two companies being parties to the contract is a private company and the other is a public company, but in such a case, it will have to be complied with by the public company.
According to the proviso to sub-section (1) of section 297, in the case of a company having a paid-up share capital of not less than rupees one crore, no contract falling within the purview of sub-section (1) of section 297 shall be entered into except with the previous approval of the Central Government. The proviso, as noted earlier, was inserted by the Companies (Amendment) Act, 1974, with effect from 1 February, 1975. In the original Amendment Bill, 1972, the amount of the paid-up capital proposed was Rs. 25 lakhs.
EXEMPTIONClause (a) of sub-section (2) exempts from sub-section (1) any contract for -
(i) the purchase of the goods and materials from the company; and
(ii) the sale of goods and materials to the company,
by any of the parties specified in sub-section (1) if such purchase or sale transaction is for cash and at prevailing market price.
clause (b) of sub-section (2), any contract or contracts between the company on one side and any director, relative, firm, partner or private company on the other for sale, purchase or supply of any goods, materials or services in which either the company or the director, relative, firm, partner or private company as the case may be, regularly trades or does business, shall not attract the provisions of sub-section (1), including the proviso, if the value of the goods/materials or the cost of the services does not exceed Rs. 5,000 in the aggregate in any year comprised in the period of the contract or contracts.
Clause (c) of sub-section (2) applies to the provision of banking services, or insurance services. It provides that in the case of a banking company or an insurance company 'any transaction' in the ordinary course of business of such company with any director, relative, firm, partner or private company shall not be affected by the provisions of sub-section (1).
A V Vishal
(Expert) 05 March 2011
YOU CAN USE ANY AVAILABLE STANDARD AGREEMENT FOR PURCHASE/SALE FOR GOODS & SERVICES AND MAKE APPROPRIATE CHANGES
Ajay Bansal
(Expert) 05 March 2011
You might be satishfied with aforesaid.
