Shreya Shah (Company Secretary) 05 August 2008

Applicability of Section 297

Our company has entered into a rent agreement with one of the Directors of the Company say Mr. A, for using his premises for the purposes of the Company. The paid up capital of the company at the time of entering into the said rent agreement was less than Rs. One crore.

Subsequently, the paid up capital of the Company was increased to Rs. 15 Crores and the rent agreement is still in existence.

As per the provisions of Section 297 (1) (b) of the Companies Act, 1956, “In the case of the Company having a paid –up share capital of not less than rupees One Crore, no such contract shall be entered into except with the previous approval of the Central Government.”

Now my query is whether we need to apply to the Central Government for obtaining approval for the transaction as mentioned above after the increase of the paid-up capital to Rs. 15 Crores??????

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4 Replies

Dhrumil (CS Professtion) 05 August 2008

please check the ministry circular, the rent of property out side the perview of section 297.

Source: Chartred Secretary Oct 1990(vol 20) Page 877

Shubhangi Patil (Management Trainee) 05 August 2008

I want to Knpw:

If company is jointly holding shares with individuals as first holder than is it necessary to file Form -22B of Beneficial Interest with ROC.

Dhrumil (CS Professtion) 06 August 2008

the words of the section 187C refers declaration to be given by person who does not hold benificial interest in the shares thefore it is not required to filed 22B

Shreya Shah (Company Secretary) 06 August 2008

Dear All,

What if the company is paying rent on car purchased by a Director of the Company??? Does the abovementioned provisions under Section 297 apply in this case???