Section 297 of the Companies Act, 2013
Section 297 of the Companies Act, 2013 deals with Contracts which need approval by the Board of Directors regarding transactions by a company with its directors or related parties.
🔹 Section 297 – Contract Relating to Sale, Purchase, or Supply of Goods, Materials, or Services to a Director, etc.
✅ Key Provisions:
📌 1. Requirement of Board Approval:
A company cannot enter into a contract or arrangement with its directors, or their relatives, or any firm or company in which they are interested, for the:
Sale,
Purchase,
Supply of any goods or materials, or
Provision of any services,
unless the contract or arrangement is approved by the Board of Directors.
📌 2. Scope:
Applies to contracts between:
The company and its director(s),
Relatives of directors,
Firms or companies in which such directors or their relatives have an interest.
The contract or arrangement must be related to:
Sale or purchase of goods/materials,
Supply of goods/materials,
Rendering or receiving of services.
📌 3. Effect of Non-Compliance:
If such a contract is entered without Board approval, the contract can be declared voidable or void depending on circumstances and may attract penalties.
📌 4. Related Sections:
Section 188 (related party transactions),
Section 184 (disclosure of interest by directors),
Section 185 (loan to directors).
📝 Objective:
To ensure transparency and fairness in transactions involving directors and their related parties.
To prevent conflict of interest and misuse of company assets.
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