PROCEDURE UNDER SECTION 297
In order to cut timelines in giving approval, the Ministry of Corporate affairs
has decided to simplify the procedures and to give approval online, if the proposed
contract has been approved by the shareholders by way of special
resolutions in a general meeting. Accordingly, the process of online approval of Central Government under section 297 of the Companies
Act, 1956 is likely to be implemented with effect from 24th September, 2011. Now the application will be made in a new e-form with the
prescribed fee as per the new procedure. The relevant information like terms of contract
and details of Board resolutions and special resolutions shall be captured in
the e-form. The e-form shall also be certified by the practicing professional
who shall specifically certify the correctness of the information and
declarations given by the company in the
e-form.
The company while seeking approval of the directors and shareholders in their meetings
shall specifically take approval to the effect that:
–
(i)
Proposed contract is competitive, at an arm’s length, without conflict of
interest and is not less advantageous to it as compared to similar contracts
with other parties.
(ii) The company has not made any default in repayment of any of
its debts (including public deposits) or debentures or interest payable thereon
and has filed its upto date Balance Sheets
and Annual Returns with the Registrar of Companies;
(iii)
The proposed contract is falling within the provisions of section 297 of the
Act and provisions of sections 198, 269, 309, 314 and 295 are not applicable in
the proposed contract.
(iv)
The company and its Directors have complied with the provisions of
sections 173, 287, 299, 300, 301 and other applicable provisions of the
Companies Act, 1956 with regard to the proposed contract.
The application will be processed online and approval of Central Government shall also be made available to the applicant company online on the basis of
declarations made by the company and certifications by the professionals given
in the e-form.
If any of the information or declaration given by the company or certificate given by the professional in the
e-form is found to be wrong, then the applicant company, its Directors and professional shall be liable for
penal action under section 297 and 628 of the Companies Act, 1956 in addition
to penal action prescribed in regulations of the respective professional
institutes.
It may be noted that the Ministry of Corporate Affairs has been receiving
representations form various stakeholders to simplify the approval processes under section 297 of the
Companies Act, 1956.
No comments:
Post a Comment