Board’s powers and restrictions

Companies Act – Board’s powers and restrictions thereon

Section 291. General Powers of Board.
(1) Subject to the provisions of this Act, the Board of directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do:
Provided that the Board shall not exercise any power or do any act or thing which is directed or required, whether by this or any other Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting:
Provided further that in exercising any such power or doing any such act or thing, the Board shall be subject to the provisions contained in that behalf in this or any other Act, or in the memorandum or articles of the company, or in any regulations not inconsistent therewith and duly made there under, including regulation made by the company in general meeting.
(2) No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made.
292. Certain powers to be exercised by Board only at meeting.
(1) The Board of directors of a company shall exercise the following powers on behalf of the company, and it shall do so only by means of resolutions passed at meetings of the Board –
(a) the power to make calls on shareholders in respect of money unpaid on their shares;
(b) the power to issue debentures;
(c) the power to borrow moneys otherwise than on debentures;
(d) the power to invest the funds of the company; and
(e) the power to make loans:
1[Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of directors, the managing director, the managing agent,secretaries and treasurers, the manager or any other principal officer of the company or in the case of a branch office of the company, a principal officer of the branch office, the powersspecified in clauses (c), (d) and (e) to the extent specified in sub-sections (2), (3) and (4) respectively, on such conditions as the Board may prescribe:
Provided further that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdrawal by cheque, draft, order or otherwise, or the placing of moneys on deposit by a banking company with another banking company on such conditions as the Board may prescribe, shall not be deemed to be a borrowing of moneys or, as the case may be, a making of loans by a banking company within the meaning of this section.
Explanation I. Nothing in clause (c) of sub-section (1) shall apply to borrowings by a banking company from other banking companies or from the Reserve Bank of India, the State Bank of India or any other banks established by or under any Act.
Explanation II.-In respect of dealings between a company and its bankers, the exercise by the company of the power specified in clause (c) of sub-section (1) shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day to day operation onoverdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of.]

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1. Subs. by Act 65 of 1960, a. 98, for the proviso.

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(2) Every resolution delegating the power referred to in clause (c) of sub-section (1) shall specify the total amount 1[outstanding at any one time] up to which moneys may be borrowed by the delegate.
(3) Every resolution delegating the power referred to in clause (d) of subsection (1) shall specify the total amount up to which the funds may be invested, and the nature of the investments which may be made, by the delegate.
(4) Every resolution delegating the power referred to in clause (e) of sub-section (1) shall specify the total amount up to which loans may be made by the delegate, the purposes for which the loans may be made, and the maximum amount of loans which may be made for each such purpose in individual cases.
(5) Nothing in this section shall be deemed to affect the right of the company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified in subsection (1).

293. Restrictions on powers of Board.
(1) The Board of directors of a public company, or of a private company which is a subsidiary of a public company, shall not, except with the consent of such public company or subsidiary in general meeting –
(a) sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the company, or where the company owns more than one undertaking, of the whole, or substantially the whole, of any such undertaking;
(b) remit, or give time for the re-payment of, any debt due by a director 2[except in the case of renewal or continuance of an advance made by a banking company to itsdirector in the ordinary course of business];
(c) invest, otherwise than in trust securities, 3 [the amount of compensation received by the company in respect of the compulsory acquisition, after the commencement of this Act], of any such undertaking as is referred to in clause (a),or of any premises or properties used for any such undertaking and without which it cannot be carried on or can be carried on only with difficulty or only after a considerable time;

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1. Ins. by Act 65 of 1960, s. 98.
2. Ins. by s. 99, ibid.
3. Subs. by s. 99, ibid., for certain words.

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(d) borrow moneys after the commencement of this Act, where the moneys to be borrowed, together with the moneys already borrowed by the company (apart from temporary loans obtained from the company’s bankers in the ordinary course of business), will exceed the aggregate of the paid-up capital of the company and its free reserves, that is tosay, reserves not set apart for any specific purpose; or
(e) contribute, after the commencement of this Act, to charitable andother funds not directly relating to the business of the company or the welfare of its employees,any amounts the aggregate of which will, in any financial year, exceed 1[fifty thousand rupees] or five per cent. of its average net profits as determined in accordance with the provisions of sections 349 and 350 during the three financial years immediately preceding, whichever is greater.
2[Explanation I. Every resolution passed by the company in generalmeeting in relation to the exercise of the power referred to in clause (d) or in clause (e) shall specify the total amount up to which moneys may be borrowed by the Board of directors underclause (d) or as the case may be, the total amount which may be contributed to charitable and other funds in any financial year under clause (e).
Explanation II.-The expression “temporary loans” in clause (d)means loans repayable on demand or within six months from the date of the loan such as short term, cash credit arrangements, the discounting of bills and the issue of other short term loansof a seasonal character, but does not include loans raised for the purpose of financing expenditure of a capital nature.]
Explanation 3[III].-Where a portion of a financial year of he company falls before the commencement of this Act, and a portion falls after such commencement, the latter portion shall be deemed to be financial year within the meaning, and for the purposes, of clause (e).

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1. Subs. by Act 46 of 1977, s.6, for the words “twenty-five thousand rupees”.
2. Ins. by Act 65 of 1960, s. 99.
3. Former Explanation I re-numbered as Explanation III by s. 99, ibid.

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(2) Nothing contained in clause (a) of sub-section (1) shall affect –
(a) the title of a buyer or other person who buys or takes a lease of any such undertaking as is referred to in that clause, in good faith and after exercising due careand caution: or
(b) the selling or leasing of any property of the company where the ordinary business of the company consists of, or comprises, such selling or leasing.
(3) Any resolution passed by the company permitting any transaction such as is referred to in clause (a) of sub-section(1) may attach such conditions to the permission as may be specified in the resolution, including conditions regarding the use, disposal or investment of thesale proceeds which may result from the transaction :
Provided that this sub-section shall not be deemed to authorise the effect any reduction in its capital except in accordance with the provisions contained in that behalf in this Act.
(4) The acceptance by a banking company, in the ordinary course of its business, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise, shall not be deemed to be a borrowing of moneys by the banking company within the meaning of clause (d) of sub-section (1).
(5) No debt incurred by the company in excess of the limit imposed by clause (d) of sub-section (1) shall be valid or effectual, unless the lender proves that he advanced the loan in good faith and without knowledge that the limit imposed by that clause had been exceeded.

Political contributions

293A. Prohibitions and restrictions regarding political contributions.
(1) Notwithstanding anything contained in any other provision of this Act –
(a) no Government company; and
(b) no other company which has been in existence for less than three financial years, shall contribute any amount or amounts, directly or indirectly –
(i) to any political party; or
(ii) for any political purpose to any person.
(2) A company, not being a company referred to in clause (a) or clause (b) of sub-section (1), may contribute any amount or amounts, directly or indirectly –
(a) to any political party, or
(b) for any political purpose to any person:
Provided that the amount or, as the case may be, the aggregate of the amounts which may be so contributed by a company in any financial year shall not exceed five per cent. of its average net profits determined in accordance with the provisions of sections 349 and 350 during the three immediately preceding financial years.
Explanation.-Where a portion of a financial year of the company falls before, the commencement of the Companies (Amendment) Act, 1985, and a portion falls after such commencement, the latter portion shall be deemed to be a financial year within the meaning, and for the purposes, of this sub-section:
Provided further that no such contribution shall be made by a company unless a resolution authorising the making of such contribution is passed at a meeting of the Board of Directors and such resolution shall, subject to the other provisions of this section,be deemed to be justification in law for the making and the acceptance of the contribution authorised by it.
(3) Without prejudice to the generality of the provisions of sub-sections (1) and (2) –
(a) a donation or subscription or payment caused to be given by a company on its behalf or on its account to a person who, to its knowledge, is carrying on any activity which, at the time at which such donation or subscription or payment was given or made, can reasonably be regarded as likely to effect public support for a political party shall also be deemed to be contribution of the amount of such donation, subscription or payment to such person for a political purpose;
(b) the amount of expenditure incurred, directly or indirectly, by a company on advertisement in any publication (being a publication in the nature of a souvenir,brochure, tract pamphlet or the like) by or on behalf of a political party or for its advantage shall also be deemed –
(i) where such publication is by or on behalf of a political party, to be a contribution of such amount to such political party, and
(ii) where such publication is not by or on behalf of but for the advantage of a political party, to be a contribution for a political purpose to the person publishing it.
(4) Every company shall disclose in its profit and loss account any amount or amounts contributed by it to any political party or for any political purpose to any person during the financial year to which that account relates, giving particulars of the total amount contributed and the name of the party or person to which or to whom such amount has been contributed.
(5) If a company makes any contribution in contravention of the provisions of this section –
(a) the company shall be punishable with fine which may extend to three times the amount so contributed; and
(b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.]

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1. Subs. by Act 35 of 1985, s.2

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293B. Power of Board and other persons to make contributions to the National Defence Fund, etc.
(1) The Board of directors of any company or any person or authority exercising the powers of the Board of directors of a company, or of the company in general meeting may, notwithstanding anything contained in sections 293 and 293A or any other provision of this Act or in the memorandum, articles or any other instrument relating to the company, contribute such amount as it thinks fit to the National Defence Fund or any other Fund approved by the Central Government for the purpose of national defence.
(2) Every company shall disclose in its profits and loss account the total amount or amounts contributed by it to the Fund referred to in sub-section (1) during the financial year to which the amount relates.]

Appointment of sole selling agents

294. Appointment of sole selling agents to require approval of company in general meeting.
(1) No company shall, after the commencement of’ the Companies (Amendment) Act 1960 (65 of 1960), appoint a sole selling agent for any area for a term exceeding five years at a time:
Provided that nothing in this sub-section shall be deemed to prohibit the re-appointment, or the extension of the term of office, of any sole selling agent by further periods not exceeding five years on each occasion.
(2) After the commencement of the Companies (Amendment) Act, 1960 (65 of 1960), the Board of directors of a company shall not appoint a sole selling agent for any area except subject to tie condition that the appointment shall cease to be valid if it is not approved by thecompany in the first general meeting held after the date on which the appointment is made.
(2A) If the company in general meeting as aforesaid disapproves the appointment, it shall cease to be valid with effect from the date of that general meeting.]
(3) Where before the commencement of this Act, a company has appointed a sole selling agent for any area for a period of not less than five years, the appointment shall be placed before the company in general meeting within a period of six months from such commencement; and the company in general meeting may, by resolution –

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1. Ins. by Act 80 of 1971. s. 2 (w.e.f. 3-12-1971)
2. Subs. by Act 65 of 1960, s. 101, for sub-sections (1) and (2).

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(a) if the appointment was made on or after the 15th day of February, 1955, terminate the appointment forthwith or with effect from such later date as may be specified in the resolution; and
(b) if the appointment was made before the date specified in clause (a), terminate the appointment with effect from such date as may be specified in the resolution, not being earlier than five years from the date on which the appointment was made, or the expiry of one year from the commencement of this Act, whichever is later.
(4) Notwithstanding anything contained in the foregoing pro visions of this section –
(a) where at an time during the period beginning on the 1st day of April, 1956 and ending on the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) a managing agent has ceased to hold office as such and has been appointed as the sole selling agent of the company whose managing agent he was, the sole selling agency agreement whether taken in his own name or in association with, or in the name of, any other person for his benefit or on his own account, shall unless approved by the Central Government within a period of six months from such commencement, become void and inoperative and the appointment as sole selling agent shall, unless it has terminated by efflux of time, come to an end on the expiry of that period;
(b) no managing agent –
(i) who has ceased to hold office as such before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) but has not been appointed beforesuch commencement as the sole selling agent of the company whose managing agent he was, or
(ii) who has ceased to hold office as such after the commencementof the Companies (Amendment) Act, 1960, (63 of 1960.) shall be appointed after such commencement during a period of three company whose managing agent he was except with the approval of the Central Government obtained in this behalf.

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1. Ins. by Act 65 of 1960, s. 101,

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(5) (a) Where a company has a sole selling agent (by whatever name called) for any are and it appears to the Central Government that there is good reason so to do, the Central Government may require the company to furnish to it such information regarding the terms and conditions of the appointment of the sole selling agent as it considers necessary for the purpose of determining whether or not such terms and conditions are prejudicial to the interestsof the company;
(b) if the company refuses or neglects to furnish any such information, the Central Government may appoint a suitable person on to investigate and report on the terms and conditions of appointment of the sole selling agent;
(c) if after perusal of the information furnished by the company or, as the case may be, the report submitted by the person appointed under clause (b), the Central Government is of the opinion that the terms and conditions of appointment of the sole sellingagent are prejudicial to the interests of the company, the Central Government may, by order, make such variations in those terms and conditions as would in its opinion make them no longer prejudicial to the interests of the company;
(d) as from such date as may be specified by the Central Government in the order aforesaid, the appointment of the sole selling agent shall be regulated by the terms and conditions as varied by the Central Government.
(6) (a) Where a company has more selling agents than one (by whatever name called) in any area or areas and it appears to the Central Government that there is good reason so to do, the Central Government may require the company to furnish to it such information regarding the terms and conditions of appointment of all the selling agents as it considers necessary for the purpose of determining whether any of those selling agents should be declared to be thesole selling agent for such area or any of such areas;
(b) if the company refuses or neglects to furnish any such information, the Central Government may appoint a suitable person to investigate and report on the terms and conditions of appointment of all the selling agents;
(c) if after perusal of the information furnished by the company or, as the case may be, the report submitted by the person appointed under clause (b), the Central Government is of the opinion that having regard to the terms and conditions of appointment of any of the selling agents and to any other relevant factors, that selling agent is to all intents and purposes the sole selling agent for such area, although there may be one or more other selling agents of the company operating in that area, the Central Government may by order declare that selling agent to be the sole selling agent of the company for that area with effect from such date as may be specified in the order and may make suitable variations in such of the terms andconditions of appointment of that selling agent as are in the opinion of the Central Government prejudicial to the interests of the company;
(d) as from the date specified in clause (c)the appointment of the sellingagent declared to be the sole selling agent shall be regulated by the terms and conditions asvaried by the Central Government.
(7) It shall be the duty of the company –
(a) to produce to the person appointed under clause (b) of sub-section (5) or clause (b) of sub-section (6), all books and papers of, or relating to, the company which are inits custody or power; and
(b) otherwise to give to that person all assistance in connection with theinvestigation which the company is reasonably able to give.
(8) If a company refuses or neglects –
(a) to furnish the information required by the Central Government under clause (a) of sub-section (5) or clause (a) of sub-section (6), or
(b) to produce to the person appointed under clause (b) of sub-section (5) or clause (b) of sub-section (6) any books and papers which are in its custody or power or otherwise to give to that person any assistance which it is reasonably able to give, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees and with a further fine of not less than fifty rupees for every day after the first during which such refusal or neglect continues.]

Prohibition of payment of compensation to sole selling agents for loss of office in certain cases

294A. Prohibition of payment of compensation to sole selling agents for loss of office in certain cases.
(1) A company shall not pay or be liable to pay to its sole selling agent any compensation for the loss of his office in the following cases –
(a) where the appointment of the sole selling agent ceases to be valid by virtue of sub-section (2A) of section 294;
(b) where the sole selling agent resigns his office in view of the reconstruction of the company or of its amalgamation with any other body corporate or bodies corporate and is appointed as the sole selling agent of the reconstructed company or of the body corporate resulting from the amalgamation;
(c) where the sole selling agent resigns his office, otherwise than on the reconstruction of, the company or its amalgamation as aforesaid;
(d) where the sole selling agent has been guilty of fraud or breach of trust in relation to, or of gross negligence in, the conduct of his duty as the sole selling agent;
(e) where the sole selling agent has instigated, or has taken part directly or indirectly in bringing about, the termination of the sole selling agency.
(2) The compensation which may be paid by a company to its sole selling agent for loss of office shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term, or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which his office ceased or was terminated, or where he held his office for a lesser period than three years, during such period.]

294AA. Power of Central Government to prohibit the appointment of sole selling agents in certain cases.

(1) Where the Central Government is of opinion that the demand for goods of any category, to be specified by that Government, is substantially in excess of the production or supply of such goods and that the services of sole selling agents will not be necessary to create a market for such goods, the Central Government may, by notification in the Official Gazette, declare that sole selling agents shall not be appointed by a company for the sale of such goods for such period as may be specified in the declaration.

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1. Ins. by Act 31 of 1965, s. 40 (w.e.f. 15-10-1965).
2. Ins. by Act 41 of 1974, s. 27 (w.e.f. 1-2-1975).

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(2) No company shall appoint any individual, firm or body corporate, who or which has a substantial interest in the company, as sole selling agent of that company unless such appointment has been previously approved by the Central Government.
(3) No company having a paid-up share capital of rupees fifty lakhs or more shall appoint a sole selling agent except with the consent of the company accorded by a special resolution and the approval of the Central Government.
(4) The provisions of sub-sections (5), (6) and (7) of section 294 shall, so far as may be, apply to the sole selling, or the sole purchasing or buying, agents of a company.
(5) A company seeking approval under this section shall furnish such particulars as may be prescribed.
(6) Where an appointment has been made of a sole selling agent by a company before the commencement of the Companies (Amendment) Act, 1974, (41 of 1974.) and the appointment is such that it could not have been made except on the authority of a special resolution passed by the company and the approval of the Central Government, if sub-section (2), sub-section (3) and sub-section (8), were in force at the time of such appointment, the company shall obtain s authority and approval within six months from such commencement. and if such authority and approval are not so obtained, the appointment of the sole selling agent shall stand terminated on the expiry of six months from such commencement.
(7) If the company in general meeting disapproves the appointment referred to in sub-section (3), such appointment shall, notwithstanding anything contained in sub-section (6), cease to have effect from the date of the general meeting.
(8) The provisions of this section except those of sub-section (1), shall apply so far as may be to the appointment by a company of a sole agent for the buying or purchasing of goods on behalf the company.
Explanation In this section –
(a) “appointment” includes “re-appointment”,
(b) “substantial interest” –
(i) in relation to an individual, means the beneficial interest heldby such individual or any of his relatives, whether singly or taken together, in the shares of the company, the aggregate amount paid-up on which exceeds five lakhs of rupees or five per cent of the paid up share capital of the company, whichever is the lesser;
(ii) in relation to a firm, means the beneficial interest held by one or more partners of the firm or any relative of such partner, whether singly or taken together, in the shares of the company, the aggregate amount paid-up on which exceeds five lakhs of rupees or five per cent of the paid-up share capital of the company whichever is the lesser;
(iii) in relation to a body corporate, means the beneficial interest held by such body corporate or one or more of its directors or any relative of such director, whether singly or taken together, in the shares of the company, the aggregate amount paid-up on which exceeds five lakhs of rupees or five per cent of the paid up share capital of the company,whichever is the lesser.

Loans to directors, etc.

295. Loans to directors, etc.
(1) Save as otherwise provided in sub-section (2), no company (hereinafter in this section referred to as “the lending company”) 1[without obtaining the previous approval of the Central Government in that behalf shall directly or indirectly, make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by –
(a) any director of the lending company or of a company which is its holding company or any partner or relative of any such director;

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1. Subs. by Act 65 of 1960, s. 102, for certain words.

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(b) any firm in which any such director or relative is a partner;
(c) any private company of which any such director is a director or member;
(d) any body corporate at a general meeting of which not less than twenty-five per cent. of the total voting power may be exercised or controlled by any such director, or by two or more such directors together; or
(e) any body corporate, the Board of directors, managing director,managing agent, secretaries and treasurers, or manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.
(2) Sub-section (1) shall not apply to –
(a) any loan made, guarantee given or security provided –
(i) by a private company unless it is a subsidiary of a publiccompany, or
(ii) by a banking company;
(b) any loan made –
(i) by a holding company to its subsidiary,
(ii) by a company which is the managing agent or secretaries and treasurers of another company to that other company;
(c) any guaranty given or security provided –
(i) by a holding company in respect of any loan made to itssubsidiary, or
(ii) by a company which is the managing agent or secretaries and treasurers of another company in respect of any loan made to that other company.
(3) Where any loan made, guarantee given or security provided by a lending company and outstanding at the commencement of this Act could not have been made, given or provided, without the previous approval of the Central Government, if this section had then been in force, the lending company shall, within six months from the commencement of this Act or such further time not exceeding six months as the Central Government may grant for that, purpose, either obtain the approval of the Central Government to the transaction or enforce the repayment of the loan made, or in connection with which the guarantee was given or thesecurity was provided, notwithstanding any agreement to the contrary.

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1. Subs. by Act 65 of 1960, s.102, for sub-section (2).

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(4) Every person who is knowingly a party to any contravention of sub-section (1) or (3), including in particular any person to whom the loan is guarantee is given or the security is provided, shall be punishable either with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months:
Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this sub-section; and where the loan has been repaid in part, the maximum punishment which may be imposed under thissub-section by way of imprisonment shall be proportionately reduced.
(5) All persons who are knowingly parties to any contravention of sub-section (1) or (3) shall be liable, jointly and severally, to the lending company for the repayment of the loan or for making good the sum which the lending company may have been called upon the pay in virtue of the guarantee given or the security provided by such company.
(6) No officer of the lending company or of the borrowing body corporate shall be punishable under sub-section (4) or shall incur the liability referred to in sub-section (5) in respect of any loan made, guarantee given or security provided 1[after the 1st day of April 1956] in contravention of clause (d) or (e) of sub-section (1), unless at the time when the loan was made, the guarantee was given or the security was provided by the lending company, he knew or had express notice that that clause was being contravened thereby.

Application of section 295 to book debts in certain cases

2[296. Application of section 295 to book debts in certain cases.
Section 295 shall apply to any transaction represented by a book debt which was from its inception in the nature of a loan or an advance.]

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1. Ins. by Act 65 of 1960, S. 102.
2. Subs. by s. 103, ibid., for s. 296.

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297. Board’s sanction to be required for certain contracts in which particular directors are interested.
(1) Except with the consent of the Board of directors of a company, a director of the company or his relative, a firm in which such a director or relative is a partner, any other partner in such a firm, or a private company of which the director is a member or director, shall not enter into any contract with the company –
(a) for the sale, purchase or supply of any goods, materials or services; or
(b) after the commencement of this Act, for underwriting the subscription of any shares in, or debentures of, the company:
1[Provided that in the case of a company having a paid-up share capitalof not less than rupees one crore, no such contract shall be entered into except with the previous approval of the Central Government.]
2[(2) Nothing contained in clause (a) of sub-section (1) shall affect –
(a) the purchase of goods and materials from the company or the sale ofgoods and materials to the company, by any director, relative, firm, partner or private company as aforesaid for cash at prevailing market prices; or
(b) any contract or contracts between the company on one side and any such director, relative, firm, partner or private company on the other for sale, purchase or supplyof an goods, materials and 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 :
Provided that such contract or contracts do not relate to goods and materials the value of which, or services the cost which, exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract or contracts; or
(c) in the case of a banking or insurance company any transaction in the ordinary course of business of such company with any director, relative, firm, partner or private company as aforesaid.

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1. Ins. Act 41 of 1974, s. 28 (w.e.f.1-2-1975).
2. Subs. by Act 65 of 1960, s. 104, for subsection (2) to (5).

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(3) Notwithstanding anything contained in sub-sections (1) and (2), a director,relative, firm, partner or private company as aforesaid may, in circumstances of urgent necessity, enter, without obtaining the consent of the Board, into any contract with the company for the sale, purchase or supply of any goods, materials or services even if the value of such goods or cost of such services exceeds five thousand rupees in the aggregate in any year comprised in theperiod of the contract ; but in, such a case, the consent of the Board shall be obtained at a meeting within three months of the date on which the contract was entered into.
(4) Every consent of the Board required under this section shall be accorded by a resolution passed at a meeting of the Board and not otherwise; and the consent of the Board required under sub-section (1) shall not be deemed to have been given within the meaning of that sub-section unless the consent is accorded before the contract is entered into within three months of the date on which if was entered into.
(5) If consent is not accorded to any contract under this section, anything done in pursuance of the contract shall be voidable at the option of the Board.
(6) Nothing in this section shall apply to any case where the consent has been accorded to the contract before the commencement of the Companies Amendment) Act 1960.] (65 of 1960.)
298. Power of directors to carry on business when managing agent or secretaries and treasurers are deemed to have vacated office, etc.
Where in pursuance of any provisions contained in this Act, the managing agent or secretaries and treasurers of a company are deemed to have vacated or to have been suspended from office, or are removed or suspended from office, or cease to act or to be entitled to act as managing agent or secretaries and treasurers, or where a permanent or temporary vacancy has otherwise occurred in the office of managing agent or secretaries and treasurers, then 1* * *the Board of directors shall have power to carry on, or arrange for the carrying on of, the affairsof the company until the managing agent or secretaries and treasurers again become entitled to act as such, or until the company in general meeting resolves otherwise.

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1. The words “notwithstanding anything contained in this Act” omitted by Act 65 of 1960, s. 105.

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Procedure, etc., where Director interested

299. Disclosure of interests by director.
(1) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the Board of directors.
(2) (a) In the case of a proposed contract or arrangement, the disclosurerequired to be made by a director under sub-section (1) shall be made at-the meeting of the Board at which the question of entering into the contract or arrangement is first taken into consideration, or if the director was not, at the date of that meeting, concerned or interestedin the proposed contract or arrangement, at the first meeting of the Board held after he becomes so concerned or interested.
(b) In the case of any other contract or arrangement, the requireddisclosure shall be made at the first meeting of the Board held after the director becomes concerned or interested in the contract or arrangement.
(3) (a) For the purposes of sub-sections (1) and (2), a general notice given to the Board by a director, to the effect that he is a director or a member of a specified body corporate or is a member of a specified firm and is to be regarded as concerned or interested in any contract or arrangement which may, after the date of the notice, be entered into with that body corporate or firm, shall be deemed to be a sufficient disclosure of concern or interest in relation to any contract or arrangement so made.
(b) Any such general notice shall expire at the end of the financial year in which it is given, but may be renewed for further periods of one financial year at a time, by a fresh notice given in the last month of the financial year in which it would otherwise expire.
(c) No such general notice, and no renewal thereof, shall be of effect unlesseither it is given at a meeting of the Board, or the director concerned takes reasonable steps to secure that it is brought upon and read at the first meeting of the Board after it is given.
(4) Every director who fails to comply with sub-section (1) or (2) shall be punishable with fine which may extend to five thousand rupees.
(5) Nothing in this section shall be taken to prejudice the operation of any rule of law restricting a director of a company from having any concern or interest in any contracts or arrangements with the company.
1[(6) Nothing in this section shall apply to any contract or arrangement entered into or to be entered into between two companies where any of the directors of the one company or two or more of them together holds or hold not more than two per cent. of the paid-up share capital in the other company.]

Interested director not to participate or vote in Board’s proceedings

300. Interested director not to participate or vote in Board’s proceedings.
(1) No director of a company shall, as a director, take any part in the discussion of, or vote on, any contract or arrangement entered into, or to be entered into, by or on behalf of the company, if he is in any way, whether directly or indirectly, concerned or interested in the contract or arrangement; nor shall his presence count for the purpose of forming a quorum at the time of any such discussion or vote ; and if he does vote, his vote shall be void.
(2) Sub-section (1) shall not apply to –
(a) a private company which is neither a subsidiary nor a holding company of a public company;
(b) a private company which is a subsidiary of a public company, in respect of any contract or arrangement entered into or to be entered into, by the private company with the holding company thereof;
(c) any contract of indemnity against any loss which the directors, or any one or more of them, may suffer by reason of becoming or being sureties or a surety for the company;
(d) any contract or arrangement entered into or to be entered into with a public company, or a private company which is a subsidiary of a public company, in which the interest of the director aforesaid 2[consists solely –
(i) in his being a director of such company and the holder of not more than shares of such number or value therein as is requisite to qualify him for appointment as a director thereof, he having been nominated as such director by the company referred to in sub-section (1), or

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1. Ins. by Act 65 of 1960, s. 106.
2. Subs. by s. 107, ibid., for certain words.

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(ii) in his being a member holding not more than two per cent. of its paid-up share capital.]
(e) a public company, or a private company which is a subsidiary of a public company, in respect of which a notification is issued under sub-section (3), to the extent specified in the notification.
(3) In the case of a public company or a private company which is a subsidiary of a public company, if the Central Government is of opinion that having, regard to the desirability ofestablishing or promoting any industry, business or trade, it would not be in the public interest to apply all or any of the prohibitions contained in sub-section (1) to the company, the CentralGovernment may, by notification in the Official Gazette, direct that that sub-section shall not apply to such company, or shall apply thereto subject to such exceptions, modifications and conditions as may be specified in the notification.
(4) Every director who knowingly contravenes the provisions of this section shall be punishable with fine which may extend to five thousand rupees.
301. Register of contracts, companies and firms in which directors are interested.
1[(1) Every company shall keep one or more registers in which shall be entered separately particulars of all contracts or arrangements to which section 297 or section 299applies, including the following particulars to the extent they are applicable in each case, namely –
(a) the date of the contract or arrangement;
(b) the names of the parties thereto;
(c) the principal terms and conditions thereof;
(d) in the case of a contract to which section 297 applies or in the case of a contract or arrangement to which sub-section (2) of section 299 applies, the date on which it was placed before the Board;
(e) the names of the directors voting for and against the contract orarrangement and the names of those remaining neutral.

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1. Subs. by Act 65 of 1960, s. 108, for sub-section (1), (2) and (3).

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(2) Particulars of every such contract or arrangement to which section 297 or, as the case may be, sub-section (2) of section 299 applies, shall be entered in the relevant register aforesaid –
(a) in the case of a contract or arrangement requiring the Board’s approval, within seven days (exclusive of public holidays) of the meeting of the Board at which the contract or arrangement is approved,
(b) in the case of any other contract or arrangement, within seven days of the receipt at the registered office of the company of the particulars of such other contract or arrangement or within thirty days of the date of such other contract or arrangement whichever is later;
and the register shall be placed before the next meeting of the Board and shall then be signed by all the directors present at the meeting.
(3) The register aforesaid shall also specify, in relation to each director of the company, the names of the firms and bodies corporate of which notice has been given by himunder sub-section (3) of section 299.
(3A) Nothing in sub-sections (1), (2) and (3) shall apply –
(a) to any contract or arrangement for the sale, purchase or supply of any goods, materials or services if the value of such goods and materials or the cost of such servicesdoes not exceed one thousand rupees in the aggregate in any year; or
(b) to any contract or arrangement (to which section 297 or, as the case may be, section 299 applies) by a banking company for the collection of bills in the ordinary course of its business or to any transaction referred to in clause
(c) of sub- section (2) of section 297.]
(4) If default is made in complying with the provisions of sub-section (1), (2) or (3), 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 five hundred rupees.
(5) The register aforesaid shall be kept at the registered office of the company ; and it shall be open to inspection at such office and extracts may be taken therefrom and copies thereof may be required, by any member of the company to the same extent, in the same manner, and on payment of the same fee, as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly.
302. Disclosure to members of director’s interest in contract appointing manager, managing director, managing agent or secretaries and treasurers.
(1) Where a company –
(a) enters into a contract for the appointment of a manager of thecompany, in which contract any director of the company is in any way, whether directly orindirectly, concerned or interested; or
(b) varies any such contract already in existence and in which a director is concerned or interested as aforesaid; the company shall, within twenty-one days from the date ofentering into the contract or of the varying of the contract, as the case may be, send to every member of the company an abstract of the terms of the contract or variation, together with a memorandum clearly specifying the nature of the concern or interest of the director in such contract or variation.
(2) Where a company enters into a contract for the appointment of a managing director of the company, or varies any such contract which is already in existence, the company shall send an abstract of the terms of the contract or variation to every member of thecompany within the time specified in sub-section (1); and if any other director of the company is concerned or interested in the contract or variation, a memorandum clearly specifying the nature of the concern or interest of such other director in the contract or variation shall also be sent toevery member of the company with the abstract aforesaid.
(3) Where a company proposes to enter into a contract for the appointment of a managing agent or of secretaries and treasurers, in which contract any director of the company is concerned or interested as aforesaid, or proposes to vary any such contract already in existence in which a director is concerned or interested as aforesaid, the company shall send the abstract and memorandum referred to in sub-section (2) to every member of the company, in sufficient time before the general meeting of the company at which the proposal is to be considered.
(4) Where a director becomes concerned or interested as aforesaid in any such contract as is referred to in sub-section (1), (2) or (3) after it is made, the abstract and the memorandum, if any, referred to in the said sub-section shall be sent to every member of the company within twenty-one days from the date on which the director becomes so concerned or interested.
(5) If default is made in complying with the foregoing provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one thousand rupees.
(6) All contracts entered into by a company for the appointment of a manager, managing director, managing agent or secretaries and treasurers, shall be kept at the registered office of the company; and shall be open to the inspection of any member of the company at such office ; and extracts may be taken therefrom and copies thereof may be required by anysuch member, to the same extent, in the same manner and on payment of the same fee, as in the case of the register of members of the company ; and the provisions of section 163 shall apply accordingly.
(7) The provisions of this section shall apply in relation to any resolution 1* * * of the Board of directors of a company appointing, a manager or a managing or whole-time director, or varying any previous contract or resolution of the company relating to the appointment of a manager or a managing or whole time director, as they apply in relation to any contract 2* * * for the like purpose.

Register of Directors, etc.

303. Register of directors, managing agents, secretaries and treasurers, etc.
(1) Every company shall keep at its registered office a register of its directors, managing director, managing agent, secretaries and treasurers, manager and secretary,containing with respect to each of them the following particulars, that is to say –
(a) in the case of an individual, his present name and surname in full; any former name or surname in full; 3[his father’s name and surname in full or where the individual is a married woman, the husband’s name and surname in full] his usual residential address; his nationality; and, if that nationality is not the nationality of origin, his nationality of origin; his business occupation, if any; if he holds the office of director, managing director, managing agent, manager or secretary in any other body, corporate, the particulars of each such office held by him; and except in the case of a private company which is not a subsidiary of a public company, the date of his birth;
(b) in the case of a body corporate, its corporate name and registered or principal office; and the full name, address, nationality, and nationality of origin, if different from that nationality 1[the father’s name or where a director is a married woman, the husband’s name] of each of its directors; and if it holds the office of managing agent, secretaries and treasurers, manager or secretary in any other body corporate, the particulars of each such office;

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1. The words “or proposed resolution” omitted by Act 65 of 1960, s. 109.
2. The words “or proposed contract” omitted by s. 109, ibid.
3. Ins. by s. 110 ibid.

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(c) in the case of a firm, the name of the firm, the full name, address, nationality, and nationality of origin, if different from that nationality 1[the father’s name or where a partner is a married woman, the husband’s name] of each partner; and the date on which each became a partner; and if the, firm holds the office of managing agent, secretaries and treasurers, manager or secretary in any other body corporate, the particulars of each such office;
(d) if any director or directors have been nominated by a body corporate,its corporate name; all the particulars referred to in clause (a) in respect of each director so nominated, and also all the particulars referred to in clause (b) in respect of the body corporate;
(e) if any director or directors have been nominated by a firm, the name of the firm, all the particulars referred to in clause (a) in respect of each director so nominated, and also all the particulars referred to in clause (c) in respect of the firm.
Explanation.-For the purposes of this sub-section –
(1) any person in accordance with 2 [whose directions or instructions], the Board of directors of a company is accustomed to act shall be deemed to be a director of the company;
(2) in the case of a person usually known by a title different from his surname, the expression ” surname” means that title; and
(3) references to a former name or surname do not include –
(i) in the case of a person usually known by an Indian title different from his surname, the name by which he was known previous to the adoption of, or succession to, the title;

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1. Ins. by Act 65 of 1960, s. 110.
2. Subs. by s. 110, ibid. for “whose instructions”.

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(ii) in the case of any person, a former name or surname, where that name or surname was changed or disused before the person bearing the name attained the age of eighteen years, or has been changed or disused for a period of not less than twenty years; and
(iii) in the case of a married woman, the name or surname by which she was known previous to the marriage.
(2) The company shall, within the periods respectively mentioned in this sub-section, send to the Registrar 1[a return in duplicate in the prescribed form] containing the particulars specified in the said register and 2 [a notification in duplicate in the prescribed form] of any change among its directors, managing directors, managing agents, secretaries 3* * * and treasurers, managers or secretaries specifying the date of the change.
The period within which the said return is to be sent shall be a period of 4[thirty] days from the appointment of the first directors of the company and the period within which the said notification of a change is to be sent shall be 4 [thirty] days from the happening thereof : 5** * * *
(3) If default is made in complying with sub-section (1) or (2),the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Inspection of the register

304. Inspection of the register.
(1) The register kept under section 303 shall be open to the inspection of any member of the company without charge and of any other person on payment of one rupee for each inspection during business hours subject to such reasonable restrictions as the company may by its articles or in general meeting impose, so that not less than two hours in each day are allowed for inspection.

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1. Subs. by Act 65 of 1960, s. 110, for ” a return in the prescribed form”.
2. Subs. by s.110, ibid for “a notification in the prescribed form”
3. The words “or in any of the particulars contained in the register “omitted by Act 31 of 1965, s. 41 (w.e.f. 15-10-1965).
4. Subs. by s. 62 and Sch., ibid., for “twenty-eight” (w.e.f. 15-10-1965).
5. Proviso omitted by s. 41, ibid. (w.e.f. 15-10-1965).

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(2) If any inspection required under sub-section (1) is refused –
(a) the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees; and
(b) the 1[Company Law Board] may, by order, compel an immediateinspection of the register.
305. Duty of directors. etc. to make disclosure.
(1) Every director, managing director, managing agent, secretaries and treasurers, manager or secretary of any company, who is appointed to, or relinquishes, the office of director, managing director, managing agent, secretaries and treasurers, manager or secretary of any other body corporate, shall, within twenty days of his appointment to, or as the case may be, relinquishment of, such office, disclose to the company aforesaid the particulars relating to the office in the other body corporate which are required to be specified under sub-section (1) of section 303 ; and if he fails to do so, he shall be punishable with fine which may extend to five hundred rupees.
(2) The provisions of sub-section (1) shall also apply to a person deemed to be a director of the company by virtue of the Explanation to sub-section (1) of section 303 when such person is appointed to, or relinquishes, any of the offices in the other body corporate referred to in sub-section (1).]
306. Register to be kept by Registrar and inspection thereof.
(1) The Registrar shall keep a separate register or registers in which there shall be entered the particulars received by him under sub-section (2) of section 303 in respect of companies, so however that all entries in respect of each such company shall be together.
(2) The register or registers aforesaid shall be open to inspection by anymember of the public at any time during office hours, on payment of the prescribed fee.

Register of Directors’ Shareholdings

307. Register of directors’, share holdings, etc.
(1) Every company shall keep a register showing, as respects each director of the company, the number, description and amount of any shares in, or debentures of, the company or any other body corporate, being the company’s subsidiary or holding company, or a subsidiaryof the company’s holding company, which are held by him or in trust for him, or of Which he has any right to become the holder whether on payment or not.

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1. Subs. by Act 31 of 1988, s. 67 (w.e.f. 31.5.1991).
2. Subs. by Act 65 of 1960, s. 111, for s. 305.

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(2) Where any shares or debentures have to be recorded in the said register or to be omitted there from, in relation to any director, by reason of a transaction entered into after the commencement of, this Act and while he is a director, the register shall also show the date of, and the price or other consideration for, the transaction:
Provided that where there is an interval between the agreement for any such transaction and the completion thereof, the date so shown shall be that of the agreement.
(3) The nature and extent of any interest or right in or over any shares or debentures recorded in relation to a director in the said register shall, if he so requires, be indicated in the register.
(4) The company shall not, by virtue of anything done for the purposes of this section, be affected with notice of, or be put upon inquiry as to, the rights of any person in relation to any shares or debentures.
(5) The said register shall, subject to the provisions of this section, be kept at the registered office of the company, and shall be open to inspection during business hours (subject to such reasonable restrictions as the company may, by its articles or in general meeting, impose,so that not less than two hours in each day are allowed for inspection) as follows –
(a) during the period beginning fourteen days before the date of the company’s annual general meeting and ending three days after the date of its conclusion, it shall be open to the inspection of any member or holder of debentures of the company; and
(b) during that or any other period, it shall be open to the inspection of any person acting on behalf of the Central Government or of the Registrar.
In computing the fourteen days and the three days mentioned in this sub-section, any day which is a Saturday, a Sunday or a public holiday shall be disregarded.
(6) Without prejudice to the rights conferred by sub-section (5), the Central Government or the Registrar may, at any time require a copy of the said register, or any part thereof.
(7) The said register shall also be produced at the commencement of every annual general meeting of the company and shall remain open and accessible during the continuance of the meeting to any person having the right to attend the meeting.
If default is made in complying with this sub-section the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.
(8) If default is made in complying with sub-section (1) or (2), or if any inspection required under this section is refused, or if any copy required there under is not sent within a reasonable time, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees and also with a further fine which may extend to twenty rupees for every day during which the default continues.
(9) In the case of any such refusal, the 1[Company Law Board] may also, by order, compel an immediate inspection of the register.
(10) For the purposes of this section –
(a) any person in accordance with whose directions or instructions theBoard of directors of a company is accustomed to act, shall be deemed to be a director of the company; and
(b) a director of a company shall be deemed to hold, or to have an interestor a right in or over, any shares or debentures, if a body corporate other than the company holds them or has that interest or right in or over them, and either –
(i) that body corporate or its Board of directors is accustomed to act in accordance with his directions or instructions; or
(ii) he is entitled to exercise or control the exercise of one-third or more of the total voting power exercisable at any general meeting of that body corporate.
2[(11) The provisions of this section and section 308 shall apply to managing agents, secretaries and treasurers and managers as they apply to directors.]
308. Duty of directors and persons deemed to be directors to make disclosure of share holdings.
(1) Every director of a company, and every person deemed to be a director of the company by virtue of sub-section (10) of section 307, shall give notice to the company of such matters relating to himself as may be necessary for the purpose of enabling the company to comply with the provisions of that section.
(2) Any such notice shall be given in writing, and if it is not given at a meeting of the Board, the person giving the notice shall take all reasonable steps to secure that it is brought up and read at the meeting of the Board next after it is given.

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1. Subs. by Act 31 of 1988, s. 67 (w.e.f. 31-5-1991).
2. Ins. by Act 65 of 1960, s.112.

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(3) Any person who fails to comply with sub-section (1) or (2) shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or with both.

Remuneration of Directors

309. Remuneration of directors.
(1) The remuneration payable to the directors of a company, including any managing or whole-time director, shall be determined, in accordance with and subject to the provisions of section 198 and this section, either by the articles of the company, or by a resolution or, if the articles so require, by a special resolution, passed by the company in general meeting 1[and the remuneration payable to any such director determined as aforesaid shall be inclusive of the remuneration payable to such director for services rendered by him in any other capacity:
Provided that any remuneration for services rendered by any such director in any other capacity shall not be so included if –
(a) the services rendered are of a professional nature, and
(b) in the opinion of the Central Government, the director possesses the requisite qualifications for the practice of, the profession].
2[(2) A director may receive remuneration by way of a fee for each meeting of the Board, or a committee thereof, attended by him:
Provided that where immediately before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) fees for meetings of the Board and any committee thereof, attended by a director are paid on a monthly basis, such fees may continue to be paid on that basis for a period of two years after such commencement or for the remainder of the term of office of such director, whichever is less, but no longer.
(3) A director who is either in the whole-time employment of the company or a managing director may be paid remuneration either by way of a monthly payment or at a specified percentage of the net profits of the company or partly by one way and partly by the other:
Provided that except with the approval of the Central Government such remuneration shall not exceed five per cent of the net profits for one such director, and if there is more than one such director, ten per cent. for all of them together.]

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1. Ins. by Act 31 of 1965, s. 42 (w.e.f. 15-10-1965).
2. Subs. by Act 65 of 1960, s. 113, for sub-sections (2) and (3).

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1[(4) A director who is neither in the whole-time employment of the company nor a managing director may be paid remuneration –

either

(a) by way of a monthly, quarterly or annual payment with the approval of the Central Government;

or

(b) by way of commission if the company by special resolution authorises such payment:
Provided that the remuneration paid to such director, or where there is more than one such director, to all of them together, shall not exceed –
(i) one per cent of the net profits of the company, if the company has a managing or whole-time director, a managing agent or secretaries and treasurers or a manager;
(ii) three per cent. of the net profits of the company, in any other case:
Provided further that the company in general meeting may, with the approval of the Central Government, authorise the payment of such remuneration at arate exceeding one per cent. or, as the case may be, three per cent of its net profits.]
(5) The net profits referred to in sub-sections (3) and (4) shall be computed in the manner referred to in section 198, sub-section (1).
2[(5A) If any director draws or receives, directly or indirectly, by way of remunerationany such sums in excess of the limit prescribed by this section or without the prior sanction ofthe Central Government, where it is required, he shall refund such sums to the company and until such sum is refunded, hold it in trust for the company.
(5B) The company shall not waive the recovery of any sum refundable to it under sub-section (5A) unless permitted by the Central Government.]
(6) No director of a company who is in receipt of any commission from the company and who is either in the whole-time employment of the company or a managing director shall be entitled to 69 receive any commission or other remuneration from any subsidiary of such company.

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1. Subs. by Act 31 of 1965, s. 42, for sub-section (4) (w.e.f. 15-10-1965).
2. Ins. by Act 65 of 1960, S. 113.

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(7) The special resolution referred to in sub-section (4) shall not remain in force for a period of more than five years; but may be renewed, from time to time, by special resolution for further periods of not more than five years at a time:
Provided that no renewal shall be effected earlier than one year from the date on which it is to come into force.
(8) The provisions of this section shall come into force immediately on the commencement of this Act or, where such commencement does not coincide with the end of a financial year of the company, with effect from the expiry of the financial year immediately succeeding such commencement.
(9) The provisions of this section shall not apply to a private company unless it is asubsidiary of a public company.

Provision for increase in remuneration to require Government sanction.

Miscellaneous Provisions

312. Prohibition of assignment of office by directors.
Any assignment of his office made after the commencement of this Act by any director of a company shall be void.
313. Appointment and term of office of alternate directors.
(1) The Board of directors of a company may. it so authorised by its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director (hereinafter in this section called “the original director”) during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held.
2[(2) An alternate director appointed under sub-section (1) shall not hold office as such for a period longer than that permissible to the original director in whose place he has been appointed and shall vacate office if and when the original director returns to the State in which meetings of the Board are ordinarily held.]
(3) If the term of office of the original director is determined before he so returns to the State aforesaid, any provision for the automatic re-appointment of retiring directors in default of another appointment shall apply to the original, and not to the alternate, director.

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1. Subs. by Act 31 of 1988, s. 48 (w.e.f. 15.6.1988).
2. Subs. by Act 65 of 1960, s. 115, for sub-section(2).

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Director, etc., not to hold office or place of profit.

314. Director, etc., not to hold office or place of profit.
1[(1) Except with the 2[consent] of the company accorded by a special resolution –
(a) no director of a company shall hold any office or place of profit, and
(b) 3[no partner or relative of such a director, no firm in which such director, or a relative of such director, is a partner, no private company of which such director is a director or member, and no director or manager of such a private company, shall hold any office or place of profit carrying a total monthly remuneration of 4[such sum as may be prescribed], except that of managing director or manager,] banker or trustee for the holders of debentures of the company –
(i) under the company; or
(ii) under any subsidiary of the company, unless the remuneration received from such subsidiary in respect of such office or place of profit is paid over to the company or its holding company:
5[Provided that it shall be sufficient if the special resolution according the consent of the company is passed at the general meeting of the company held for the first time after the holding of such office or place of profit:
Provided further that where a relative of a director or a firm in which such relative is a partner, is appointed to an office or place of profit under the company or a subsidiary thereof without the knowledge of the director, the consent of the company may be obtained either in the general meeting aforesaid or within three months from the date of the appointment, whichever is later.]
Explanation.-For the purpose of this sub-section, a special resolution according consent shall be necessary for every appointment in the first instance to an office or place of profit and to every subsequent appointment to such office or place of profit on a higher remuneration not covered by the special resolution, except where an appointment on a time scale has already been approved, by the special resolution.

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1. Subs. by Act 65 of 1960, s. 116, for sub-section (1).
2. Subs. by Act 31 of 1965, s. 44, for “previous consent” (w.e.f. 15-10-1965).
3. Subs, by Act 41 of 1974, s. 29, for certain words (w.e.f. 1-2-1975).
4. Subs. by Act 31 of 1988, s. 49 (w.e.f. 15.6.1988).
5. Subs. by Act 31 of 1965, s. 44, for proviso (w.e.f. 15-10-1965).

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(1A) Nothing in sub-section (1) shall apply where a relative of a director or a firm in which such relative is a partner holds any office or place of profit under the company or a subsidiary thereof having been appointed to such office or place before such director becomes a director of the company.]
1[(1B) Notwithstanding anything contained in subsection (1) –
(a) no partner or relative of a director or manager,
(b) no firm in which such director or manager or, relative of either, is a partner,
(c) no private company of which such a director or manager or relative of either, is a director or member, shall hold any office or place of profit in the company which carries a total monthly remuneration of not less than 2[such as may be prescribed] except with the prior consent of the company by a special resolution and the approval of the Central Government; 3* ** *
4[(2) 5[(a)] If any office or place of profit is held in contravention of theprovisions of sub-section (1) the director, partner, relative, firm, private company, managing agent, secretaries and treasurers or the manager, concerned, shall be deemed to have vacated his or its office as such on and from the date next following the date of the general meeting of the company referred to in the first proviso or, as the case may be, the date of the expiry ofthe period of three months referred to in the second proviso to that sub-section, and shall also be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him or it for the period immediately preceding the date aforesaid in respect of such office or place of profit.]

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1. Ins. by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975).
2. Subs. by Act 31 of 1988, s.49 (w.e.f. 15-6-1988).
3. Omitted by s.49, ibid.
4. Subs. by Act 31 of 1965, s. 44, for sub-section (2) (w.e.f. 15-10-1965).
5. Sub-section (2) relettered at cl. (a) by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975),

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1[(b) The company shall not waive the recovery of any sum refundable to it under clause (a) unless permitted to do so by the Central Government.]
2[(2A) Every individual, firm, private company or other body corporate proposed to be appointed to any office or place of profit to which this section applies shall, before or at the timeof such appointment, declare in writing whether he or it is or is not connected with a director of the company in any of the ways referred to in subsection (1).]
1[(2B) If, after the commencement of the Companies (Amendment) Act, 1974, (41 of 1974.) any office or place of profit is held, without the prior consent of the company by a special resolution and the approval of the Central Government, the partner, relative, firm or private company appointed to such office or place of profit shall be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him on and from the date on which the office was so held by him.
(2C) If any office or place of profit is held in contravention of the provisions of the proviso to sub-section (1B), the director, partner, relative, firm, private company or manager concerned shall be deemed to have vacated his or its office as such on and from the expiry of six months from the commencement of the Companies (Amendment) Act, 1974, (41 of 1974.) or the date next following the date of the general meeting of the company referred to in the saidproviso, whichever is earlier, and shall be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him or it for the period immediately preceding the date aforesaid in respect of such office or place of profit.
(2D) The company shall not waive the recovery of any sum refundable to it under sub-section (2B) 3* * * unless permitted to do so by the Central Government.]

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1. Ins. by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975).
2. Ins. by Act 65 of 1960, s. 116.
3. Omitted by Act 31 of 1988, s.49 (w.e.f. 15.6.1988).

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(3) Any office or place 1* * * shall be deemed to be an office or place of profit under the company 2[within the meaning of this section] –
(a) in case the office or place is held by a director, if the director holding it 3[obtains from the company anything] by way of remuneration over and above the remunerationto which he is entitled as such director whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise;
(b) in case the office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it 3[obtains from the company anything] by way of remuneration whether as salary fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise.
4[(4) Nothing in this section shall apply to a person, who being the holder of any office of profit in the company, is appointed by the Central Government, under section 408, as a director of the company.]

Restrictions on appointment of managing directors

315. [Application of sections 316 and 317.] Rep. by the Companies (Amendment) Act, 1960 (65 of 1960), s. 117.

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1. The words “in a company” omitted by Act 65 of 1960, s. 116.
2. Subs. by Act 41 of 1974, s. 29, for certain words (w.e.f. 1-2-1975).
3. Subs. by Act 65 of 1960, s. 116, for “obtains anything”.
4. Ins. by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975).

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316. Number of companies of which one person may be appointed managing director.
(1) 1[No public company and no private company which is a subsidiary of apublic company] shall, after the commencement of this Act, appoint or employ any person asmanaging director, if he is either the managing director or the manager of 2[any other company(including a private company which is not a subsidiary of a public company)], except as providedin sub-section (2).
(2) 3[A public company or a private company which is a subsidiary of a public company] may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one , 4 [other company (including a private company which is not a subsidiary of a public company) ] :
Provided that such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.
(3) Where, at the commencement of this Act, any person is holding the office either of managing director or of manager in more than 5[two companies of which each one or at least one is a public company or a private company which is a subsidiary of a public company], he shall, within one year from the commencement of 6[the Companies (Amendment) Act, 1960], (65 of 1960.) choose not more than two of those companies as companies in which he wishes to continue to hold the office of managing director or manager, as the case may be; and theprovisions of clauses (b) and (c) of sub-section (1) and of sub-sections (2) and (3) of section 276 shall apply mutatis mutandis in relation to this case, as those provisions apply in relation to the case of a director.
(4) Notwithstanding anything contained in sub-sections (1) to (3), the Central Government may, by order, permit any person to be appointed as a managing director of more than two companies if the Central Government is satisfied that it is necessary that the companies should, for their proper working, function as a single unit and have a common managing director.

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1. Subs. by Act 65 of 1960, s. 118, for “No company”.
2. Subs. by s. 118, ibid., for “any other company”.
3. Subs. by s. 118, ibid., for “A company”.
4. Subs. by s. 118, ibid., for ” other company”.
5. Subs. by s. 118, ibid., for “two companies”.
6. Subs. by s. 118, ibid., for “this Act”.

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317. Managing director not to be appointed for more than five years at a time.
(1) No company shall, after the commencement of this Act, appoint or employ any individual as its managing director for a term exceeding five years at a time.
(2) Any individual holding at the commencement of this Act the office of managing director in a company shall, unless his term expires earlier, be deemed to have vacated his office immediately on the expiry of five years from the commencement of this Act.
(3) Nothing contained in sub-section (1) shall be deemed to prohibit the re-appointment, re-employment, or the extension of the term of office, of any person by further periods not exceeding five years on each occasion:
Provided that any such re-appointment, re-employment or extension shall not be sanctioned earlier than two years from the date on which it is to come into force.
1[(4) This section shall not apply to a private company unless it is a subsidiary of a public company.]

Compensation for loss of office

318. Compensation for loss of office not permissible except to managing or whole-time directors or to directors who are managers.
(1) Payment may be made by a company, except in the cases specified in sub-section (3) and subject to the limit specified in sub-section (4), to a managing director, or a director holding the office of manager or in the whole-time employment of the company, by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement.
(2) No such payment shall be made by the company to any other director.
(3) No payment shall be made to a managing or other director in pursuance of sub-section (1), in the following cases, namely –
(a) where the director resigns his office in view of the reconstruction of the company, or of its amalgamation with any other body corporate or bodies corporate, and is appointed as the managing director, managing agent, 2* * * manager or other officer of the reconstructed company or of the body corporate resulting from the amalgamation;
(b) where the director resigns his office otherwise than on the reconstruction of the company or its amalgamation as aforesaid;

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1. Ins. by Act 65 of 1960, s. 119.
2. The words “secretaries and treasurers” omitted by s. 120, ibid.

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(c) where the office of the director is vacated by virtue of section 203, 1* * * or any of the clauses (a) to 2[(l)], of sub-section (1) of section 283;
(d) where the company is being wound up, whether by or subject tothe supervision of the Court or voluntarily, provided the winding up was due to the negligence or default of the director;
(e) where the director has been guilty of fraud or breach of trust in relation to, or of gross negligence in or gross mismanagement of, the conduct of the affairs of thecompany or any subsidiary or holding company thereof;
(f) where the director has instigated, or has taken part directly or indirectly in bringing about, the termination of his office.
(4) Any payment made to a managing or other director in pursuance of sub-section (1) shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which he ceased to hold the office, or where he held the office for a lesser period than three years, during such period:
Provided that no such payment shall be made to the director in the event of the commencement of the winding up of the company, whether before, or at any time within twelve months after, the date on which he ceased to hold office, if the assets of the company on the winding up, after deducting the expenses thereof, are not sufficient to repay to the shareholders the share capital (including the premiums, if any,) contributed by them.
(5) Nothing in this section shall be deemed to prohibit the payment to a managing director, or a director holding the office of manager, of any remuneration for services rendered by him to the company in any other capacity.
319. Payment to director, etc., for loss of office, etc., in connection with transfer of undertaking or property.
(1) No director of a company shall, in connection with the transfer of the whole or any part of any undertaking or property of the company, receive any payment, by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement –

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1. The word and figures “section 280 “omitted by Act 31 of 1965, s. 45 (w.e.f. 15-10-1965).
2. Subs. by Act 65 of 1960, s. 120, for “(k),”.

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(a) from such company; or
(b) from the transferee of such undertaking or property or from any otherperson (not being such company), unless particulars with respect to the payment proposed to be made by such transferee or person (including the amount thereof) have been disclosed to the members of the company and the proposal has been approved by the company in general meeting.
(2) Where a director of a company receives payment of any amount in, contravention of sub-section (1), the amount shall be deemed to have been received by him in trust for the company.
(3) Sub-sections (1) and (2) shall not affect in any manner the operation of section 318.
320. Payment to director for loss of office, etc., in connection with transfer ofshares.
(1) No director of a company shall, in connection with the transfer to any persons of all or any of the shares in a company, being a transfer resulting from –
(i) an offer made to the general body of shareholders;
(ii) an offer made by or on behalf of some other body corporate with a view to the company becoming a subsidiary of such body corporate or a subsidiary of its holding company;
(iii) an offer made by or on behalf of an individual with a view to his obtaining the right to exercise, or control the exercise of, not less than one-third of the totalvoting power at any general meeting of the company; or
(iv) any other offer which is conditional on acceptance to a given extent; receive any payment by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement –
(a) from such company; or
(b) except as otherwise provided in this section, from the transferees of the shares or from any other person (not being such company).
(2) In the case referred to in clause (b) of sub-section (1), It shall be the duty of the director concerned to take all reasonable steps to secure that particulars with respect to the payment proposed to be made by the transferees or other person (including the amount thereof) are included in, or sent with, any notice of the offer made for their shares which is given to any shareholders.
(3) If –
(a) any such director fails to take reasonable steps as aforesaid; or
(b) any person who has been properly required by any such director toinclude the said particulars in, or send them with, any such notice as aforesaid fails so to do; heshall be punishable with fine which may extend to two hundred and fifty rupees.
(4) If –
(a) the requirements of sub-section (2) are not complied with in relation to any such payment as is governed by clause (b) of sub-section (1); or
(b) the making of the proposed payment is not, before the transfer of any shares in pursuance of the offer, approved by a meeting, called for the purpose, of the holders ofthe shares to which the offer relates and other holders of shares of the same class (other than shares already held at the date of the offer by, or by a nominee for, the offer or where the offer or is a company, by, or by a nominee for, any subsidiary thereof) as any of the said shares;
any sum received by the director on account of the payment shall be deemed to have been received by him in trust for any persons who have sold their shares as a result of the offer made, and the expenses incurred by him in distributing that sum amongst those persons shall be borne by him and not retained out of that sum.
(5) If at a meeting called for the purpose of approving any payment as required by clause (b) of sub-section (4), a quorum is not present and, after the meeting has been adjourned to a later date, a quorum is again not present, the payment shall, for the purposes of that sub-section, be deemed to have been approved.
321. Provisions supplementary to section 318, 319 and 320.
(1) Where in proceedings for the recovery of any payment as having, by virtue

Directors, etc., with unlimited liability in limited company

322. Directors, etc., with unlimited liability in limited company.
(1) In a limited company, the liability of the directors or of any director or of the managing agent, secretaries and treasurers or manager may, if so provided by the memorandum be unlimited.
(2) In a limited company in which the liability of a director, managing agent, secretaries and treasurers or manager is unlimited, the directors, the managing agent, secretaries and treasurers and the manager of the company, and the member who proposes a person for appointment to the office of director, managing agent, secretaries and treasurers or manager, shall add to that proposal a statement that the liability of the person holding that office will be unlimited; and before the person accepts the office or acts therein, notice in writing that his liability will be unlimited, shall be given to him by the following or one of the following persons, namely, thepromoters of the company, its directors, its managing agent, secretaries and treasurers or manager, if any, and its officers.
(3) If any director, managing agent, secretaries and treasurers, manager or proposer makes default in adding such a statement, or if any promoter, director, managing agent, secretaries and treasurers, manager or officer of the company makes default in giving such a notice, he shall be punishable with fine which may extend to one thousand rupees and shall also be liable for any damage which the person so appointed may sustain from the default; but the liability of the person appointed shall not be affected by the default.
323. Special resolution of limited company making liability of directors, etc., unlimited.
(1) A limited company may, if so authorised by its articles, by special resolution, alter its memorandum so as to render unlimited the liability of its directors or of any director or of its managing agent, secretaries and treasurers or manager.
(2) Upon the passing of any such special resolution, the provisions thereof shall be as valid as if they had been originally contained in the memorandum:
Provided that no alteration of the memorandum making the liability of any of the officers referred to in sub-section (1) unlimited shall apply to such officer, if he was holding the office from before the date of the alteration, until the expiry of his then term, unless he has accorded his consent to his liability becoming unlimited.

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