All directors of a company are interested in a contract.What should the company do to make it possible to enter into the contract without violating Section 297 of the Companies Act,1956?
Under section 300 of the Act any director interested in a contract is prohibited from taking part in the discussion on that matter at the Board Meeting. Further his presence shall not be taken into account for the purpose of counting quorum at the time of such discussion and he is also not entitled to vote on that matter and if he does vote, his vote shall be void.
If all directors are interested in a contract, quorum cannot be formed at the Board Meeting and in the absence of disinterested quorum, the Board cannot approve the contract.
So the matter should be referred to the general Meeting for approval.Since the General Meeting is the supreme body in a company, it is proper to get such approval from the General Meeting.
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