Section 238, The Companies Act, 2009

(1) Unless otherwise provided in the company’s articles,a director, notwithstanding section 235, shall be entitled to enter into a contract with the company and, subject to compliance with section 231 and subsections (2) to (7), such contract or any other contract by the company in which any director is in any way interested shall not be liable to be avoided nor shall any director be liable to account for any profit made thereby by reason of such director holding that office or of the fiduciary relationship thereby established. (2) Every director who is in any way, whether directly or indirectly, materially interested in any contract or proposed contract entered into or to be entered into by or on behalf of the company shall declare the nature and extent of his interest at a meeting of the directors of the company. (3) In the case of a proposed contract the “declaration” required by this section to be made by a director shall be made at the meeting of the directors at which the question of entering into the contract is first taken into consideration or, if the director was not at the date of that meeting interested in the proposed contract, at the next meeting after he became so interested; and in a case where the director becomes interested in a contract after it is made the declaration shall be made at the first meeting of the directors held after the director becomes so interested. (4) For the purposes of this section, a general notice in writing given to the directors of the company by a director to the effect that he is a member of a specified company or firm and is to be regarded as interested in any contract which may, after the date of the notice, be made with that company or firm, shall be deemed to be a sufficient declaration of interest in relation to any contract or proposed contract so made or to be made– (a) if there is stated in the notice the nature and extent of the interest of the director in such company or firm; Contracts in which directors are interested. Consent of directors in connection with sales. 174 175 (b) if at the time the question of confirming or entering into the contract is first taken into consideration the extent of his interest in such company or firm is not greater than is stated in the notice; (c) no general notice shall be of any effect unless it is given at a meeting of the directors or the director giving the notice takes all reasonable steps to ensure that it is brought up and read at the next meeting of directors after it is given; (d) such general notice shall not be effective for more than twelve months but may from time to time be renewed. (5) A director of the company shall not enter into any contract on its behalf in which he or, to his knowledge, any director of the company or any associated company is in any way materially interested, whether directly or indirectly, until a resolution has been passed by the directors approving it. (6) In the case of any proposed contract in which the officer is himself interested he shall, prior to the passing of the approving resolution, declare the nature and extent of his interest in the contract at a meeting of directors or by written notice given to the director or such other director. (7) A director shall not vote in respect of any contract or arrangement in which he is materially interested and if he does so his vote shall not be counted, nor shall he be counted in the quorum required for that business; but neither of these prohibitions shall apply to– (a) any arrangement for giving any director any security and indemnity in respect of money lent by him to or obligations undertaken by him for the benefit of the company; (b) any arrangement for the giving by the company of any security to a third party in respect of a debt or obligation of the company for which the director himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the deposit of a security; or (c) any contract by a director to subscribe for or underwrite shares or debentures of the (8) A copy of every declaration made and notice given in pursuance of this section shall, within three days after the making or giving, be entered in a book kept for this purpose. (9) The book shall be open for inspection without charge by any director, secretary, auditor or member of the company at the registered office of the company and shall be produced at every general meeting of the company and at any meeting of the directors if any director so requests in sufficient time to enable the book to be available at the meeting. (10) Any director or officer who fails to comply with any of the provisions of this section shall be guilty of an offence and be liable to a fine not exceeding Le5,000,000 (11) If a company fails to comply with subsections (8) and (9), the company and every officer of the company who is in default Le3,000,000 and if any inspection or production required is refused, the court may by order compel an immediate inspection or production. (12) For the purposes of this section, an interest merely as holder of debentures, or of not more than 2 per cent of the shares or any class of shares, of a public company shall not be deemed to be a material interest. 176 177