Companies Act, 1973 (Act No. 61 of 1973)Chapter VIII: DirectorsRestrictions on Directors, their Powers and Certain Acts222. Restriction on issue of shares and debentures to directors |
| 1) | No provision in any memorandum or articles or in any resolution of a company authorizing the directors to allot or issue any shares or debentures convertible into shares of the company at the discretion of the directors, shall authorise the allotment or issue of any such shares or debentures to any director of the company or his nominee, or to any body corporate which is or the directors of which are accustomed to act in accordance with the directions or instructions of such director or nominee, or at a general meeting of which such director or his nominee is entitled to exercise or control the exercise of one-fifth or more of the voting power, or to any subsidiary of such body corporate unless- |
| a) | the particular allotment or issue has prior to the allotment or issue been specifically approved by the company in general meeting; or |
| b) | such shares or debentures are allotted or issued under a contract underwriting such shares or debentures; or |
| c) | such shares or debentures are allotted or issued in proportion to existing holdings, on the same terms and conditions as have been offered to all the members or debenture-holders of the company or to all the holders of the shares or such debentures of the class or classes being allotted or issued; or |
| d) | such shares or debentures are allotted or issued on the same terms and conditions as have been offered to members of the public. |
| 2) |
| a) | Any director of a company who contravenes or permits the contravention of this section, shall be guilty of an offence and shall be further liable to compensate the company for any loss, damages or costs which the company may have sustained or incurred thereby. |
| b) | No proceedings to recover any such loss, damages or costs shall be commenced after the expiration of two years from the date of the allotment or issue. |