Answer :
The Companies Act 2016 provides a framework for addressing the issue of directors or persons connected to directors entering into contracts with the company.
This discussion examines the relevant provisions of the Companies Act 2016, specifically sections 221, 222, and 234, and explores any applicable case laws that guide this issue.
Section 221 of the Companies Act 2016 addresses the general rule prohibiting a director from entering into a transaction or arrangement with the company, subject to certain exceptions. The section guides transactions that require shareholder approval and those that do not.
Section 222 of the Companies Act 2016 pertains to the circumstances under which a director can be granted authorization to enter into a contract with the company. It sets out the requirements for obtaining shareholder approval and emphasizes the need for transparency and fairness in the decision-making process.
Section 234 of the Companies Act 2016 deals with the disclosure of interest in existing transactions or arrangements involving directors. It mandates that directors disclose any direct or indirect interest in a contract or proposed contract with the company.
Case laws may provide additional insights into how these provisions are interpreted and applied. The discussion should include relevant cases that illustrate the application of the law and provide guidance on the permissible actions of directors and persons connected to them.
So, the Companies Act 2016 provides a framework for addressing the issue of directors or persons connected to directors entering into contracts with the company. Sections 221, 222, and 234 outline the general prohibition, the exceptions, and the disclosure requirements. Case laws further contribute to the understanding of how these provisions are interpreted and applied in practice.
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