1. Where One Person Company limited by shares or by guarantee enters into a contract with the sole member of the company who is also the director of the company, the company shall, unless the contract is in writing, ensure that the terms of the contract or offer are contained in a memorandum or are recorded in the minutes of the first meeting of the Board of Directors of the company held next after entering into contract:
Provided that: nothing in this sub-section shall apply to contracts entered into by the company in the ordinary course of its business.
2. The company shall inform the Registrar about every contract entered into by the company and recorded in the minutes of the meeting of its Board of Directors under sub-section (1 ) within a period of fifteen days of the date of approval by the Board of Directors.
Legal Commentary & Landmark Judgments: Section 193
Section 193 prescribes mandatory governance and recording procedures for contracts entered into by a One Person Company (OPC) with its sole member who is also a director, eliminating conflicts between the sole proprietor's individual capacity and corporate personality.
In disputes with tax authorities or creditors seeking to pierce the corporate veil of an OPC, produce the certified Board minutes and the RoC acknowledgment receipt filed within 15 days under Section 193. Demonstrating rigorous compliance with Section 193 provides absolute evidentiary protection against allegations that corporate transactions were personal drawings or sham arrangements.