Does Sharing a common place of work against rent comes under Related party Transactions

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This discussion explores whether group companies sharing office space, manpower, and facilities in a building owned by one of the group companies falls under Related Party Transactions (RPT) as per Section 184 of the Companies Act. The core issue is determining an arm's length rental price to avoid triggering RPT provisions. The thread seeks advice on how to calculate fair rent, if there are exemptions, and the legal validity of a co-lease agreement for shared space.

Prakash Joshi

Prakash Joshi (Querist)

16 July 2025 Dear Friends,
There are 4 Pvt Ltd cos in a group.
A Pvt. owns a commercial building on one floor of which it has its own office and as well as the offices of other group companies which share common space, manpower and facilities. They have made this place as a corporate office and to register it as a communication office for bank purpose.The banks want them to provide a proof of tenancy ie. rent agreement.But the problem comes with the provisions of Related party transactions under section 184 of CA

All other floors are available to let out and rent is very high in the area. So if A Pvt Ltd charges a rent which is not an arm's length price, then provisions of RPT. will tigger.
So, please let me know your news on the following.

1. Is this transaction i.e. sharing common space attracts related party transactions.
2.How to determine the rent payable by each co that it doesn't attract RTP provisions
3. Is there any way that the RPT doesn't apply in this matter?
4. Can a single rent agreement be made as a co-lease in which one company is lessor and rest 3 as lessee and a common terms and conditions applicable to all is it legally acceptable agreement.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

19 July 2025 You can consider it as permission to use table space at lower rate. Contact a professional to draft such agreement which should be valid for GST registration.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

26 September 2025 Good luck...

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