Related party transaction

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Gargi Ranade (Querist)
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30 June 2015 Dear All,

We are private limited Company and wholly owned subsidiary of Japanese Company. We are working in capacity of contract manufacturer for our parent company.

Our entire export is routed through parent company and its subsidiaries spread world wide. This transaction are carried on the basis of sale purchase agreement eneterd in 2010.

As per provision of section 188 (2) every contract or arrangement enetered into with related party has to be reffered in the Board Report.

Recent exemption dated 5th June 2015,has exempted transaction entered into between Pvt. Co. with holding and its subsidiary company from the purview of related party transaction.

Now my query is do i need to provide details of these transaction in Board Report ??

Pratik Shah

Pratik Shah (Expert)
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01 July 2015 I think you need to recheck the sections and amendment again.

First of all, exemption to private companies issued on 5th June, 2015 does not have any exemption for subsidiary-holding in case of Section 188. It has given exemption for second proviso of Section 188(1).

Secondly, the exemption you are talking about has been given in the Companies Amendment Act 2015 but it has only given exemption to comply with first proviso of Section 188(1) regarding passing of resolution in general meeting.

Except these both proviso, every provisions of Section 188 is applicable to every company. Hence, you need to include details of this transactions in Board report.

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On a separate note, if you see third proviso of Section 188(1), it has given an exemption if the transaction is in ordinary course of business and it is on arms length basis. I think this exemption might be applicable in your case. If it is applicable, then you do not need to see anything in Section 188.

Gargi Ranade

Gargi Ranade (Querist)
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01 July 2015 Dear Sir,

Thanks a lot for your kind reply, I was referring to the very first exemption noted on 5th June 2015 for private Company it has specifically exempted provision of Section 2 (76)(viii)from the applicability of the Section 188 , hence I concluded that as there is specific exemption to Pvt. Company , I need not require to give the details in Form AOC.

Further, we believe that our transaction were on arms length price and normal business transaction , further ,I refer to the clarification issued by MCA on General Circular No. 30/2014, Dated: 17th July 2014 wherein transaction occurred through the already existing contract are specifically exempted from compliance if it has duly complied with the Section 297 of the Co. Act 1956.

We have entered into contract under co. Act 1956 and duly complied with the provision of Section 297.

hence I think we need not require to comply with the section 188 (2)

Pratik Shah

Pratik Shah (Expert)
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01 July 2015 I am sorry for the first para.
yes, you are correct. you do not need to comply Section 188(2)

Pratik Shah

Pratik Shah (Expert)
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01 July 2015 I am sorry for the first para.
yes, you are correct. you do not need to comply Section 188(2)

Gargi Ranade

Gargi Ranade (Querist)
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02 July 2015 Dear Sir,

Thanks a lot for your kind confirmation.

Regards,

Gargi

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