Related party transaction - section 188

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Supriya (Querist)
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18 August 2015 Dear Experts,

Can a director let out a portion of his house for rent to the Company (Private) to carry its business, as a branch office?
Will it be a related party transaction?
If yes, what are the compliance's and if no, then please provide reasons for the same.

Thanks in advance.

Pratik Shah

Pratik Shah (Expert)
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18 August 2015 Yes..it will be related party transaction. Please refer Section 188 of Companies Act 2013 for compliances.

Let me know if you have any further queries.

Supriya

Supriya (Querist)
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18 August 2015 Thanks Sir.

As per the Rules if leasing then 10% of networth/ annual turnover or Rs.100 crores w.e.is lower is permitted by passing Board resolution.

Here the Company is newly incorporated and the paid up capital is Rs. 10,000/- only.

Can you please suggest and provide checklist of activities to be complied as per the Companies Act, 2013.

Pratik Shah

Pratik Shah (Expert)
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18 August 2015 It is simple procedure.
Company just need to have Board meeting, wherein board should approve Leasing of Property for office (since in your case, limit is not exceeded). Then you can enter into an agreement for Leasing of Property.

The main point of Section 188 is to take prior approval or Board or Shareholder, as the case may be, before entering into such transactions.

Also ensure that you comply with whatever has been written in Section 188 and its Rules.

Supriya

Supriya (Querist)
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19 August 2015 Thanks once again.

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