Rent to director

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Revati Sathe (Querist)
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26 September 2016 A private limited company is giving rent to its Directors Rs.1,50,000/- per month . ( No proer Rent Agreement was executed ) A company is profit making and having turnover exceeding Rs. 2 Crores.

Whether this transaction is related party and if yes there are only two directors husband and wife what will be solution.

Pratik Shah

Pratik Shah (Expert)
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27 September 2016 Obviously, this is a related party transaction under Section 188. If the amount of rent is exceeding the limit specified in Section 188 read with relevant rules, then Company needs to pass special resolution before entering into such transaction. Kindly refer the provisions of Section 188.

Even though they both are related parties, an exemption has been to Private Companies (notification dated 05th June, 2015) in which interested party can vote for such resolution.

c.bakshi

c.bakshi (Expert)
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28 September 2016 if such transaction is in the ordinary course of business and is at arm length basis, then only a disclosure is requirement to be given and such no approval is required. however, if on the company Provisions of Internal audit is applicable, then such transaction has to be approved by such commitee.

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