Sec.188
This query is : Resolved
Tripti Agarwal
(Querist)
07 September 2016
Does director remuneration amount to related party transaction?
CA SAGAR M. AHUJA
(Expert)
07 September 2016
As Per Section 2 (76) of the Companies Act, 2013
“Related party”, with reference to a company, means—
(i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a partner;
(iv) a private company in which a director or manager is a member or director;
(v) a public company in which a director or manager is a director or holds along with his relatives, more than two per cent. of its paid-up share capital;
(vi) anybody corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a director or manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;
(viii) any company which is—
(A) a holding, subsidiary or an associate company of such company; or
(B) a subsidiary of a holding company to which it is also a subsidiary;
(ix) such other person as may be prescribed;
Hence, Remuneration Given to director is transaction with Related Party
Thanks.
“Related party”, with reference to a company, means—
(i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a partner;
(iv) a private company in which a director or manager is a member or director;
(v) a public company in which a director or manager is a director or holds along with his relatives, more than two per cent. of its paid-up share capital;
(vi) anybody corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a director or manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;
(viii) any company which is—
(A) a holding, subsidiary or an associate company of such company; or
(B) a subsidiary of a holding company to which it is also a subsidiary;
(ix) such other person as may be prescribed;
Hence, Remuneration Given to director is transaction with Related Party
Thanks.
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Tripti Agarwal
(Querist)
07 September 2016
Thank You Sir
Pratik Shah
(Expert)
09 September 2016
I do not completely agree to above view. For the purpose of Section 188, remuneration to Director can not be a related party transaction.
Section 188 (1) of Companies Act, 2013 has specified transactions on which section 188 applies.
Even though Director is 'Related Party' as per Section 2(76), remuneration to such director can not be 'a related party transaction' for the purpose of Section 188 of Companies Act.
However, it is related party transaction as per AS-18.
Section 188 (1) of Companies Act, 2013 has specified transactions on which section 188 applies.
Even though Director is 'Related Party' as per Section 2(76), remuneration to such director can not be 'a related party transaction' for the purpose of Section 188 of Companies Act.
However, it is related party transaction as per AS-18.
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