Clause 49 related party transaction

Co Act 2013 312 views 2 replies

CS Kushal Jain

Assistant Company Secretary & legal Offi

73 Points Joined August 2011

hi experts,

Here is a situation where a listed company having no turnover as the project are in pipeline and they have some related party transaction which have are of lower amount as rent paid and such.

Now listing agreement clause 49 says any material related party transaction requires shareholder approval also same need to be attached to CG report.

"Material transaction : if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds five percent of the annual turnover or twenty percent of the net worth of the company as per the last audited financial statements of the company, whichever is higher."

Does this co. transaction exceeds 5% of annual turnover as it has zero turnover

Replies (2)

Jaikishan

168 Points Joined May 2012

Dear Kushal

There are two conditions 5% of turnover or 20% of networth of company as per last audited financial statements whichever is higher. Since turnover is not there you can consider the amount of transaction with 20% of networth. If transaction is higher you can report it if not you cannot report

Thanks

Desai

329 Points Joined June 2014

Hello

Kindly refer the foll.amendment by SEBI vide its circular no.CIR/CFD/POLICY CELL/7/2014 dated 15.09.2014.

The Criteria have changed , please note and refer the abovesaid circular.

Amendment to Clause 49(VII)(C)
The clause shall be substituted with the following:
"(C)The company shall formulate a policy on materiality of Related Party
Transactions and also on dealing with Related Party Transactions.
Provided that a transaction with a related party shall be considered
material if the transaction / transactions to be entered into individually or taken
together with previous transactions during a financial year, exceeds ten percent
of the annual consolidated turnover of the company as per the last audited
financial statements of the company."

regds