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Related party transaction

Companies Act 2013 580 views 2 replies

Friends,

What are the relevent provisions of "RELATED PARTY TRANSACTIONS" under Companies Act, 2013?

Plz let me know.

 

Thanq

Radhika

Replies (2)

Please read section 188 of Companies Act 2013. For the definition of related party please refer section 2(76).

Summary:

Without consent of BOD given by resolution at a meeting of the board and subject to other conditions as may be prescribed, no company shall enter into any contract or arrangement with the related party with respect to sale, purchase, lease, dispose, rendering of services, related partys appointment etc.

Section 188 states where any director is interested in any contract or arrangement with a related party, such director shall not be present at the meeting during discussions on the subject matter of the resolution relating to such contract or arrangement. If all the directors are interested in a transaction say in case of group companies having common directors, such a transaction cannot be approved in Board Meeting. Hence to approve such transaction a Member's meeting would be called. What if the members and directors are the same. As per section 188, Second proviso, no member shall vote to approve any transaction, he is interested in. In this situation, how can one approve such transaction in pvt. cos.

Experts' views are solicited.


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