Sale of property of company to it's director

Pvt ltd 7711 views 1 replies

What steps should be taken by a private limited company while selling immovable property in company's name to one of its directors

The sale value of the property is more than it's purchase value

The property is sold at fair market value.

Replies (1)

If the Private Limited Company sells one of its property to any of the Director of the Company, firstly, the Company has to  observe that there shall be the mandatory transfer or the sale deed duly registered, notarized and stamped. The stamp duty has to be paid as per the respective stamp duty act of the state as per the provisions of Indian Stamp Act 1899 which would depend upon the circle rate.

Further the sale of imovable property to buyer would involve the capital gain liability on seller wjich could be either the LTCG or STCG depending upon the property.

Further as per the provisions of section 188 of the Companies act 2013, selling of property by the Company to director is the related party transaction and if the sale value of the property is more than 10 percent of the net worth of the Company, Company has to pass ordinary resolution in the general meeting and if the sale value is less than 10 percent of the net worth of the Company, no need to pass any ordinary resolution.

Entry in the registers has to be made under the provisions of section 189 of the Companies Act 2013 which has to be ratified by the Board in every next Board meetig but if the transaction is in the ordinary course of business and arm lenght basis no need to approve the transaction at every Board meeting as it would not invlove any differential of interest.


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