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Section 188

Sagar (AM) (123 Points)

23 April 2014

Dear All,

Please advise on below issue

In case of private company having paid up capital of Rs. 15 crores where all the memebs are family memebers, how will be the compliance of passing SR will be fullfiled ? when section says "Provided further that no member of the company shall vote on such special resolution, to approve any contract or arrangement which may be entered into by the company, if such member is a related party".

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P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 23 April 2014

Pl note that the problem will arise only if contract with a related party is to be approved which is not in the ordinary course of business or which is not on an arm's length basis. This will be a common problem to be faced by all companies and we can expect some relief from MCA in the times to come. As of now, there seems to be no solution except to transfer some shares to outsiders so that the resolution can be passed.

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