ACS Divesh Goyal
(1) Every Director Shall disclose his Concern or interest in any
by giving a Notice In Writing In Form MBP 1.
Note:It is Duty of Director to give notice of interest, so it can be take note at the meeting held immediately after the date of Notice. (Rule)
2. Every Director of Company Who is any way Whether,
i. Hold More than 2% of Shareholding or
ii. Is a Promoter or
iv. CEO of the body corporate
i. Is a Partner,
ii. Owner or member
Shall disclose nature of his interest at the meeting of Board in which such contract or arrangement is discussed and shall not participate in such meeting.
Conclusion of 184:
Approval:the Transaction of a company with Related Parties which are Not in the Ordinary Course of Business and which is Not on Arm Length Price require following approval for Entering into Such Transactions with Related Party:-
1- Board Approval
Note:Such resolution can’t be pass by circulation of resolution to the Board of Directors.
2- General Meeting
For entering Transactions with related parties mention below SR is required to be passed in GM:
|NATURE OF RELATED PARTY TRANSACTION||THRESHOLD LIMIT|
|Sale, purchase or supply of any goods or materials directly or through appointment of agents (or)||Exceeding 25% of Annual Turnover|
|Selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agents (or)||Exceeding 10% of Net worth|
|Leasing of property of any kind (or)||Exceeding 10% of Annual Turnover ORExceeding 10% of Net worth|
|Availing or rendering of any services directly or through appointment of agents (or)||Exceeding 10% of Net worth|
|Appointment to any office or place of profit in the company, its subsidiary company or associate company (or)||Monthly Remuneration Exceeding Rs. 2.5 lakhs|
|Remuneration for underwriting the subscription of any securities or derivative||Exceeding 1% of Net worth|
Note:*Turnover and Net worth as per Audited Financial Statement of Preceding Financial Year.
* If any member is interested in any transaction, than such member shall not cast vote in meeting regarding such resolution.
* Exemption:No resolution is required to be passed by WOS, when Special Resolution is passed by holding company to enter into transaction with Wholly Own Subsidiary Company.
* Every Transaction enter into section 188 shall be enter into Director Report along with Justification.
Voidable Contract (Section 188 (3) :
According to the section 188, sub section (1), any contact or arrangement must be passed through Board Meeting or Shareholders Meeting, as case may be,
Suppose, the Contact has been made but the approval has not taken either in the Board Meeting or Shareholders Meeting within 3 months from the date of Contract, In that case the Contract shall be voidable at the option of the Board.
In case of Loss in Result of Contract:
If a director or employee entered into any contract and arrangement in contravention of provision of this section then company can proceed against such director and employee for recovery of any loss sustained by it from such contract.
Any director who enter any contact or any employee who is authorized to enter any contact make any default for compliance of this provisions shall be penalized in case of:
Unlisted Company: – Fine which shall not be less than 25000/- but which may extend Rs. 5,00,000/- or both
FOR LISTED COMPANIES CORPORATE GOVERNANCE IN LISTED COMPANIES:
1. Clause 49 (VII)as given in Part-B shall be applicable to all PROSPECTIVE Transactions.
2. All EXISTING Material related party contracts& arrangements as on 17th April, 2014,which will continue beyond 31st March 2015, Shall be require Share Holder Approval in the First GM held after 01st October, 2014.But companies may get approval of share holder even before 01st Oct, 2014.
Meaning of Related Party Transaction under clause 49:
Material Related Party Transaction:if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year
Exceeds 5% percent of the annual turnover OR
20% percent of the net worth of the company
As per the last audited financial statements of the company,whichever is higher.
Disclosures of Related Party Transactions:
- Website AND
- In the Annual Report
Check Point for Section 188:
If company going to enter in contract or arrangement with related parties as mention in section 2(76) for the transaction mention under section 188(1) following is the procedure:
a) Consent of Board of Director by Passing of Board Resolution for contract
b) Issue notice of General Meeting, if require
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