RELATED PARTY TRANSACTION UNDER SECTION 188 OF COMPANIES ACT, 2013 (CA, 2013)
| Related Party Transactions | Related Party |
| 1. Sale/Purchase/Supply of goods or materials
2. Selling/Buying/Dispose of any property 3. Lending of any property 4. Availing/rendering of any services 5. Appointment of any agent for purchase/sale of goods/materials/services/property 6. RP’s appointment to any office or place of profit in the Co./Subsi./Associate Co. 7. Underwriting the subscription of any Securities/Derivatives Aforesaid items can be passed by BR only. But If limits* exceeds then OR would be required, Exception: However, there is no need to take Shareholders approval if the transaction are held between Holding and Wholly Owned Subsidiary Company (WOS) |
1. Director or his relative 2. KMP or their relatives 3. A firm, in which Director or Manager of his relative is PARTNER 4. A Private Co., in which Director or Manager or his relative is DIRECTOR/MEMBER 5. A Public Co., in which Director or Manager or his relative is DIRECTOR and holds together with relative more than 2% of paid up share capital. 6. Any Body Corporate whose BOD/MD/Manager is accustomed to act on instructions of Director/Manager. 7. Any person on whose advice/directions a director/manager is accustomed to act. 8. Any company which is- – Holding/subsidiary/associate co. – subsidiary of a holding co. – An investing company or venture of the company 9. A director or KMP of the holding company or his relative⇓ |
Points to be remember:
1. FOR EVERY RPT, the company requires to take Audit Committee approval, even if the transactions are within limits or under ordinary course of business or arm’s length basis.
2. No need to take Board’s approval if the transaction undertaken was under ordinary course of business.
3. Interested Member can’t vote in the RPT resolution. [exempted for Private Companies]
4. If, 90% (in numbers) members are interested, then they are eligible to vote.
5. Every contract or arrangement shall be stated in Board’s Report.
6. Any resolution w.r.t. RPT can be ratified within 3 months from the date of contract or arrangement was entered into.
| *Limits which required approval of Shareholders (OR): | |
| a. Sale/Purchase/Supply of goods or materials | > 10% of the turnover |
| b. Selling/Dispose/Buying property | > 10% of Net worth |
| c. Leasing of property | > 10% of the turnover |
| d. availing/rendering of any services | > 10% of the turnover |
| e. Appointment of RP to any office or place of profit | > 250000 monthly |
| f. remuneration for underwriting the subscription of any securities | > 1% of net Worth |
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