Analysis on Related Party Transaction Under Section 188 of the Companies Act, 2013 – Section 188 of Companies Act, 2013 is been made effective from 01.04.2014 and since than the same been amended nine times till date. In this article Analyses Provision of Section 188-
Some Important Definitions:
1. Goods means every kind of movable property other than actionable claim and money and includes stock and shares, growing crops, grass attached to or forming part of the land which are agreed to be severed before sale or under contract of sale.
2. “office or place of profit” means any office or place—
(i) if the director receives from the company anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
(ii) if any individual other than a director or any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding receives from the company anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
3. “arm’s length transaction” means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.
♦ In case of Wholly Owned Subsidiary, the resolution passed by the holding company shall be sufficient for the purpose of entering into the transaction between the wholly owned subsidiary and the holding company.
Penalty for Contravention under Section 188
For Directors or any other employee in default:
Listed Company
and/or
Other than Listed Company
About the Author
Author is Divya Goel, ACS working as Assistant Manager- Company Secretary with Neeraj Bhagat & Co. Chartered Accountants, a Chartered Accountancy firm helping foreign companies in setting up business in India and complying with various tax laws applicable to foreign companies while establishing their business in India.