Related Party Transaction

[Ankita Dhabhai]

Hi

As per the fourth proviso of section 188(1) of the companies Act, 2013 says that Provided also that nothing in this sub-section shall apply to any transactions entered into by the company in its ordinary course of business other than transactions which are not on an arm’s length basis.

So there is no need to pass board resolution if the transactions are on an arm's length basis?

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Thanks & Regards Ankita Dhabhai ACS, LLB, M.com, B.com.   +91 9167375508   cs.an...@gmail.com| ankitadh...@gmail.com

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[V Kartik]

Can you elaborate your query further as to what is the transaction that is entered into ?

Kartik

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[Ankita Dhabhai]

Normal sale purchase with the subsidiary and associate companies.

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[Tanvi Aggarwal]

Yes.

Further the definition of related party at 2 (77), point (viii) is not applicable with respect to private companies for Section 188.

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Regards

Tanvi- Aggarwal
9999629990

[V Kartik]

According to me, board resolution is required as per the explanation given in point no. 2 of Rule 15(3) of Companies (Meetings of the Board & it's powers) Rules, 2014.

Further the second proviso of Sec 188(1) which talks about voting of members is not applicable to private companies.

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Kartik

[Tanvi Aggarwal]

1. Its simple, first check whether you transaction falls under section 188 or not;

2. Check whether the party is actually a replated party or not;

3. If at arms length and in the ordinary course of business, you need not even record in the minutes. If you still want to just write in the narration and the Board Resolution- just for the knowledge and not as per statutory requirement since the transaction is at arms lengh and in the ordinary course of business the consent of the board be and is hereby accorded..................

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[ishma...@gmail.com]

Hi,

As per Mca notification dated 5/6/2015 section 2(76)(viii) is not applicable to private limited company hence you are not required to pass a board resolution in case of transactions with subsidaries. However, the same need to be shown under related party transaction in the notes to account of the financial statement and AOC-2 annexed to the board report.

Thanks

CS Ishmavel

Sent from my iPhone

On 03-Mar-2020, at 7:27 PM, Tanvi Aggarwal <tanviagg...@gmail.com> wrote:



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[Ankita Dhabhai]

I m talking about fourth proviso

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[Ankita Dhabhai]

  1. Its simple, first check whether you transaction falls under section 188 or not;

2. Check whether the party is actually a replated party or not;

3. If at arms length and in the ordinary course of business, you need not even record in the minutes. If you still want to just write in the narration and the Board Resolution- just for the knowledge and not as per statutory requirement since the transaction is at arms lengh and in the ordinary course of business the consent of the board be and is hereby accorded.................. as per fourth proviso????

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[V Kartik]

I'm sorry, I was wrong.

If a transaction takes place between holding & subsidiary companies, board resolution is not required as per the 5th proviso of Sec 188(1).

Kartik

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[Ankita Dhabhai]

wholly-owned subsidiary not only subsidiary....

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[V Kartik]

Read the 5th proviso once again.

Kartik

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[Ankita Dhabhai]

The fifth Proviso is 

Provided also that the requirement of passing the resolution under first proviso shall not be applicable for transactions entered into between a holding company and its wholly-owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval:]  

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[Deepa Aramani]

Board Resolution is not require for purchase and sale of transaction between holding and subsidiary Company..

On Tuesday, March 3, 2020 at 5:43:47 PM UTC+5:30, Ankita Dhabhai wrote:

Hi

As per the fourth proviso of section 188(1) of the companies Act, 2013 says that Provided also that nothing in this sub-section shall apply to any transactions entered into by the company in its ordinary course of business other than transactions which are not on an arm’s length basis.

So there is no need to pass board resolution if the transactions are on an arm's length basis?

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Thanks & Regards Ankita Dhabhai ACS, LLB, M.com, B.com.   +91 9167375508

cs.a...@gmail.com| ankitadhabha...@gmail.com

[Bijay Kumar]

Yes but you should have documents to provide comfort to Audit committee that its arms length 

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