AOC-2 Reporting

[pooja Shetty]

Hi All,

Please share your opinion on reporting under AOC-2 .

When we show the transaction at arms length and ordinary course of business then as per Section 188 (proviso detailed below) the entire section is not applicable which means AOC-2 is also not applicable.

"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:"

Do we still have to figure out the MATERIAL related party transactions at arms length and ordinary course of business? and report under AOC-2? 

Please share opinion for private Limited company

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Thanks & Regards,

CS Pooja Shetty

8879700499

[sagar nagarkar]

Hello Pooja & all, 

Governing section/rule of AOC-2 is S. 134 & Rule 8 of Companies (accounts) Rule, 2014, 

Both the section 188 & 134 read with R. 8 serves different purposive interpretations,

S. 188 speaks about whether to take approval or not for RTP & its conditions, While S. 134, R. 8 mandates to report any RTP in the board's report, irrespective of whether the transaction is material or at ALP or in the ordinary course of business or not.

Thanks & Regard,

Sagar Vijay Nagarkar

9970955081

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[CS V Kartik]

If the transaction is at arm's length & in the ordinary course of business, then there's no need to attach AOC-2 as its outside the ambit of Sec 188(1).

Kartik

On Thu, Dec 16, 2021 at 11:38 AM pooja Shetty <pooja.s...@gmail.com> wrote:

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[pooja Shetty]

Thank you Sagar and Karthik,

I am also of the opinion that disclosure is not mandatory for arms length and ordinary course transactions.

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[sagar nagarkar]

Hii Pooja & Kartik, 

Refer to the standard format of AOC-2, there are 2 sections for RTP disclosures, 

i.e. 

1. if transactions are not at ALP,

2. if transactions are not at ALP 

I guess you must make disclosure of RTP, even if it is a one rupee transaction.

Your faithful,

Sagar Vijay Nagarkar

9970955081

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[CS V Kartik]

Dear Sagar,

The 3rd proviso of Sec 188(1) is very clear in its context. It clearly says that if the transactions are at arm's length & in the ordinary course of business, Sec. 188 will not apply to such transactions. Hence, reporting in AOC-2 is not required.

Kartik

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[RaHuL Sharma]

In form both options are available, it's better to show

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[sagar nagarkar]

Dear Kartik, 

As i said earlier, S. 188 & S. 134 read with rule 8, serves different purposes,

S. 188 speaks about whose prior approval is required & the preconditions for entering into RTP & 

while S. 134 R.8 has disclosure related requirements after entering into RTP. 

Your faithful,

Sagar Vijay Nagarkar

9970955081

 Defeat is not final until we refuses to awake....! 

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[CS V Kartik]

That's right but my point is transactions which are outside the purview of that section need not be disclosed. Hence, the same is not mandatory in such cases. This is my opinion. If you feel it's necessary to disclose, you can do the same. 

Kartik

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[pooja Shetty]

Hi Sagar,

 

Rule 8 says: 

The Report of the Board shall contain the particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the  Form No.AOC-2.

and Section 188 (1) is not applicable as per proviso: "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"

In Board meetings as well, noting of such related party transaction is sufficient. No Board resolution is mandatory.

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