Re: [CSMysore] Related party Transaction U/s 188

[Rajesh]

Since he is a Director it is RPT as per AS 18 only and NOT as per Section 188.

On Wed, Oct 11, 2023 at 10:51 AM Abhilash Gupta <abhilash....@gmail.com> wrote:

if the company is paying salary of more than 250000 per month to any director then will it be considered as RPT?


Case 1- he is not a relative of Director


Case 2- he is relative of other two whole time director.



Is transaction is  considered rpt only if the payment made  to a relative of director?  The director alone cant be treated as RP

Kindly Help

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[Ashish Gupta]

Sec. 188 attracts, if the person is getting any amount other than/ in addition to Remuneration as Director

 
AKG & CO
COMPANY SECRETARIES
FCS Ashish Gupta

A-16 Jitar Nagar, Parwana Road

Near Preet Vihar Metro Station, Delhi - 110051

09312210264

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[Rajesh]

Agree with Aashishji.  If it is merely Remuneration then Section 188 won't be applicable.

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[Pankaj Khandelwal]

Hi,

The provision of Section 188(1) act says, except with the consent at a meeting

 "..................no company shall enter into any contract or arrangement with a related party with respect to—

(a) sale, purchase or supply of any goods or materials;
(b) selling or otherwise disposing of, or buying, property of any kind;
(c) leasing of property of any kind;
(d) availing or rendering of any services;
(e) appointment of any agent for purchase or sale of goods, materials, services or property;
(f) such related party's appointment to any office or place of profit in the company, its subsidiary company or associate company; and

(g) underwriting the subscription of any securities or derivatives thereof, of the company: 

................."

"......... the expression “office or place of profit” means any office or place—
(i) where such office or place is held by a director, if the director holding it 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;

........................."

Yes, there are some exceptions/exemptions mentioned further in the provisions which the company need to check what is applicable in its case specifically(refer Section 188).

Now, who are covered under related party, it is mentioned in the definition under section 2(76), the part of this Section is as follows:

"related party", with reference to a company, means—

(i) a director or his relative;

(ii) a key managerial personnel or his relative;

....................."

Hence, my view, the director is a related party in any case and any transaction with the related party in general should be called as related party transaction and the provisions may be followed as per the specific applicability detailed in the provisions.

Feel free to discuss further.

Pankaj K

Follow: https://www.linkedin.com/in/cspankaj/

www.PankajKhandelwal.in

[Rajesh]

Pankaji, undoubtedly any transaction with the Director is a RPT, but the question is whether it (giving remuneration to Director) will come under Section 188.  My understanding is No.  

Any other view is always welcome.

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[Ajaykumar Vishwakarma]

Hi Rajesh,

Remuneration given to directors shall not fall under 188(1). The same have to be among those transaction as prescribed under 188(1), then only the compliances shall be attracted.

Best Regards,

Ajay Vishwakarma

+91 9022957279

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