Thus, the term ‘related party’ in the above context refers only to such related party as may be a related party in the context of the contract or arrangement for which the said resolution is being passed.ġ.1.6: Further, a transaction of giving loan, making investment, providing guarantee or security is a transaction of a financial nature and is not covered under Section 188 of the Act. G) underwriting the subscription of any securities or derivatives thereof, of the company:ġ.1.3: The requirements prescribed under Section 188 are only applicable to the aforesaid transactions.ġ.1.4: As per Second proviso of Section 188(1), related party shall not cast his vote on such Resolution to approve any contract or arrangement which may be entered into by the company.ġ.1.5: MCA vide its General Circular dated 17 th July, 2014 has further clarified that the ‘ related party’ referred to in the second proviso, as stated above, has to be construed with reference only to the contract or arrangement for which the said resolution is being passed. The list of RPTs are as follows:Ī) sale, purchase or supply of any goods or materials ī) selling or otherwise disposing of, or buying, property of any kind ĭ) availing or rendering of any services Į) appointment of any agent for purchase or sale of goods, materials, services or property į) such related party’s appointment to any office or place of profit in the company, its subsidiary company or associate company and While ‘contract’ envisages a written / formal binding document, ‘arrangement’ may be with or without a written document.ġ.1.2: Section 188 of the Act lists out certain transactions which will be considered as RPT under the Act. The expression ‘contract or arrangement’ has different connotations under the Act. Meaning of Related Party Transactions (RPT):ġ.1 For both Unlisted and Listed Companies:ġ.1.1: Related party transactions means contracts or arrangements between a company and its related parties with respect to transactions covered in Section 188 of the Companies Act, 2013 (hereinafter referred to as “the Act”).
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