SlideShare a Scribd company logo
RELATED PARTY
TRANSACTION
Under Companies Act, 2013
CS BhuwanTaragi
Why to regulate or disclose Related PartyTransaction?
CS BhuwanTaragi -The LawTalks
RPT may have a significant effect on the transactions or profit
and loss of the Company.
Transparency in such Related party transactions is essential.
Transactions with related parties need not always be disadvantageous to
the parties concerned.The concern arises only when the transactions which
are not at arm’s length prices beneficial to a related party but unfavorable
to the other stakeholders.
Provisions
defined for
RPT
Sec 188 of
Companies
Act, 2013
AS-18/ IND-
AS 24
Reg.23ofSEBI
(LODR)
Regulations,
2015
CS BhuwanTaragi -The LawTalks
Definition of ‘Related Party’ [Sec 2(76)]
Related
party
means,
with
reference
to a
Company
(i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is
a partner;
(iv) a private company in which a director or manager
or his relative is a member or director;
Continue…
CS BhuwanTaragi -The LawTalks
(v) a public company in which a director or manager is a director and holds along with
his relatives, more than 2% of its paid-up share capital;
(vi) any body corporate whose Board of Directors, MD or manager is accustomed to
act in accordance with the advice, directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a director or manager is
accustomed to act:
But sub-clauses (vi) and (vii) shall not apply to the advice, directions or instructions
given in a professional capacity;
Continue…
CS BhuwanTaragi -The LawTalks
(viii) any company
which is—
(A) a holding, subsidiary or an associate
company of such company; or
(B) a subsidiary of a holding company to which
it is also a subsidiary; (Common Holding co.)
(C) an investing company or the venturer of the
company;
Investing company or the venturer of a company” means a body corporate whose
investment in the company would result in the company becoming an associate company of
the body corporate.
(ix) such other person as may be prescribed;
CS BhuwanTaragi -The LawTalks
Definition of Relative as per sec. 2(77): -
with reference to
any person,
‘relative’ means
any one who is
related to
another, if—
• They are members of a Hindu
Undivided Family (HUF)
• They are husband and wife; or
• One person is related to the other in
such manner as may be prescribed;
CS BhuwanTaragi -The LawTalks
A person shall be deemed to be the relative of another
as per rule 4 of Companies (specification of definitions details) Rules, 2014
Father
(includes step
father)
Mother
(includes
step-mother)
Son (includes
step-son)
Son’s wife
Daughter
Daughter’s
husband
Brother/ sister
(includes
step-
brother/sister)
CS BhuwanTaragi -The LawTalks
Definition of Related Party under SEBI
LODR, 2015
Related Party
Reg. 2(1)(zb)
Related party defined
under Section 2(76) of the CA, 2013
Applicable accounting standards (AS 18 /IND-AS 24)
Any person or entity belonging to the promoter or promoter
group of the listed entity and holding 20% or more of
shareholding
Definition of Related Party as per AS-18
Related
Party
Parties are considered to be
related if at any time during the
reporting period one party has the
ability to control the other party or
exercise significant influence over
the other party in making financial
and/or operating decisions.
CS BhuwanTaragi -The LawTalks
Related Party as per IND-AS 24
A person or a close
member of that
person’s family is
related to a
reporting entity if that
person:
(i) has control or joint control of the
reporting entity; or
(ii) has significant influence over the
reporting entity; or
(iii) is a member of the KMP of the
reporting entity or of a parent of the
reporting entity.
Who all are excluded in the definition of
Related Party?
Director or KMP of Associate and JV companies
Public companies where directors hold less than 2% share capital
Any person appointed in senior management of
• The company or
• Associate company or
• Subsidiary company or
• Holding Company
CS BhuwanTaragi -The LawTalks
Arm’s length transaction
a transaction
between
two related
parties
so that there is
no conflict
of interest
CS BhuwanTaragi -The LawTalks
Arm’s Len g th
Transaction
that is conducted as
if they were
unrelated
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;
(ii) where such office or place is held by
 an individual other than a director or
 by any firm, private company or
 other body corporate
(who is related party)
Explanation: “office or place of profit”
CS BhuwanTaragi -The LawTalks
if holding it receives from the company
anything by way of remuneration, salary,
fee, commission, perquisites, any rent-
free accommodation, or otherwise;
What is Related PartyTransaction?
The Companies Act, 2013 does not define the expression “Related PartyTransactions”.
Section 188 refers the expression contract or arrangement to ‘related party transactions.’
As per AS-18 Related PartyTransactions are defined as “a transfer of resources or
obligations between related parties, regardless of whether or not price is charged.”
As per IND AS -24 “A related party transaction is a transfer of resources, services or
obligations between a reporting entity and a related party, regardless of whether a price is
charged.”
CS BhuwanTaragi -The LawTalks
Related PartyTransection as per Sec. 188(1)
No company shall enter into any contract or arrangement with a related party Except
with the consent of the Board of Directors given by a resolution at BM and subject to
such conditions as may be prescribed, 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,
- Subsidiary co.
or
-Associate co.
(g)
underwriting
the
subscription of
any securities
or derivatives
thereof, of the
company:
CS BhuwanTaragi -The LawTalks
1. Contract or arrangement shall be entered with the prior approval of the company by a
resolution (Ordinary Resolution)
 in the case of a company having a paid-up share capital of not less than such amount, or
transactions exceeding such sums [threshold limit under Rule 15(3)], as may be prescribed:
Interested Shareholder/Member
2. if such member is a related party, that member shall not vote on such resolution, to approve
any contract or arrangement which may be entered into by the company
3. But Related Parties can vote on such resolution in a company in which 90 % or more
members, in number, are relatives of promoters or are related parties:
Exceptions
CS BhuwanTaragi -The LawTalks
Rule 15(2): Interested Director
Where any director is interested in any contract or arrangement with a related party:
 such director shall not be present at the meeting during discussions on the subject matter of the
resolution relating to such contract or arrangement.
5. The requirement of passing the Resolution by members under first proviso to
sec 188(1) shall not be applicable if:
transactions entered into between a holding company and its WOS
whose accounts are consolidated with such holding company and placed
before the shareholders at the GM for approval.
CS BhuwanTaragi -The LawTalks
4. Section 188(1) shall not apply to any transactions entered into by the
company
 Ordinary course of business.
 transactions which are on an arm’s length basis:
CS BhuwanTaragi -The LawTalks
Rule 15(3) of the companies(Meetings of board and its power), Rules 2014 : Prior Approval of Shareholders required:
Prior approval of shareholders of the company is required if transaction of contracts or
arrangements exceeds the with criteria as mention below- (ordinary Resolution)
SNO TRANSACTION WHEN RESOLUTION REQUIRED
1. sale, purchase or supply of any goods or material,
directly or through appointment of agent
Amounting to 10 % or more of turnover or
Rs. 100 cr.
2. selling or otherwise disposing of or buying property of
any kind, directly or through appointment of agent
Amounting to 10 % or more of net worth or
Rs. 100 cr.
3. Leasing of property of any kind Amounting to 10 % or more of net worth or
10 % or more of turnover or
Rs. 100 cr.
4. availing or rendering of any services, directly or
through appointment of agent
Amounting to 10 % or more of turnover or
Rs. 50 cr. ,
5. Appointment to any office or place of profit in the
company, subsidiary company or associate company
Remuneration exceeding Rs. 2.5 Lakhs per month
6. Underwriting the subscription of any securities or
derivatives of the company
Remuneration exceeding 1 % of net worth
whichever is
lower
whichever is
lower
whichever is
lower
whichever is
lower
Approval of RPTs in Audit committee (AC)
CS BhuwanTaragi -The LawTalks
Section 177 (4) (iv): Every Audit Committee shall act as specified by board which shall include approval or any
subsequent modification of RPTs.
 Audit Committee may make omnibus approval for RPTs proposed to be entered into by the company
subject to such conditions as may be prescribed;
 In case of transaction, other than transactions referred to in section 188, and where Audit Committee
does not approve the transaction, it shall make its recommendations to the Board
 In case any transaction involving any amount not exceeding 1 crore rupees is entered into by a director or
officer of the company without obtaining the approval of the Audit Committee and it is not ratified by the
Audit Committee within 3 months from the date of the transaction, such transaction shall be voidable at
the option of the Audit Committee and
 if the RPT is with the related party to any director or is authorized by any other director, the director
concerned shall indemnify the company against any loss incurred by it:
 The provisions of this clause shall not apply to a transaction, other than a transaction referred to in section
188, between a holding company and its WOS company.
Exceptions:
Approval Process for RPTs
Board approval
• Approval under sec.
188(1) for all RPT
which are within the
threshold limits
Members approval
• All the Material
RPTs under Reg. 23
• RPTs exceeding the
threshold limits
under Rule 15(3)
CS BhuwanTaragi -The LawTalks
Audit Committee
approval
• Prior approval for all
RPTs
• May make Omnibus
approval for certain
RPT
Section 188(3): Ratification within three Months
Where any contract or arrangement is not pre-approved by Board of directors or shareholders:-
 Same shall be ratified by board or by shareholders as case may be within 3 months from the date on which
such contract or arrangement was entered into.
 if it is not ratified, such contract or arrangement shall be voidable at the option of the Board or of the
shareholders, as the case may be and
 if the contract or arrangement is with a related party to any director, or is authorised by any other director,
such directors concerned shall indemnify the company against any loss incurred by it.
Section 188(2): Disclosure of RPT in the Board Report:
Every contract or arrangement entered into under section 188(1) shall be referred to in the Board’s
report to the shareholders along with the justification for entering into such contract or
arrangement.
CS BhuwanTaragi -The LawTalks
Contravention of Non-compliance under
Companies Act, 2013
Any director or any other employee of a company, who had entered into or authorised the contract
or arrangement in violation of the provisions of this section shall liable to —
(i) in case of listed company penalty of 25 lakh rupees
(ii) in case of any other company penalty of 5 lakh rupees
CS BhuwanTaragi -The LawTalks
Section 188(4): Recovery of any Loss from Director or any other Employee
It shall be open to the company to proceed against a director or any other employee who had
entered into such contract or arrangement in contravention of the provisions of this section for
recovery of any loss sustained by it as a result of such contract or arrangement.
Definition of Related PartyTransaction
under LODR
Under Reg 2(1)(zc) “related party transaction” means
A transfer of resources, services or obligations
 between a listed entity and a related party,
regardless of whether a price is charged and
a "transaction" with a related party shall be construed to include a single
transaction or a group of transactions in a contract:
Provided that this definition shall not be applicable for the units issued by mutual funds
which are listed on a recognized stock exchange(s);
CS BhuwanTaragi -The LawTalks
Reg. 23: Related PartyTransaction under LODR
CS BhuwanTaragi -The LawTalks
(1) The listed entity shall formulate a policy on materiality of RPTs and on dealing with RPTs
including clear threshold limits duly approved by the board of directors and such policy shall
be reviewed by the board of directors at least once every 3 years and updated accordingly
(2) All related party transactions shall require prior approval of the audit committee.
(3) Audit committee may grant omnibus approval for RPTs proposed to be entered into by
the listed entity
(4) All material RPTs shall require approval of the shareholders through resolution and no
related party shall vote to approve such resolutions
(5)The provisions of sub-regulations (2), (3) and (4) shall not be applicable in the following cases:
(a) RPT entered into between two govt. companies;
(b) RPT entered into between a holding company and itsWOS whose accounts are consolidated
with such holding company and placed before the shareholders at the general meeting for approval.
Disclosure of RPT as per SEBI(LODR),2015
CS BhuwanTaragi -The LawTalks
Regulation 53: requires Listed Entities to disclose RPT Disclosures in their annual
reports as specified in para A of ScheduleV.
Regulation 34(3) requires Listed Entities to make disclosures in their annual reports
which are specified in schedule V, These are requirements are addition to the
disclosure to be made in the Board’s Report under section 134 of CA2013
Regulation 23(9) states that Listed Entities should submit within 30 days from the
date of publication of its standalone and consolidated financial results for the half
year, Disclosure of RPT on consolidated basis in prescribed format and also publish
the same on website.
Two conditions have to be satisfied to avail of the exemptions from the
provisions of Related party u/s 188 by a Company.
1. It must be entered into by the Company in the ordinary course of its
business;
2. It must be an Arm’s length transaction.
CS BhuwanTaragi -The LawTalks
What are the conditions to avail the exemption form
provisions of section 188?
Telegram: https://t.me/TheLawTalks
Facebook Page: The Law Talks
LinkedIn: https://www.linkedin.com/in/csBhuwanTaragi
Instagram: @the_law_talks and @bhuwantaragi
Podcast: https://anchor.fm/cs-bhuwan-taragi--the-law-talks
Twitter: @csbhuwantaragi
Do write for any Queries/suggestions and to get a free PDF copy of this PPT on Slideshare

More Related Content

What's hot

Related Party Transactions
Related Party TransactionsRelated Party Transactions
Related Party Transactions
Anita Raut
 
Merger and amalgamation under companies act, 2013
Merger and amalgamation under companies act, 2013Merger and amalgamation under companies act, 2013
Merger and amalgamation under companies act, 2013
DVSResearchFoundatio
 
Reduction of share capital
Reduction of share capitalReduction of share capital
Reduction of share capital
Pankaj Malkani
 
Acceptance of deposits
Acceptance of depositsAcceptance of deposits
Acceptance of deposits
DVSResearchFoundatio
 
SEBI (Listing obligations and disclosure requirements) Regulations, 2015 - Ob...
SEBI (Listing obligations and disclosure requirements) Regulations, 2015 - Ob...SEBI (Listing obligations and disclosure requirements) Regulations, 2015 - Ob...
SEBI (Listing obligations and disclosure requirements) Regulations, 2015 - Ob...
DVSResearchFoundatio
 
Inter-Corporate Loans & Investments
Inter-Corporate Loans & InvestmentsInter-Corporate Loans & Investments
Inter-Corporate Loans & Investments
Deepak Ahuja
 
Related Party Transactions: Disclosure & Transparency
Related Party Transactions: Disclosure & TransparencyRelated Party Transactions: Disclosure & Transparency
Related Party Transactions: Disclosure & Transparency
Pavan Kumar Vijay
 
Overview of SEBI Takeover Regulations, 2011
Overview of SEBI Takeover Regulations, 2011Overview of SEBI Takeover Regulations, 2011
Overview of SEBI Takeover Regulations, 2011
Corporate Professionals
 
loans to directors (section 185)
loans to directors (section 185)loans to directors (section 185)
loans to directors (section 185)
Raju and Associates
 
Related Party Transactions by Makarand Lele
Related Party Transactions by Makarand LeleRelated Party Transactions by Makarand Lele
Related Party Transactions by Makarand Lele
Makarand Lele
 
Insider Trading : Analysis of Provisions, Offences and Penalties
Insider Trading : Analysis of Provisions, Offences and PenaltiesInsider Trading : Analysis of Provisions, Offences and Penalties
Insider Trading : Analysis of Provisions, Offences and Penalties
Corporate Professionals
 
Sebi(lodr)+regulations,+2015+ +obligations+on+listing+of+specified+securities...
Sebi(lodr)+regulations,+2015+ +obligations+on+listing+of+specified+securities...Sebi(lodr)+regulations,+2015+ +obligations+on+listing+of+specified+securities...
Sebi(lodr)+regulations,+2015+ +obligations+on+listing+of+specified+securities...
DVSResearchFoundatio
 
ARTICLES OF ASSOCIATION
ARTICLES  OF  ASSOCIATIONARTICLES  OF  ASSOCIATION
ARTICLES OF ASSOCIATION
yash nahata
 
Removal of directors
Removal of directorsRemoval of directors
Removal of directors
Uttma Shukla
 
Chapter II of Companies Act, 2013
Chapter II of Companies Act, 2013Chapter II of Companies Act, 2013
Chapter II of Companies Act, 2013
Mamta Binani
 
Din
DinDin
Capital and current account transactions under fema
Capital and current account transactions under femaCapital and current account transactions under fema
Capital and current account transactions under fema
DVSResearchFoundatio
 
Role of Directors under Companies Act 2013
Role of Directors under Companies Act 2013Role of Directors under Companies Act 2013
Role of Directors under Companies Act 2013
Corporate Professionals
 
SEBI(LODR) Regulations, 2015- Obligations on listing of specified securities ...
SEBI(LODR) Regulations, 2015- Obligations on listing of specified securities ...SEBI(LODR) Regulations, 2015- Obligations on listing of specified securities ...
SEBI(LODR) Regulations, 2015- Obligations on listing of specified securities ...
DVSResearchFoundatio
 
Merger and-amalgamation
Merger and-amalgamationMerger and-amalgamation
Merger and-amalgamation
Dwara Balaji
 

What's hot (20)

Related Party Transactions
Related Party TransactionsRelated Party Transactions
Related Party Transactions
 
Merger and amalgamation under companies act, 2013
Merger and amalgamation under companies act, 2013Merger and amalgamation under companies act, 2013
Merger and amalgamation under companies act, 2013
 
Reduction of share capital
Reduction of share capitalReduction of share capital
Reduction of share capital
 
Acceptance of deposits
Acceptance of depositsAcceptance of deposits
Acceptance of deposits
 
SEBI (Listing obligations and disclosure requirements) Regulations, 2015 - Ob...
SEBI (Listing obligations and disclosure requirements) Regulations, 2015 - Ob...SEBI (Listing obligations and disclosure requirements) Regulations, 2015 - Ob...
SEBI (Listing obligations and disclosure requirements) Regulations, 2015 - Ob...
 
Inter-Corporate Loans & Investments
Inter-Corporate Loans & InvestmentsInter-Corporate Loans & Investments
Inter-Corporate Loans & Investments
 
Related Party Transactions: Disclosure & Transparency
Related Party Transactions: Disclosure & TransparencyRelated Party Transactions: Disclosure & Transparency
Related Party Transactions: Disclosure & Transparency
 
Overview of SEBI Takeover Regulations, 2011
Overview of SEBI Takeover Regulations, 2011Overview of SEBI Takeover Regulations, 2011
Overview of SEBI Takeover Regulations, 2011
 
loans to directors (section 185)
loans to directors (section 185)loans to directors (section 185)
loans to directors (section 185)
 
Related Party Transactions by Makarand Lele
Related Party Transactions by Makarand LeleRelated Party Transactions by Makarand Lele
Related Party Transactions by Makarand Lele
 
Insider Trading : Analysis of Provisions, Offences and Penalties
Insider Trading : Analysis of Provisions, Offences and PenaltiesInsider Trading : Analysis of Provisions, Offences and Penalties
Insider Trading : Analysis of Provisions, Offences and Penalties
 
Sebi(lodr)+regulations,+2015+ +obligations+on+listing+of+specified+securities...
Sebi(lodr)+regulations,+2015+ +obligations+on+listing+of+specified+securities...Sebi(lodr)+regulations,+2015+ +obligations+on+listing+of+specified+securities...
Sebi(lodr)+regulations,+2015+ +obligations+on+listing+of+specified+securities...
 
ARTICLES OF ASSOCIATION
ARTICLES  OF  ASSOCIATIONARTICLES  OF  ASSOCIATION
ARTICLES OF ASSOCIATION
 
Removal of directors
Removal of directorsRemoval of directors
Removal of directors
 
Chapter II of Companies Act, 2013
Chapter II of Companies Act, 2013Chapter II of Companies Act, 2013
Chapter II of Companies Act, 2013
 
Din
DinDin
Din
 
Capital and current account transactions under fema
Capital and current account transactions under femaCapital and current account transactions under fema
Capital and current account transactions under fema
 
Role of Directors under Companies Act 2013
Role of Directors under Companies Act 2013Role of Directors under Companies Act 2013
Role of Directors under Companies Act 2013
 
SEBI(LODR) Regulations, 2015- Obligations on listing of specified securities ...
SEBI(LODR) Regulations, 2015- Obligations on listing of specified securities ...SEBI(LODR) Regulations, 2015- Obligations on listing of specified securities ...
SEBI(LODR) Regulations, 2015- Obligations on listing of specified securities ...
 
Merger and-amalgamation
Merger and-amalgamationMerger and-amalgamation
Merger and-amalgamation
 

Similar to Related Party Transaction as per Companies Act and SEBI(LODR)

Related party trasaction
Related party trasactionRelated party trasaction
Related party trasaction
arun2211
 
western unionRelated Person Transactions Policy
western unionRelated Person Transactions Policy western unionRelated Person Transactions Policy
western unionRelated Person Transactions Policy
finance47
 
Section 188, 184 & 189 Related Party Transacions & Rules
Section 188, 184 & 189 Related Party Transacions & RulesSection 188, 184 & 189 Related Party Transacions & Rules
Section 188, 184 & 189 Related Party Transacions & Rules
Dwarkesh K. Diwan
 
Intensive-Study-Course-on-Companies-Act-2013-Related-party-transaction.pdf
Intensive-Study-Course-on-Companies-Act-2013-Related-party-transaction.pdfIntensive-Study-Course-on-Companies-Act-2013-Related-party-transaction.pdf
Intensive-Study-Course-on-Companies-Act-2013-Related-party-transaction.pdf
CatcoreB
 
Section 185,186,188 of companies act, 2013
Section 185,186,188 of companies act, 2013Section 185,186,188 of companies act, 2013
Section 185,186,188 of companies act, 2013
arpit1314
 
Accounting Standard- 18 - Related Party Transactions
Accounting Standard- 18 - Related Party Transactions Accounting Standard- 18 - Related Party Transactions
Accounting Standard- 18 - Related Party Transactions
Krishan Singla
 
Understanding - Related Party Transactions
Understanding - Related Party Transactions Understanding - Related Party Transactions
Understanding - Related Party Transactions
Krishan Singla
 
Cross Border Mergers
Cross Border MergersCross Border Mergers
Cross Border Mergers
DVSResearchFoundatio
 
Cross Border M&A - New Rules Notified
Cross Border M&A - New Rules NotifiedCross Border M&A - New Rules Notified
Cross Border M&A - New Rules Notified
Adity Chaudhury
 
As 18
As 18As 18
As 18
Tarun Shah
 
Related Party Transaction Policy And The Subsidiaries
Related  Party  Transaction Policy And The SubsidiariesRelated  Party  Transaction Policy And The Subsidiaries
Related Party Transaction Policy And The Subsidiaries
AtishNayar
 
office depot RelatedPersonTransactionsPolicy
 office depot  RelatedPersonTransactionsPolicy office depot  RelatedPersonTransactionsPolicy
office depot RelatedPersonTransactionsPolicy
finance17
 
office depot RelatedPersonTransactionsPolicy
 office depot  RelatedPersonTransactionsPolicy office depot  RelatedPersonTransactionsPolicy
office depot RelatedPersonTransactionsPolicy
finance17
 
dana holdings RelatedPartyTransactionsPolicy_013108
dana holdings RelatedPartyTransactionsPolicy_013108dana holdings RelatedPartyTransactionsPolicy_013108
dana holdings RelatedPartyTransactionsPolicy_013108
finance42
 
dana holdings RelatedPartyTransactionsPolicy_013108
dana holdings RelatedPartyTransactionsPolicy_013108dana holdings RelatedPartyTransactionsPolicy_013108
dana holdings RelatedPartyTransactionsPolicy_013108
finance42
 
Related Party Transactions-Detailed Analysis
Related Party Transactions-Detailed AnalysisRelated Party Transactions-Detailed Analysis
Related Party Transactions-Detailed Analysis
Krishan Singla
 
Companies Act 2013 : Loans, Advances and Related Party Transactions (Sec. 185...
Companies Act 2013 : Loans, Advances and Related Party Transactions (Sec. 185...Companies Act 2013 : Loans, Advances and Related Party Transactions (Sec. 185...
Companies Act 2013 : Loans, Advances and Related Party Transactions (Sec. 185...
Chintan N. Patel
 
Takeover Code
Takeover CodeTakeover Code
Takeover Code
Pavan Kumar Vijay
 
Related party transaction policy - DMI Finance Pvt. Ltd.
Related party transaction policy - DMI Finance Pvt. Ltd.Related party transaction policy - DMI Finance Pvt. Ltd.
Related party transaction policy - DMI Finance Pvt. Ltd.
dmifinance
 
New company bill 2013
New company bill 2013New company bill 2013
New company bill 2013
Balveer Singh
 

Similar to Related Party Transaction as per Companies Act and SEBI(LODR) (20)

Related party trasaction
Related party trasactionRelated party trasaction
Related party trasaction
 
western unionRelated Person Transactions Policy
western unionRelated Person Transactions Policy western unionRelated Person Transactions Policy
western unionRelated Person Transactions Policy
 
Section 188, 184 & 189 Related Party Transacions & Rules
Section 188, 184 & 189 Related Party Transacions & RulesSection 188, 184 & 189 Related Party Transacions & Rules
Section 188, 184 & 189 Related Party Transacions & Rules
 
Intensive-Study-Course-on-Companies-Act-2013-Related-party-transaction.pdf
Intensive-Study-Course-on-Companies-Act-2013-Related-party-transaction.pdfIntensive-Study-Course-on-Companies-Act-2013-Related-party-transaction.pdf
Intensive-Study-Course-on-Companies-Act-2013-Related-party-transaction.pdf
 
Section 185,186,188 of companies act, 2013
Section 185,186,188 of companies act, 2013Section 185,186,188 of companies act, 2013
Section 185,186,188 of companies act, 2013
 
Accounting Standard- 18 - Related Party Transactions
Accounting Standard- 18 - Related Party Transactions Accounting Standard- 18 - Related Party Transactions
Accounting Standard- 18 - Related Party Transactions
 
Understanding - Related Party Transactions
Understanding - Related Party Transactions Understanding - Related Party Transactions
Understanding - Related Party Transactions
 
Cross Border Mergers
Cross Border MergersCross Border Mergers
Cross Border Mergers
 
Cross Border M&A - New Rules Notified
Cross Border M&A - New Rules NotifiedCross Border M&A - New Rules Notified
Cross Border M&A - New Rules Notified
 
As 18
As 18As 18
As 18
 
Related Party Transaction Policy And The Subsidiaries
Related  Party  Transaction Policy And The SubsidiariesRelated  Party  Transaction Policy And The Subsidiaries
Related Party Transaction Policy And The Subsidiaries
 
office depot RelatedPersonTransactionsPolicy
 office depot  RelatedPersonTransactionsPolicy office depot  RelatedPersonTransactionsPolicy
office depot RelatedPersonTransactionsPolicy
 
office depot RelatedPersonTransactionsPolicy
 office depot  RelatedPersonTransactionsPolicy office depot  RelatedPersonTransactionsPolicy
office depot RelatedPersonTransactionsPolicy
 
dana holdings RelatedPartyTransactionsPolicy_013108
dana holdings RelatedPartyTransactionsPolicy_013108dana holdings RelatedPartyTransactionsPolicy_013108
dana holdings RelatedPartyTransactionsPolicy_013108
 
dana holdings RelatedPartyTransactionsPolicy_013108
dana holdings RelatedPartyTransactionsPolicy_013108dana holdings RelatedPartyTransactionsPolicy_013108
dana holdings RelatedPartyTransactionsPolicy_013108
 
Related Party Transactions-Detailed Analysis
Related Party Transactions-Detailed AnalysisRelated Party Transactions-Detailed Analysis
Related Party Transactions-Detailed Analysis
 
Companies Act 2013 : Loans, Advances and Related Party Transactions (Sec. 185...
Companies Act 2013 : Loans, Advances and Related Party Transactions (Sec. 185...Companies Act 2013 : Loans, Advances and Related Party Transactions (Sec. 185...
Companies Act 2013 : Loans, Advances and Related Party Transactions (Sec. 185...
 
Takeover Code
Takeover CodeTakeover Code
Takeover Code
 
Related party transaction policy - DMI Finance Pvt. Ltd.
Related party transaction policy - DMI Finance Pvt. Ltd.Related party transaction policy - DMI Finance Pvt. Ltd.
Related party transaction policy - DMI Finance Pvt. Ltd.
 
New company bill 2013
New company bill 2013New company bill 2013
New company bill 2013
 

Recently uploaded

Creation or Update of a Mandatory Field is Not Set in Odoo 17
Creation or Update of a Mandatory Field is Not Set in Odoo 17Creation or Update of a Mandatory Field is Not Set in Odoo 17
Creation or Update of a Mandatory Field is Not Set in Odoo 17
Celine George
 
NIPER 2024 MEMORY BASED QUESTIONS.ANSWERS TO NIPER 2024 QUESTIONS.NIPER JEE 2...
NIPER 2024 MEMORY BASED QUESTIONS.ANSWERS TO NIPER 2024 QUESTIONS.NIPER JEE 2...NIPER 2024 MEMORY BASED QUESTIONS.ANSWERS TO NIPER 2024 QUESTIONS.NIPER JEE 2...
NIPER 2024 MEMORY BASED QUESTIONS.ANSWERS TO NIPER 2024 QUESTIONS.NIPER JEE 2...
Payaamvohra1
 
مصحف القراءات العشر أعد أحرف الخلاف سمير بسيوني.pdf
مصحف القراءات العشر   أعد أحرف الخلاف سمير بسيوني.pdfمصحف القراءات العشر   أعد أحرف الخلاف سمير بسيوني.pdf
مصحف القراءات العشر أعد أحرف الخلاف سمير بسيوني.pdf
سمير بسيوني
 
Ch-4 Forest Society and colonialism 2.pdf
Ch-4 Forest Society and colonialism 2.pdfCh-4 Forest Society and colonialism 2.pdf
Ch-4 Forest Society and colonialism 2.pdf
lakshayrojroj
 
Observational Learning
Observational Learning Observational Learning
Observational Learning
sanamushtaq922
 
78 Microsoft-Publisher - Sirin Sultana Bora.pptx
78 Microsoft-Publisher - Sirin Sultana Bora.pptx78 Microsoft-Publisher - Sirin Sultana Bora.pptx
78 Microsoft-Publisher - Sirin Sultana Bora.pptx
Kalna College
 
Accounting for Restricted Grants When and How To Record Properly
Accounting for Restricted Grants  When and How To Record ProperlyAccounting for Restricted Grants  When and How To Record Properly
Accounting for Restricted Grants When and How To Record Properly
TechSoup
 
adjectives.ppt for class 1 to 6, grammar
adjectives.ppt for class 1 to 6, grammaradjectives.ppt for class 1 to 6, grammar
adjectives.ppt for class 1 to 6, grammar
7DFarhanaMohammed
 
Andreas Schleicher presents PISA 2022 Volume III - Creative Thinking - 18 Jun...
Andreas Schleicher presents PISA 2022 Volume III - Creative Thinking - 18 Jun...Andreas Schleicher presents PISA 2022 Volume III - Creative Thinking - 18 Jun...
Andreas Schleicher presents PISA 2022 Volume III - Creative Thinking - 18 Jun...
EduSkills OECD
 
How to Setup Default Value for a Field in Odoo 17
How to Setup Default Value for a Field in Odoo 17How to Setup Default Value for a Field in Odoo 17
How to Setup Default Value for a Field in Odoo 17
Celine George
 
CIS 4200-02 Group 1 Final Project Report (1).pdf
CIS 4200-02 Group 1 Final Project Report (1).pdfCIS 4200-02 Group 1 Final Project Report (1).pdf
CIS 4200-02 Group 1 Final Project Report (1).pdf
blueshagoo1
 
The basics of sentences session 7pptx.pptx
The basics of sentences session 7pptx.pptxThe basics of sentences session 7pptx.pptx
The basics of sentences session 7pptx.pptx
heathfieldcps1
 
220711130083 SUBHASHREE RAKSHIT Internet resources for social science
220711130083 SUBHASHREE RAKSHIT  Internet resources for social science220711130083 SUBHASHREE RAKSHIT  Internet resources for social science
220711130083 SUBHASHREE RAKSHIT Internet resources for social science
Kalna College
 
A Free 200-Page eBook ~ Brain and Mind Exercise.pptx
A Free 200-Page eBook ~ Brain and Mind Exercise.pptxA Free 200-Page eBook ~ Brain and Mind Exercise.pptx
A Free 200-Page eBook ~ Brain and Mind Exercise.pptx
OH TEIK BIN
 
Bonku-Babus-Friend by Sathyajith Ray (9)
Bonku-Babus-Friend by Sathyajith Ray  (9)Bonku-Babus-Friend by Sathyajith Ray  (9)
Bonku-Babus-Friend by Sathyajith Ray (9)
nitinpv4ai
 
SWOT analysis in the project Keeping the Memory @live.pptx
SWOT analysis in the project Keeping the Memory @live.pptxSWOT analysis in the project Keeping the Memory @live.pptx
SWOT analysis in the project Keeping the Memory @live.pptx
zuzanka
 
Contiguity Of Various Message Forms - Rupam Chandra.pptx
Contiguity Of Various Message Forms - Rupam Chandra.pptxContiguity Of Various Message Forms - Rupam Chandra.pptx
Contiguity Of Various Message Forms - Rupam Chandra.pptx
Kalna College
 
Creative Restart 2024: Mike Martin - Finding a way around “no”
Creative Restart 2024: Mike Martin - Finding a way around “no”Creative Restart 2024: Mike Martin - Finding a way around “no”
Creative Restart 2024: Mike Martin - Finding a way around “no”
Taste
 
How to Manage Reception Report in Odoo 17
How to Manage Reception Report in Odoo 17How to Manage Reception Report in Odoo 17
How to Manage Reception Report in Odoo 17
Celine George
 
Pharmaceutics Pharmaceuticals best of brub
Pharmaceutics Pharmaceuticals best of brubPharmaceutics Pharmaceuticals best of brub
Pharmaceutics Pharmaceuticals best of brub
danielkiash986
 

Recently uploaded (20)

Creation or Update of a Mandatory Field is Not Set in Odoo 17
Creation or Update of a Mandatory Field is Not Set in Odoo 17Creation or Update of a Mandatory Field is Not Set in Odoo 17
Creation or Update of a Mandatory Field is Not Set in Odoo 17
 
NIPER 2024 MEMORY BASED QUESTIONS.ANSWERS TO NIPER 2024 QUESTIONS.NIPER JEE 2...
NIPER 2024 MEMORY BASED QUESTIONS.ANSWERS TO NIPER 2024 QUESTIONS.NIPER JEE 2...NIPER 2024 MEMORY BASED QUESTIONS.ANSWERS TO NIPER 2024 QUESTIONS.NIPER JEE 2...
NIPER 2024 MEMORY BASED QUESTIONS.ANSWERS TO NIPER 2024 QUESTIONS.NIPER JEE 2...
 
مصحف القراءات العشر أعد أحرف الخلاف سمير بسيوني.pdf
مصحف القراءات العشر   أعد أحرف الخلاف سمير بسيوني.pdfمصحف القراءات العشر   أعد أحرف الخلاف سمير بسيوني.pdf
مصحف القراءات العشر أعد أحرف الخلاف سمير بسيوني.pdf
 
Ch-4 Forest Society and colonialism 2.pdf
Ch-4 Forest Society and colonialism 2.pdfCh-4 Forest Society and colonialism 2.pdf
Ch-4 Forest Society and colonialism 2.pdf
 
Observational Learning
Observational Learning Observational Learning
Observational Learning
 
78 Microsoft-Publisher - Sirin Sultana Bora.pptx
78 Microsoft-Publisher - Sirin Sultana Bora.pptx78 Microsoft-Publisher - Sirin Sultana Bora.pptx
78 Microsoft-Publisher - Sirin Sultana Bora.pptx
 
Accounting for Restricted Grants When and How To Record Properly
Accounting for Restricted Grants  When and How To Record ProperlyAccounting for Restricted Grants  When and How To Record Properly
Accounting for Restricted Grants When and How To Record Properly
 
adjectives.ppt for class 1 to 6, grammar
adjectives.ppt for class 1 to 6, grammaradjectives.ppt for class 1 to 6, grammar
adjectives.ppt for class 1 to 6, grammar
 
Andreas Schleicher presents PISA 2022 Volume III - Creative Thinking - 18 Jun...
Andreas Schleicher presents PISA 2022 Volume III - Creative Thinking - 18 Jun...Andreas Schleicher presents PISA 2022 Volume III - Creative Thinking - 18 Jun...
Andreas Schleicher presents PISA 2022 Volume III - Creative Thinking - 18 Jun...
 
How to Setup Default Value for a Field in Odoo 17
How to Setup Default Value for a Field in Odoo 17How to Setup Default Value for a Field in Odoo 17
How to Setup Default Value for a Field in Odoo 17
 
CIS 4200-02 Group 1 Final Project Report (1).pdf
CIS 4200-02 Group 1 Final Project Report (1).pdfCIS 4200-02 Group 1 Final Project Report (1).pdf
CIS 4200-02 Group 1 Final Project Report (1).pdf
 
The basics of sentences session 7pptx.pptx
The basics of sentences session 7pptx.pptxThe basics of sentences session 7pptx.pptx
The basics of sentences session 7pptx.pptx
 
220711130083 SUBHASHREE RAKSHIT Internet resources for social science
220711130083 SUBHASHREE RAKSHIT  Internet resources for social science220711130083 SUBHASHREE RAKSHIT  Internet resources for social science
220711130083 SUBHASHREE RAKSHIT Internet resources for social science
 
A Free 200-Page eBook ~ Brain and Mind Exercise.pptx
A Free 200-Page eBook ~ Brain and Mind Exercise.pptxA Free 200-Page eBook ~ Brain and Mind Exercise.pptx
A Free 200-Page eBook ~ Brain and Mind Exercise.pptx
 
Bonku-Babus-Friend by Sathyajith Ray (9)
Bonku-Babus-Friend by Sathyajith Ray  (9)Bonku-Babus-Friend by Sathyajith Ray  (9)
Bonku-Babus-Friend by Sathyajith Ray (9)
 
SWOT analysis in the project Keeping the Memory @live.pptx
SWOT analysis in the project Keeping the Memory @live.pptxSWOT analysis in the project Keeping the Memory @live.pptx
SWOT analysis in the project Keeping the Memory @live.pptx
 
Contiguity Of Various Message Forms - Rupam Chandra.pptx
Contiguity Of Various Message Forms - Rupam Chandra.pptxContiguity Of Various Message Forms - Rupam Chandra.pptx
Contiguity Of Various Message Forms - Rupam Chandra.pptx
 
Creative Restart 2024: Mike Martin - Finding a way around “no”
Creative Restart 2024: Mike Martin - Finding a way around “no”Creative Restart 2024: Mike Martin - Finding a way around “no”
Creative Restart 2024: Mike Martin - Finding a way around “no”
 
How to Manage Reception Report in Odoo 17
How to Manage Reception Report in Odoo 17How to Manage Reception Report in Odoo 17
How to Manage Reception Report in Odoo 17
 
Pharmaceutics Pharmaceuticals best of brub
Pharmaceutics Pharmaceuticals best of brubPharmaceutics Pharmaceuticals best of brub
Pharmaceutics Pharmaceuticals best of brub
 

Related Party Transaction as per Companies Act and SEBI(LODR)

  • 1. RELATED PARTY TRANSACTION Under Companies Act, 2013 CS BhuwanTaragi
  • 2. Why to regulate or disclose Related PartyTransaction? CS BhuwanTaragi -The LawTalks RPT may have a significant effect on the transactions or profit and loss of the Company. Transparency in such Related party transactions is essential. Transactions with related parties need not always be disadvantageous to the parties concerned.The concern arises only when the transactions which are not at arm’s length prices beneficial to a related party but unfavorable to the other stakeholders.
  • 3. Provisions defined for RPT Sec 188 of Companies Act, 2013 AS-18/ IND- AS 24 Reg.23ofSEBI (LODR) Regulations, 2015 CS BhuwanTaragi -The LawTalks
  • 4. Definition of ‘Related Party’ [Sec 2(76)] Related party means, with reference to a Company (i) a director or his relative; (ii) a key managerial personnel or his relative; (iii) a firm, in which a director, manager or his relative is a partner; (iv) a private company in which a director or manager or his relative is a member or director; Continue… CS BhuwanTaragi -The LawTalks
  • 5. (v) a public company in which a director or manager is a director and holds along with his relatives, more than 2% of its paid-up share capital; (vi) any body corporate whose Board of Directors, MD or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager; (vii) any person on whose advice, directions or instructions a director or manager is accustomed to act: But sub-clauses (vi) and (vii) shall not apply to the advice, directions or instructions given in a professional capacity; Continue… CS BhuwanTaragi -The LawTalks
  • 6. (viii) any company which is— (A) a holding, subsidiary or an associate company of such company; or (B) a subsidiary of a holding company to which it is also a subsidiary; (Common Holding co.) (C) an investing company or the venturer of the company; Investing company or the venturer of a company” means a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate. (ix) such other person as may be prescribed; CS BhuwanTaragi -The LawTalks
  • 7. Definition of Relative as per sec. 2(77): - with reference to any person, ‘relative’ means any one who is related to another, if— • They are members of a Hindu Undivided Family (HUF) • They are husband and wife; or • One person is related to the other in such manner as may be prescribed; CS BhuwanTaragi -The LawTalks
  • 8. A person shall be deemed to be the relative of another as per rule 4 of Companies (specification of definitions details) Rules, 2014 Father (includes step father) Mother (includes step-mother) Son (includes step-son) Son’s wife Daughter Daughter’s husband Brother/ sister (includes step- brother/sister) CS BhuwanTaragi -The LawTalks
  • 9. Definition of Related Party under SEBI LODR, 2015 Related Party Reg. 2(1)(zb) Related party defined under Section 2(76) of the CA, 2013 Applicable accounting standards (AS 18 /IND-AS 24) Any person or entity belonging to the promoter or promoter group of the listed entity and holding 20% or more of shareholding
  • 10. Definition of Related Party as per AS-18 Related Party Parties are considered to be related if at any time during the reporting period one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions. CS BhuwanTaragi -The LawTalks
  • 11. Related Party as per IND-AS 24 A person or a close member of that person’s family is related to a reporting entity if that person: (i) has control or joint control of the reporting entity; or (ii) has significant influence over the reporting entity; or (iii) is a member of the KMP of the reporting entity or of a parent of the reporting entity.
  • 12. Who all are excluded in the definition of Related Party? Director or KMP of Associate and JV companies Public companies where directors hold less than 2% share capital Any person appointed in senior management of • The company or • Associate company or • Subsidiary company or • Holding Company CS BhuwanTaragi -The LawTalks
  • 13. Arm’s length transaction a transaction between two related parties so that there is no conflict of interest CS BhuwanTaragi -The LawTalks Arm’s Len g th Transaction that is conducted as if they were unrelated
  • 14. 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; (ii) where such office or place is held by  an individual other than a director or  by any firm, private company or  other body corporate (who is related party) Explanation: “office or place of profit” CS BhuwanTaragi -The LawTalks if holding it receives from the company anything by way of remuneration, salary, fee, commission, perquisites, any rent- free accommodation, or otherwise;
  • 15. What is Related PartyTransaction? The Companies Act, 2013 does not define the expression “Related PartyTransactions”. Section 188 refers the expression contract or arrangement to ‘related party transactions.’ As per AS-18 Related PartyTransactions are defined as “a transfer of resources or obligations between related parties, regardless of whether or not price is charged.” As per IND AS -24 “A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.” CS BhuwanTaragi -The LawTalks
  • 16. Related PartyTransection as per Sec. 188(1) No company shall enter into any contract or arrangement with a related party Except with the consent of the Board of Directors given by a resolution at BM and subject to such conditions as may be prescribed, 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, - Subsidiary co. or -Associate co. (g) underwriting the subscription of any securities or derivatives thereof, of the company: CS BhuwanTaragi -The LawTalks
  • 17. 1. Contract or arrangement shall be entered with the prior approval of the company by a resolution (Ordinary Resolution)  in the case of a company having a paid-up share capital of not less than such amount, or transactions exceeding such sums [threshold limit under Rule 15(3)], as may be prescribed: Interested Shareholder/Member 2. if such member is a related party, that member shall not vote on such resolution, to approve any contract or arrangement which may be entered into by the company 3. But Related Parties can vote on such resolution in a company in which 90 % or more members, in number, are relatives of promoters or are related parties: Exceptions CS BhuwanTaragi -The LawTalks Rule 15(2): Interested Director Where any director is interested in any contract or arrangement with a related party:  such director shall not be present at the meeting during discussions on the subject matter of the resolution relating to such contract or arrangement.
  • 18. 5. The requirement of passing the Resolution by members under first proviso to sec 188(1) shall not be applicable if: transactions entered into between a holding company and its WOS whose accounts are consolidated with such holding company and placed before the shareholders at the GM for approval. CS BhuwanTaragi -The LawTalks 4. Section 188(1) shall not apply to any transactions entered into by the company  Ordinary course of business.  transactions which are on an arm’s length basis:
  • 19. CS BhuwanTaragi -The LawTalks Rule 15(3) of the companies(Meetings of board and its power), Rules 2014 : Prior Approval of Shareholders required: Prior approval of shareholders of the company is required if transaction of contracts or arrangements exceeds the with criteria as mention below- (ordinary Resolution) SNO TRANSACTION WHEN RESOLUTION REQUIRED 1. sale, purchase or supply of any goods or material, directly or through appointment of agent Amounting to 10 % or more of turnover or Rs. 100 cr. 2. selling or otherwise disposing of or buying property of any kind, directly or through appointment of agent Amounting to 10 % or more of net worth or Rs. 100 cr. 3. Leasing of property of any kind Amounting to 10 % or more of net worth or 10 % or more of turnover or Rs. 100 cr. 4. availing or rendering of any services, directly or through appointment of agent Amounting to 10 % or more of turnover or Rs. 50 cr. , 5. Appointment to any office or place of profit in the company, subsidiary company or associate company Remuneration exceeding Rs. 2.5 Lakhs per month 6. Underwriting the subscription of any securities or derivatives of the company Remuneration exceeding 1 % of net worth whichever is lower whichever is lower whichever is lower whichever is lower
  • 20. Approval of RPTs in Audit committee (AC) CS BhuwanTaragi -The LawTalks Section 177 (4) (iv): Every Audit Committee shall act as specified by board which shall include approval or any subsequent modification of RPTs.  Audit Committee may make omnibus approval for RPTs proposed to be entered into by the company subject to such conditions as may be prescribed;  In case of transaction, other than transactions referred to in section 188, and where Audit Committee does not approve the transaction, it shall make its recommendations to the Board  In case any transaction involving any amount not exceeding 1 crore rupees is entered into by a director or officer of the company without obtaining the approval of the Audit Committee and it is not ratified by the Audit Committee within 3 months from the date of the transaction, such transaction shall be voidable at the option of the Audit Committee and  if the RPT is with the related party to any director or is authorized by any other director, the director concerned shall indemnify the company against any loss incurred by it:  The provisions of this clause shall not apply to a transaction, other than a transaction referred to in section 188, between a holding company and its WOS company. Exceptions:
  • 21. Approval Process for RPTs Board approval • Approval under sec. 188(1) for all RPT which are within the threshold limits Members approval • All the Material RPTs under Reg. 23 • RPTs exceeding the threshold limits under Rule 15(3) CS BhuwanTaragi -The LawTalks Audit Committee approval • Prior approval for all RPTs • May make Omnibus approval for certain RPT
  • 22. Section 188(3): Ratification within three Months Where any contract or arrangement is not pre-approved by Board of directors or shareholders:-  Same shall be ratified by board or by shareholders as case may be within 3 months from the date on which such contract or arrangement was entered into.  if it is not ratified, such contract or arrangement shall be voidable at the option of the Board or of the shareholders, as the case may be and  if the contract or arrangement is with a related party to any director, or is authorised by any other director, such directors concerned shall indemnify the company against any loss incurred by it. Section 188(2): Disclosure of RPT in the Board Report: Every contract or arrangement entered into under section 188(1) shall be referred to in the Board’s report to the shareholders along with the justification for entering into such contract or arrangement. CS BhuwanTaragi -The LawTalks
  • 23. Contravention of Non-compliance under Companies Act, 2013 Any director or any other employee of a company, who had entered into or authorised the contract or arrangement in violation of the provisions of this section shall liable to — (i) in case of listed company penalty of 25 lakh rupees (ii) in case of any other company penalty of 5 lakh rupees CS BhuwanTaragi -The LawTalks Section 188(4): Recovery of any Loss from Director or any other Employee It shall be open to the company to proceed against a director or any other employee who had entered into such contract or arrangement in contravention of the provisions of this section for recovery of any loss sustained by it as a result of such contract or arrangement.
  • 24. Definition of Related PartyTransaction under LODR Under Reg 2(1)(zc) “related party transaction” means A transfer of resources, services or obligations  between a listed entity and a related party, regardless of whether a price is charged and a "transaction" with a related party shall be construed to include a single transaction or a group of transactions in a contract: Provided that this definition shall not be applicable for the units issued by mutual funds which are listed on a recognized stock exchange(s); CS BhuwanTaragi -The LawTalks
  • 25. Reg. 23: Related PartyTransaction under LODR CS BhuwanTaragi -The LawTalks (1) The listed entity shall formulate a policy on materiality of RPTs and on dealing with RPTs including clear threshold limits duly approved by the board of directors and such policy shall be reviewed by the board of directors at least once every 3 years and updated accordingly (2) All related party transactions shall require prior approval of the audit committee. (3) Audit committee may grant omnibus approval for RPTs proposed to be entered into by the listed entity (4) All material RPTs shall require approval of the shareholders through resolution and no related party shall vote to approve such resolutions (5)The provisions of sub-regulations (2), (3) and (4) shall not be applicable in the following cases: (a) RPT entered into between two govt. companies; (b) RPT entered into between a holding company and itsWOS whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.
  • 26. Disclosure of RPT as per SEBI(LODR),2015 CS BhuwanTaragi -The LawTalks Regulation 53: requires Listed Entities to disclose RPT Disclosures in their annual reports as specified in para A of ScheduleV. Regulation 34(3) requires Listed Entities to make disclosures in their annual reports which are specified in schedule V, These are requirements are addition to the disclosure to be made in the Board’s Report under section 134 of CA2013 Regulation 23(9) states that Listed Entities should submit within 30 days from the date of publication of its standalone and consolidated financial results for the half year, Disclosure of RPT on consolidated basis in prescribed format and also publish the same on website.
  • 27. Two conditions have to be satisfied to avail of the exemptions from the provisions of Related party u/s 188 by a Company. 1. It must be entered into by the Company in the ordinary course of its business; 2. It must be an Arm’s length transaction. CS BhuwanTaragi -The LawTalks What are the conditions to avail the exemption form provisions of section 188?
  • 28. Telegram: https://t.me/TheLawTalks Facebook Page: The Law Talks LinkedIn: https://www.linkedin.com/in/csBhuwanTaragi Instagram: @the_law_talks and @bhuwantaragi Podcast: https://anchor.fm/cs-bhuwan-taragi--the-law-talks Twitter: @csbhuwantaragi Do write for any Queries/suggestions and to get a free PDF copy of this PPT on Slideshare