Related Party transactions (Companies Act, 2013)

Approval required for Related Party transactions (Companies Act, 2013) is mentioned in Section 188 & Chapter 12 Rules

Section – 188 – provides such Transactions as below:-

(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:

------------------------------------------------------------------------------------------------------------

Clarification:-

1.      A Company with paid up capital above 10 Crores: For all above 188 transactions, special resolution is required.

2.      A Company with less than 10 Crores paid up capital will require special resolution in following cases:-

(i)                 sale, purchase or supply of any goods or materials directly or through appointment of agents exceeding twenty five percent of the annual turnover as mentioned in clause (a) and clause (e) respectively of sub-section (1) of section 188;

(ii)               selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agents exceeding ten percent. of net worth as mentioned in clause (b) and clause (e) respectively of sub-section (1) of section 188;

(iii)             leasing of property of any kind exceeding ten percent of the net worth or exceeding ten percent. of turnover as mentioned in clause (c) of sub-section (1) of section 188;

(iv)       availing or rendering of any services directly or through appointment of agents exceeding ten percent. of the net worth as mentioned in clause (d) and clause (e) of sub-section (1) of section 188;

3.      All other Cases:

Board Resolution is only required.