Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Friday, July 18, 2014

Clarifications by MCA on matters relating to Related Party Transactions

Clarifications issued by MCA on matters relating to Related Party Transactions  vide Circular No.30/2014  the following are clarified as:-

1. Scope of second proviso to Section 188{1) :- It is clarified that 'related party' referred has to be construed with reference only to the contract or arrangement for which the special resolution is being passed. 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 said special resolution is being passed. In all other resolution, shareholders of the Company can participate & vote even if member is a related patty.

2. Applicability of Section 188 to Corporate Restructuring - Amalgamations etc- :- It is clarified that transactions will not attract the requirements of section 188 of the Companies Act, 2013 if arising out of Compromises, Arrangements and Amalgamations dealt with under specific provisions of the Companies Act, 1956/Companies Act, 2013, 

3. Requirement of fresh approvals for past contracts only if any modification after 01.04.14 under Section 188:- It is clarified that Contracts entered into by companies, after making necessary compliances under Section 297 of the Companies Act, 1956, which already came into effect before the commencement of Section 188 of the Companies Act, 2013, will not require fresh approval under the said section 188 till the expiry of the original term of such contracts. Thus, the requirements under section 188 will have to be complied with if any modification in such contract is made on or after lst April, 2014,

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