MCA:
MCA vide its General Circular has issued much needed Clarification on matters relating to Related Party Transactions falling under the provisions of the Section 188 of the Companies Act, 2013. MCA on the basis of the representations received from stakeholders and after examining the issues has issued the following clarifications :-
1. Scope of second proviso to Section 188{1) :- It is clarified that ‘related party’ referred to in the second proviso has to be construed with reference only to the contract or arrangement for which the said 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 the said special resolution is being passed. In other words 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 arising out of Compromises, Arrangements and Amalgamations dealt with under specific provisions of the Companies Act, 1956/Companies Act, 2013, will not attract the requirements of section 188 of the Companies Act, 2013.
3. Requirement of fresh approvals for past contracts under Section 188:- 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, if any modification in such contract is made on or after lst April, 2014, the requirements under section 188 will have to be complied with.
Speak Your Mind