The Ministry of corporate affairs has vide its clarification letter dated 17th july 2014 clarified a few aspects on the intriguing aspect of related party transactions and the compliances thereof. Really had the Ministry taken a little trouble in drafting the original provisions correctly, the spate of clarifications that they are issuing would not have been necessary.
The clarifications that they have issued vide the above circular are briefly summarised as under :
1) The shareholder who is the related party will not be allowed to vote on the resolution laid before the general meeting only in respect of such contracts/ transactions in respect of which he is the related party. If he is a related party within the general definition of "related party" under the Companies Act, 2013 but he is not concerned or interested in the contract or arrangement which has been put up for approval at the general meeting, then he will be allowed to vote;
2) Corporate restructuring or amalgamations will not be covered under the definition of related party transactions;
3) Related party contracts which have already been approved under the old provisions of Companies Act, 1956 will not need fresh approval until the term of the contract is over. However any alteration or variation in the contracts will need fresh compliances under the Companies act, 2013.
Stay tuned for more such compliance news
The clarifications that they have issued vide the above circular are briefly summarised as under :
1) The shareholder who is the related party will not be allowed to vote on the resolution laid before the general meeting only in respect of such contracts/ transactions in respect of which he is the related party. If he is a related party within the general definition of "related party" under the Companies Act, 2013 but he is not concerned or interested in the contract or arrangement which has been put up for approval at the general meeting, then he will be allowed to vote;
2) Corporate restructuring or amalgamations will not be covered under the definition of related party transactions;
3) Related party contracts which have already been approved under the old provisions of Companies Act, 1956 will not need fresh approval until the term of the contract is over. However any alteration or variation in the contracts will need fresh compliances under the Companies act, 2013.
Stay tuned for more such compliance news
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