Article Published In Vol.4 (July-Aug-2016)

An Analysis of Provisions of Related Party Transactions under Companies Act, 2013

Author : Dr. Shamsuddin

Section 188 of the Companies Act, 2013 talks about the approval required in order to enter into related party transactions. The section provides for the various transactions which cannot be entered into by the company without the consent of the Board of Directors. Meaning thereby unless the Board of Directors have given their consent by way of a resolution at a meeting of the Board, the company cannot enter into the prescribed transactions. But by Companies Amendment Act 2015 it is liberalized and no special resolution required. Omnibus approval will be granted by audit committee for all kind of related party transactions than ordinary resolution will be passed by the board of directors for the validity of the related party transactions of a Company. In this article, the provision of related party transaction is discussed.

Keywords: Related Party, Transaction, Section 188, Holding Company, Arm’s length basis