Rule 15: Contract or arrangement with a related party

Rule 15: Contract or arrangement with a related party · Complied AI

(3)

For the purposes of first proviso to sub-section (1) of section 188, except with the prior approval of the company by a special resolution resolution, a company shall not enter into a transaction or transactions, where the transaction or transactions to be entered into,—

(a)

as contracts or arrangements with respect to clauses (a) to (e) of sub-section (1) of section 188, with criteria as mentioned below –

(i)

sale, purchase or supply of any goods or materials, directly or through appointment of agent, exceeding ten per cent .amounting to ten per cent. or more of the turnover of the company or rupees one hundred crore, whichever is lower , 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 agent, exceeding ten per cent. amounting to ten per cent. or more of net worth of the company or rupees one hundred crore, whichever is lower , as mentioned in clause (b) and clause (e) respectively of sub-section (1) of section 188;

(iii)

leasing of property of any kind amounting to ten per cent or more of the turnover of the company exceeding ten per cent. amounting to ten per cent. or more of the net worth of the company or ten per cent. of ten per cent. or more of turnover of the company or rupees one hundred crore, whichever is lower , as mentioned in clause (c) of sub-section (1) of section 188;

(iv)

availing or rendering of any services, directly or through appointment of agent, exceeding ten per cent. amounting to ten per cent. or more of the turnover of the company or rupees fifty crore, whichever is lower , as mentioned in clause (d) and clause (e) respectively of sub-section (1) of section 188:

Explanation

—It is hereby clarified that the limits specified in sub-clauses (i) to (iv) shall apply for transaction or transactions to be entered into either individually or taken together with the previous transactions during a financial year.

(b)

is for appointment to any office or place of profit in the company, its subsidiary company or associate company at a monthly remuneration exceeding two and half lakh rupees as mentioned in clause (f) of subsection (1) of section 188; or

(c)

is for remuneration for underwriting the subscription of any securities or derivatives thereof, of the company exceeding one per cent. of the net worth as mentioned in clause (g) of sub-section (1) of section 188.

Explanation

(1) The Turnover or Net Worth referred in the above sub-rules shall be computed on the basis of the Audited Financial Statement of the preceding Financial year.

(3)

For the purposes of first proviso to sub-section (1) of section 188, except with the prior approval of the company by a special resolution-

(i)

a company having a paid-up share capital of ten crore rupees or more shall not enter into a contract or arrangement with any related party; or

(ii)

a company shall not enter into a transaction or transactions, where the transaction or transactions to be entered into-

(a)

as contracts or arrangements with respect to clauses (a) to (e) of sub-section (1) of section 188 with criteria, as mentioned below—

(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;

(b)

(c)

is for remuneration for underwriting the subscription of any securities or derivatives thereof of the company exceeding one percent of the net worth as mentioned in clause (g) of sub-section (1) of section 188.

Explanation

(1) The Turnover or Net Worth referred in the above sub-rules shall be computed on the basis of the Audited Financial Statement of the preceding Financial year.