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    Amendment To The Rules Pertaining To Related Party Transactions – Section 188

    Ministry vide The Companies (Meetings of Board and its Powers) Second Amendment Rules, 2014 Dated:14.08.2014, has amended the limits as to transactions as contained in the initial rules, in relation the 1st provisio to Section 188 (1) of the Companies Act, 2013. The revised rules in comparison with the Original rules are herewith reproduced.

     

    Sl.

    Nature of transaction with

    AS PER THE ORIGINAL RULES

    AS PER THE AMENDED RULES dt:14.08.2014

     

    No

    related Party

    Board Approval

    Members Approval

    Board Approval

    Members Approval

     

     

    Paid-up Capital upto Rs.10 Crores or Value of the transaction with following limits.

    Paid-up Capital of Rs.10 Crores or more or Value of the transaction with following limits.

    Value of the Transaction as per the amended rules

    Value of the Transaction as per the amended rules

    1.

    Sale, purchase or supply of any goods or materials directly or through appointment of agents. [Sec.188 (1) (a) & (e)]

    Not exceeding 25 % of the annual turnover*

    Exceeding 25 % of the annual turnover*

    Not exceeding 10 % of the turnover* of the Company or Rs.100 Crores, whichever is lower.

    Exceeding 10 % of the turnover* of the Company or Rs.100 Crores, whichever is lower.

    2.

    selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agents [Sec.188 (1) (b) & (e)]

    Not exceeding 10 % of net worth*

    Exceeding 10 % of net worth*

    Not exceeding 10 % of the net worth* of the Company or Rs.100 Crores, whichever is lower.

    Exceeding 10 % of the net worth* of the Company or Rs.100 Crores, whichever is lower.

    3

    leasing of property of any kind directly or through appointment of agents [Sec.188 (1) (c)]

    Not exceeding 10 % of net worth/Turnover*

    Exceeding 10 % of net worth/Turnover*

    Not exceeding 10 % of the turnover* of the Company or Rs.100 Crores, whichever is lower

    Exceeding 10 % of the turnover* of the Company or Rs.100 Crores, whichever is lower.

    4

    Availing or rendering of any services directly or through appointment of agents [Sec.188 (1) (d) & (e)]

    Not exceeding 10 % of net worth*

    Exceeding 10 % of net worth*

    Not exceeding 10 % of the turnover* of the Company or Rs.50 Crores, whichever is lower.

    Exceeding 10 % of the turnover* of the Company or Rs.50 Crores, whichever is lower.

    5

    Appointment of any related party to any office or place of profit in the company, its subsidiary company or associate company [Sec.188 (1) (f)]

    At a monthly remuneration not exceeding Rs.2.5 Lakhs

    At a monthly remuneration exceeding Rs.2.5 Lakhs

    At a monthly remuneration not exceeding Rs.2.5 Lakhs

    At a monthly remuneration exceeding Rs.2.5 Lakhs

    6

    Remuneration for underwriting the subscription of any securities or derivatives thereof of the company [Sec.188 (1) (g)]

    Not exceeding 1 % of the net worth*

    Exceeding 1 % of the net worth*

    Not exceeding 1 % of the net worth*

    Exceeding 1 % of the net worth*

     

     

    • - Turnover or Net Worth referred above shall be computed on the basis of the Audited Financial Statement of the preceding Financial year. 

    Explanation under the amended rules, in respect of transactions at Sl.No. 1 to 4: The limits specified for items 1 to 4, shall apply for transactions to be entered in to either individually or taken together with the previous transactions during a financial year. 

    Accordingly, the Article relating to Sec.188, published in August, 2014 issue of SBS Wiki, stands amended to the above effect.

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