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Section 2(76), read with Rule 3 of Companies (Specification of definition details) Rule 2014, define the Related Party Transaction with reference to a Body Corporate means-
In addition to the above, a director or Key Managerial Personnel of holding the company or his relative also covered under the definition of related parties.
Exemption to a private company: Subclause (viii) shall not apply with respect to section 188 dealing with related party transaction.
Except with the consent of the Board of Directors given by a resolution at a meeting of the Board and subject to such conditions as may be prescribed, not a single company shall enter into any kind of contract or arrangement by related party with regard to—
Provided that no contract arrangement, in the case of a company having paid-up share capital of minimum such an amount, or transactions not beyond such sums, as may be given, will be entered into except with the previous approval of the company by a special resolution.
Provided further that not a single member of a company shall vote on such resolution to approve any contract arrangement which may be entered into by the company if such member is a related party.
Provided also that nothing in this sub-section will apply to any kind of transaction entered into by a company in the ordinary course of the business except transactions which aren’t on the arm’s length basis.
Provided that the requirement of passing a resolution under the first proviso shalln’t be applicable for transaction that is entered into between the holding company & its wholly-owned subsidiary whose accounts are consolidated with such holding company & it is placed before shareholders at the general meeting for approval
If the office is held by the director & if such a director receives from the company whatsoever called by way of compensation beyond the remuneration to which he is permitted as director, by means of salary, or fee or commission or perquisites or any kind of rent-free accommodation, or otherwise;
Where such an office is held by the individual excluding a director or by any of the firm, private company or other bodies corporates if such individual, firm, private company or body corporates holding it receives from a company by way of remuneration salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
The Arm’s length transaction is defined as the transactions between 2 related parties that are conducted as if they were not related so that there is not any conflict of interest.
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