Disclosures
Companies Act 2013
Specified Transactions – Non Arm’s Length transactions & Material Arm’s Length transactions
To be reported vide Form AOC-2
LODR
Half yearly on consolidated basis
AS/Ind AS
All transactions
Audit Committee
- Approval or any subsequent modification of RPTs
- In case of RPTs other than those referred to in Sec 188, Audit Committee doesn’t approve but shall make its recommendations to the Board
- For transactions referred to in Sec 188, Audit Committee may make Omnibus approval, after Board’s approval & subject to criteria specified by the rules.
- Omnibus Approval means specifying :-
- Name of the RP
- Nature and duration of the transaction
- Maximum amount of transaction
- the indicative base price or current contracted price and the formula for variation in the price, if any
- Any other relevant information
- Omnibus approval shall be valid for a period not exceeding one financial year
- Omnibus approval shall not be made for transactions in respect of selling or disposing of the undertaking of the company
Independent Directors
Schedule IV – Duties of Independent Directors – Para 9
States that Independent Directors should “pay sufficient attention and ensure that adequate deliberations are held before approving related party transactions and assure themselves that the same are in the interest of the company”
Notice & Agenda
The notice of the meeting in which approval shall be granted should contain Board’s agenda which contains the following items:
- Name of the related party
- Nature of relationship
- Nature, duration & particulars of the transaction
- Advance paid or received
- Manner of determining the pricing
- Other commercial terms
Along with the notice, an explanatory statement should also be sent to the parties entitled to the notice of the meeting which shall include the following:
- Name of the related party
- Name of related Director, KMP
- Nature of relationship
- Nature of transaction
- Material terms
- Monetary value
- Particulars
- Other material information
Register
Form
- Form MBP-4 – all contracts or arrangements to which section 188 applies
- Once the entry is made – Authenticated by CS
- Placed before the next meeting of the Board – to be signed by all directors
Inspection
- Open for Inspection – Extracts/Copies may be given – within 7 days – Max fee Rs. 10 per page
- Open for inspection at AGM also
Exemptions
- For the sale, purchase or supply of any goods, materials or services if value < 5 lakh/year
- By a Banking company – for the collection of bills – in the ordinary course of its business
Penal Provisions
Director/Any employee – entered into or authorized the contract or arrangement – in violation of the provisions of the Act
Listed Company – Rs. 25 Lakhs
Unlisted Company – Rs. 5 Lakhs
