Tag: Board of Directors

All about Related Party Transactions – Part 3 (Voting and Approval))

Voting (Sec 188, Sec 184)

The basic question anyone can raise now is that “Can a Related party vote?”

If yes, in what circumstances?

Listed Companies –

RPs can’t vote (whether party to transaction or not)

All Material RPTs shall require approval of the shareholders through a resolution (Regulation 23)

Unlisted Public Companies –

If Promoters (incl. their relatives) holds >90%, then RPs can vote on the resolution

In other cases, RPs can only vote if they are not parties to the transaction proposed in the resolution

Private Companies –

Exempted i.e. any RP can vote on any Resolution (vide MCA notification dated 5th June,2015)

The above exemption is subject to compliance of Sec 137 (Filing of Financial Statements) and Sec 92 (Annual Return) with RoC.

Exceptions (Proviso) –

  • Transaction between Holding and its WOS

           Placed before shareholders at the general meeting for approval (subject to consolidation of accounts)

  • Government Company

           Exempted. Subject to compliance of Sec 137 (Filing of Financial Statements) and Sec 92 (Annual Return) with RoC.

  • Unlisted public company

          Licensed by RBI or SEBI or IRDAI to operate from IFSC located in an approved multi-services SEZ

Note:

Interested Directors should not present in the meeting during the discussions

Corporate Governance Points –

  • As the RPTs between 2 Govt. companies will not be reaching to members for approval, it’s a good practice to place such items before the Audit Committee and the Board for Noting.
  • Directors should also make a disclosure regarding Interest (Section 184) in the respective transactions proposed in the resolution so that it would be easy to track.

Ratification –

  • As per LODR, ratification is not possible (no such option provided). So, a listed company should compulsorily obtain the approval.
  • But the Companies Act has provided the ratification option –

             Upto 1 crore – Audit Committee (within 3 months)            

             Other cases – Board or Shareholders (as the case may be) (within 3 months)

All about Related Party Transactions – Part 2 (Determination & Approval)

  • Related Party Transaction in the context of companies means transaction between the company and its related parties.
  • Every transaction with related party is related party transaction, however, approval mechanism may be different and situational.
  • Transactions with related parties need not always be disadvantageous to the parties concerned. The concern arises only when there is abuse of a related stakeholders.

Specified RPTs under Companies Act

  1. Sale/Purchase/Supply of any Goods/Materials
  2. Sale/Purchase/Leasing of any Property
  3. Availing/Rendering of services
  4. Appointment of any agent for carrying out activities listed above [from points (i) to (iii)]
  5. Appointment to any office or place of profit (Director, Manager etc.) [Company, Subsidiary & Associate] [Note: Holding Company is not included]
  6. Remuneration for underwriting the subscription of any Securities/Derivatives

RPTs under SEBI (LODR)

Transfer of any:

  1. Resources
  2. Services
  3. Obligations

Approval Mechanism

Listed Companies

  • Approval of Audit committee is mandatory for every RPT &
  • Approval of Shareholders (Ordinary Resolution) is to be taken for Material RPTs.

Material RPT = Transactions (either individually or taken as a whole) accounting for [5% in case of Brand/Royalty, 10% in case of other than Brand/Royalty] of the annual consolidated turnover of the listed entity.

Exception:

  • Transaction between 2 Govt. companies
  • Transaction with a wholly owned subsidiary

Unlisted Companies

  • If there is an Audit Committee, its approval should be taken (except Transaction with a wholly owned subsidiary)
  • If there is no Audit Committee and the transactions were entered on Arm’s Length Basis/Ordinary course of business, then no approval is required.
  • If there is no Audit Committee and the transactions were not entered on Arm’s Length Basis/Ordinary course of business, Shareholder’s approval is required if the transactions are Specified RPTs and the Specified threshold is crossed.
  • If the Specified threshold doesn’t cross, Board’s approval is enough.

Specified threshold

  • 10% or more of the respective limits (individually/ taken as awhole during FY)
  1. Sale, purchase or supply of any goods or materials – Turnover
  2. Sale/Purchase of property – Networth
  3. Leasing of property – Turnover
  4. Availing/Rendering of services – Turnover
  • Remuneration for underwriting the subscription of any Securities/Derivatives exceeding 1% of Networth
  • Remuneration (other than Director’s remuneration) exceeding Rs. 2.50 lakhs per month (incl. company, subsidiary & associate)

Arm’s Length Price

The price if the transactions were between two unrelated parties with similarly placed terms & conditions

Ordinary Course of Business

  • MoA Objects clause
  • Activity is routine/normal/common in the particular industry
  • Activity is repetitive/frequent
  • Income earned from such activity is treated as Business Income in the company’s books

All about Related Party Transactions – Part 1 (Definition Part)

Framework Companies Act – Sections 177 & 188 SEBI (LODR) – Regulation 23 Accounting – AS 18, Ind AS 24 What is a Related Party? (Answered as per Companies Act)… Click Here to full read

NTPC’s Board of Directors recommended a final dividend of Rs 3.15 per equity for FY 21

The Country’s largest power generator- NTPC Ltd., a Maharatna CPSU under Ministry of Power with a present group installed capacity of 65825 MW, declared the financial results for FY21 along with unaudited financial results for Q4 FY21 on Saturday.

In FY21, NTPC group has recorded the highest ever gross generation of 314.07 Billion units as against 290.19 Billion units during the previous year. On Standalone basis, the gross generation of NTPC for FY21 was 270.91 Billion units as against 259.62 Billion units in the previous year. Coal stations achieved a Plant Load Factor of 66.00% as against National Average of 54.56% with an availability factor of 91.43%.

NTPC has realized more than 100% of the billed amount during the year, crossing rupees one lakh crore, which is the highest ever realization. For FY21, the total income was ₹ 103,552.71 crore as against ₹ 100,478.41 crore in FY20, registering an increase of 3.06%. For FY21, NTPC has registered its highest ever Profit After Tax of ₹ 13,769.52 crore, as against ₹ 10,112.81 crore in FY20 registering an increase of 36.16%.

The Board of Directors of NTPC Ltd. have recommended a final dividend @ 31.5% of paid-up share capital i.e. ₹ 3.15 per equity share of the face value of ₹ 10/- each for FY21, subject to the approval of shareholders in the Annual General Meeting. The Company had paid an Interim Dividend @ 30% of paid-up share capital i.e. ₹ 3.00 per equity share in February 2021. This is the 28th consecutive year of dividend payment by the Company.