The
Government has issued a Circular on 17th July, 2014 on matters relating to
related party transactions under the Companies Act, 2013 (Act) and rules made
thereunder. The Circular, inter-alia, clarifies that the term ‘related party’
appearing in the second proviso to section 188(1) of the Companies Act, 2013
refers only to such related parties as may be related party in the context of
the contract or arrangement for which the relevant special resolution is being
passed. It has also been clarified that contracts entered into by companies,
after complying with section 297 of the Companies Act, 1956, before
commencement of section 188 of the Companies Act, 2013 will not require fresh
approval under the latter provision till the expiry of original term of such
contracts. The Circular also clarifies that transactions arising out of
compromise, arrangements and amalgamations dealt with under specific provisions
of the Companies Act, 1956 or Companies Act, 2013 would not attract the
provisions of section 188 of the Companies Act, 2013.
This information was given by Smt. Nirmala Sitharaman, MoS in the Ministry of Corporate Affairs in written reply to a question in the Lok Sabha today.
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