Ansal Properties & Infrastructure Limited

Checklist on Section 188 of Companies Act, 2013 - Related Party

Transactions
(Corresponding Sections- 297 & 314 of Companies Act, 1956)
Section Provisions of Sections Checklist
188(1)








































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,
no company shall enter into any
contract or arrangement with a
related party with respect to:





a) sale, purchase or supply of any
goods or materials.




b) selling or otherwise disposing of ,
or buying, property of any kind,



c) leasing of property of any kind


d) availing or rendering of any
services



e) appointment of any agent for
purchase or sale of goods,
materials, services or property.



Provisions of Section 188 shall apply if
any of the sub points within point no. 2
plus any of the sub points within both
points No. 3 and point No 4 is YES

YES NO
1. Whether there is
contract or
arrangement

2. whether the Contract or
arrangement is in relation to:-

Sale, purchase or supply
of any goods

Sale, purchase or supply
of any materials

Selling or otherwise
disposing of
property of any kind

Buying property of any
kind

Leasing of property of
any kind

Availing of any service


Rendering of any service

Appointment of any
agent for purchase
of goods, materials,
services or property

Appointment of any
agent for sale
of goods, materials,
services or property

















































f) such related partys appointment
to any office or place of profit in
the company, its subsidiary
company or associate company;

Explanation:-
The expression office or place of
profit means any office or place-

(i) where such office or place is held
by a director, if the director
holding it receives from the
company anything by way of
remuneration over and above the
remuneration to which he is
entitled as director, by way of
salary, fee, commission,
perquisites, any rent-free
accommodation, or otherwise;

(ii) where such office or place is held
by an individual other than a
director or by any firm, private
company or other body corporate,
if the individual, firm, private
company or body corporate
holding it receives from the
company anything by way of
remuneration, salary, fee,
commission, perquisites, any
rent-free accommodation, or
otherwise;

g) underwriting the subscription of
any securities or derivatives
thereof, of the company








YES NO

Related partys appoint-
ment to any office or
place of profit in the
company.




Related partys appoint-
ment to any office or
place of profit in the
subsidiary company








Related partys appoint-
ment to any office or
place of profit in the
associate Company








Underwriting the subs-
cription of any securit-
ies or derivatives.



Resolution of the Board should be passed
only in a duly convened Board Meeting
and not otherwise {i.e. not by way of
Resolution by Circulation/Directors
committee meeting}


















































As per Section 2(76)related party,
with reference to a company,
means

(i) a director or his relative;

(ii) a key managerial personnel or his
relative;

(iii) a firm, in which a director,
manager or his relative is a partner;


(iv) a private company in which a
director or manager is a member or
director;















(v) a public company in which a
director or manager is a director or
holds along with his relatives, more
than two per cent of its paid-up share
capital;






















YES NO
3. Whether the contract or
arrangement entered by the
company with :


(i) a director or his relative

(ii) a key managerial
personnel or his relative;

(iii) a firm in which
director or his relative
is a partner

(iv)a firm in which Manager
or his relative is a partner

(v) a pvt. Co. in which
director is a member

(vi) a pvt. Co. in which
director is a director

(vii) a pvt. Co. in which
Manager is a member

(vii) a pvt. Co. in which
Manager is a Director

(vii) a public Co. in which
director of the company
is a Director; or

(viii) a public Co. in which
director of the company
holds along with his relatives
more than 2% of its paid up
share capital

(ix) a public Co. in which
Manager of the Company
is a Director; or

(x) a public Co. in which
Manager of the company
holds along with his relatives
more than 2% of its





















































(vi) any body corporate whose Board
of Directors, managing director or
manager is accustomed to act in
accordance with the advice, directions
or instructions of a director or
manager;

(vii) any person on whose advice,
directions or instructions a director or
manager is accustomed to act.


Provided that nothing in sub-clauses
(vi) and (vii) shall apply to the
advice, directions or instructions
given in a professional capacity;

(viii) any company which is
(A) a holding, subsidiary or an
associate company of such
company; or

(B) a subsidiary of a holding
company to which it is also a
subsidiary;

(ix) such other person as may be
prescribed;



Provided also that nothing in this sub-
section shall apply to any transactions
entered into by the company in the
ordinary course of business other
than transactions which are not on
arms length basis


paid up share capital


3. Whether the contract or
arrangement entered by the
company with:

YES NO

(xi)any BODY CORPORATE
whose BOD/MD/Manager
is accustomed to act
in accordance with the
advice, directions or
instructions of a director/
manager of the company;

(xii)any PERSON on whose
advice/ directions/
instructions the director/
manager of the company is
accustomed to act;

(excludes advice/ directions/ instructions
given aforesaid in professional capacity)


(xiii) its holding,
subsidiary or an
associate company

(xiv) its fellow subsidiary/
chain subsidiary

(xv) any other person
as prescribed by way
of rules


4. whether the
transaction has NOT
been entered into by
the Company in its
ordinary course of
business AND on
arms length basis




[



Third
Proviso to
section
188(1)






Proviso to
Section
188(1)


































Provided that no contract or
arrangement, in the case of a
company having a paid-up share
capital of not less than such amount,
or transactions not exceeding such
sums, as may be prescribed, shall be
entered into except with the prior
approval of the company by a special
resolution

Text of the Draft Rules
(1) For the purposes of first proviso
to sub-section (1) of section
188,

(i) a company having a paid-up
share capital of rupees one
crore or more shall not enter
into a contract or
arrangement with any
related party; or

(ii) a company shall not enter
into a transaction or
transactions, where the
transaction or transactions to
be entered into:

(a) individually or taken
together with previous
transactions during a
financial year, exceeds
five percent of the annual
turnover or twenty
percent of the net worth
of the company as per
the last audited financial
statements of the
company, whichever is
higher, for contracts or
arrangements as
mentioned in clauses (a)
to (e) of sub-section (1)
of section 188;

or
YES NO

5. In case of Related Party
Transactions compliance has to
be done on above points and
further where any of the
following sub points is YES
SPECIAL RESOLUTION is
required for entering contract
/arrangement with related party

(in terms of the Draft Rules) :-







(i) company has a
paid-up share
capital of rupees
1 crore or more


(ii) where the
transaction or
transaction(s)
individually or
taken together
with previous
transactions
during a financial
year:
a. exceeds 5%
of the annual
turnover.
OR
b. 20% percent
of the net worth
of the company
as per the last
audited financial
statements of the
company;
whichever is
higher
























Second
Proviso to
section
188(1)








Section
188(2)





Section
188(3)




(b) relates to appointment to
any office or place of
profit in the company, its
subsidiary company or
associate company at a
monthly remuneration
exceeding one lakh
rupees as mentioned in
clause (f) of sub-section
(1) of section 188; or


(c) is for a remuneration for
underwriting the
subscription of any
securities or derivatives
thereof of the company
exceeding ten lakh rupees
as mentioned in clause
(g) of sub-section (1) of
section 188;

Provided further that no member of
the company shall vote on such
special resolution, to approve any
contract or arrangement which may
be entered into by the company, if
such member is a related party:







Every contract or arrangement
entered into under sub-section (1)
shall be referred to in the Boards
report to the shareholders along with
the justification for entering into such
contract or arrangement.

Where any contract or arrangement is
entered into by a director or any
other employee, without obtaining the
consent of the Board or approval by a


YES NO

(iii) Related party is
appointed to any
office or place of
profit in the
company its
subsidiary/associate
at a monthly
remuneration
exceeding 1 lakh
rupees

(iv) Remuneration
for underwriting the
subscription of any
securities or
derivatives thereof
of the company
exceeding 10 lakh
rupees


A Shareholder who is a related party is
not allowed to vote on such special
resolution

For the purposes of second proviso to sub-
section (1) of section 188, in case of
wholly owned subsidiary, the special
resolution passed by the holding
company shall be sufficient for the
purpose of entering into the
transactions between wholly owned
subsidiary and holding company.

Contract / arrangement mentioned in
188(1) should be referred in Boards
Report along with its justification.



Contract/ arrangement entered into by
director/employee of the company
should be approved by the Board/
shareholders as the case may be or


















Section
188(4)










Section
188(5)






special resolution in the general
meeting under sub-section (1) and if
it is not ratified by the Board or, as
the case may be, by the shareholders
at a meeting within three months
from the date on which such contract
or arrangement was entered into,
such contract or arrangement shall be
voidable at the option of the Board
and if the contract or arrangement is
with a related party to any director,
or is authorised by any other director,
the directors concerned shall
indemnify the company against any
loss incurred by it.

Without prejudice to anything
contained in sub-section (3), it shall
be open to the company to proceed
against a director or any other
employee who had entered into such
contract or arrangement in
contravention of the provisions of this
section for recovery of any loss
sustained by it as a result of such
contract or arrangement.

Any director or any other employee of
a company, who had entered into or
authorised the contract or
arrangement in violation of the
provisions of this section shall,
(i) in case of listed company,
be punishable with
imprisonment for a term
which may extend to one
year or with fine which shall
not be less than twenty-five
thousand rupees but which
may extend to five lakh
rupees, or with both; and
(ii) in case of any other
company, be punishable
with fine which shall not be
less than twenty-five
thousand rupees but which
may extend to five lakh
rupees.
should be ratified by the Board/
shareholders within three months from
the date of contract/ arrangement.

Otherwise such contract/ arrangement is
voidable at the option of Board and if
entered with related party to any
director/ authorised by any other
director, the concerned director shall
indemnify the loss to the company.






Penal Provisions:-
Company may recover any losses
incurred by the Company from the
director or any other employee who had
entered into the contract/arrangement
in contravention of the provisions of this
section. (Where the Company has
avoided the Contract/arrangement which
was voidable)









Imprisonment upto 1 yr or fine between
Rs. 25000 and Rs. 500,000 or with both
in case of listed companies







Fine between Rs. 25000 and
Rs. 500,000 in case of unlisted
companies

PLEASE NOTE THAT PROHIBITIONS ARE ABSOLUTE AND NO RATIFICATION OR APPROVAL OF
CENTRAL GOVERNMENT IS PERMITTED.
Date : 30
th
December, 2013