AS-18(Related party)

This query is : Resolved

Prashanth (Querist)
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15 July 2010 1.X (Director) Holding substantial Shares in PQR Ltd and also X’s is a partner in XYZ firm during the year financial year the Partnership Firm(XYZ) has supplied raw materials and rendered other services to the PQR ltd Co, in which X’s has no interest in such transaction. Company on his own interest had made the transaction with XYZ firm.

Query
a) In the above question it Clearly shows as X’s has no interest in the above transaction , Now whether the above transaction should be treated as related party and should be recorded in the 301 register of the company act 1956?

b)In what way a transaction said to be related party transaction?

2.X (Director) Holding substantial Shares in PQR Ltd and also X’s is a partner in XYZ firm every year the Partnership Firm(XYZ) supplies raw materials and rendered other services to the PQR ltd Co, in which X’s had interest ,but during the Firm has not supplied any raw materials to the firm.

a).Whether any thing should be written in the 301 register of the company act 1956?

CA SMR

CA SMR (Expert)
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13 August 2010 Excerpt from Sec 297 of Companies' Act 1956-
BOARD'S SANCTION TO BE REQUIRED FOR CERTAIN CONTRACTS IN WHICH PARTICULAR DIRECTORS ARE INTERESTED.
(1) Except with the consent of the Board of directors of a company, a director of the company or his relative, a firm in which such a director or relative is a partner, any other partner in such a firm,or a private company of which the director is a member or director, shall not enter into any contract with the company -
(a) for the sale, purchase or supply of any goods, materials or services;
(2) Nothing contained in clause (a) of sub-section (1) shall affect –
(a) the purchase of goods and materials from the company, or the sale of goods, and materials to the company, by any director, relative, firm, partner or private company as aforesaid for cash at prevailing market prices; or
(b) any contract or contracts between the company on one side and any such director, relative,firm, partner of private company on the other for sale, purchase or supply of any goods, materials and services in which either the company or the director, relative, firm, partner or private
company, as the case may be, regularly trades or does business :Provided that such contract or contracts do not relate to goods and materials the value of which,or services the cost of which, exceeds five thousand rupees in the aggregate in any year.
Section 301
REGISTER OF CONTRACTS, COMPANIES AND FIRMS IN WHICH DIRECTORS ARE
INTERESTED.
(1) Every company shall keep one or more registers in which shall be entered separately particulars of all contracts or arrangements to which section 297.
So the interpretation is maintainance of Register U/s 301 is applicable if the transaction value exceeds 5000.