SA-550(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 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) From the above it Clearly shows as X’s has no interest in the transaction made by the company with the firm, Now whether the such transaction should be treated as related party and whether such transaction to be recorded in the 301 register of the company act 1956 or not?

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 year 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?

vrnanda

vrnanda (Expert)
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19 July 2010 Hi Prashant,

Question 1)
i) the fact that a director is a partner in such a firm shall definitely be considered as an interested party.
ii) keep in mind that the it is not intention of the party to determine whether interested or not, interested shall mean a benefit/probable benefit could be gained from such transaction.
iii) However in the given case X, a director of a company, (influential capacity) and a partner in a firm (influential capacity) is clearly states that the the transaction is required to be disclosed as an item of transactions where directors are interested.
iv) Hence it shall be entered in the register maintained under section 301 of the companies act and he shall be excluded from being voted on the above subject.
v) all these transactions need to be disclosed under the category related party transactions, as control/significant influence can be enstablished.

Question 2)
it has been addressed in answer to the question 1.