Related party transactions

Kavitha (-) (210 Points)

09 May 2014  

Dear Friends,

In a Private Company, X & Y are the only 2 directors and also the only 2 members.

As per the provisions of Section 188 (1) of the Companies Act, 2013, the interested members cannot vote on special resolution and

As per Rule 15 (2) of the Companies (Meetings of Board and its Powers) Rules, 2014, interested directors shall not be present in the meeting during discussion of related party transactions.

In this situation, if Y purchases a house from the Private Company, how to carry out the Board Resolutions and Special Resolutions?

As per third proviso to Section 188(1), Section 188(1) is not applicable to any transactions entered into by the Company in its ordinary course of business other than transactions which are not on an arm's length basis.

If the Private Company is dealing in construction of houses business and director is purchasing a house on the price received from other customers, then does Section 188(1) not apply to the said Company?

Regards,

Kavitha