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The Tax Publishers Companies Act, 2013--Related Party Transactions Discussion on Section 188 of the Companies Act, 2013 CA. Deepak Harwani In the present article the learned author discusses about the provision of section 188 of the Companies Act, 2013 expressing the scope and applicability of related party transactions, approval mechanism, disclosure requirements and consequences in case of non-disclosure/non-compliance of the section 188 requirements. 1. Definition of Related Party Section 2(76) of the Companies Act, 2013 delineates the scope of the term 'Related Party', encompassing a broad category of natural persons and juridical entities whose relationship with a company may give rise to conflicts of interest or influence over corporate decisions. For the purposes of compliance, governance, and regulatory oversight, the following persons and entities shall be deemed to constitute a 'related party' in relation to a company: 1. Directors and Relatives : Any individual serving as a director of the company, as well as any relative of such director. 2. Key Managerial Personnel (KMP) and Relatives : Any Key Managerial Personnel of the company--such as the Chief Executive Officer, Managing Director, Company Secretary, Whole-time Director, or Chief Financial Officer--and the relatives of such individuals. 3. Firms Involving Directors, Managers, or Relatives : Any partnership firm in which a director, manager, or any of their respective relatives is a partner, thereby creating a direct nexus between the company and such firm. 4. Private Companies connected through Directors, Managers, or Relatives : Any private company in which a director or manager of the company, or any of their relatives, holds the position of member or director, thereby establishing potential influence or control. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Companies Act, 2013--Related Party Transactions

Discussion on Section 188 of the Companies Act, 2013

CA. Deepak Harwani

In the present article the learned author discusses about the provision of section 188 of the Companies Act, 2013 expressing the scope and applicability of related party transactions, approval mechanism, disclosure requirements and consequences in case of non-disclosure/non-compliance of the section 188 requirements.

1. Definition of Related Party

Section 2(76) of the Companies Act, 2013 delineates the scope of the term 'Related Party', encompassing a broad category of natural persons and juridical entities whose relationship with a company may give rise to conflicts of interest or influence over corporate decisions. For the purposes of compliance, governance, and regulatory oversight, the following persons and entities shall be deemed to constitute a 'related party' in relation to a company:

1. Directors and Relatives : Any individual serving as a director of the company, as well as any relative of such director.

2. Key Managerial Personnel (KMP) and Relatives : Any Key Managerial Personnel of the company--such as the Chief Executive Officer, Managing Director, Company Secretary, Whole-time Director, or Chief Financial Officer--and the relatives of such individuals.

3. Firms Involving Directors, Managers, or Relatives : Any partnership firm in which a director, manager, or any of their respective relatives is a partner, thereby creating a direct nexus between the company and such firm.

4. Private Companies connected through Directors, Managers, or Relatives : Any private company in which a director or manager of the company, or any of their relatives, holds the position of member or director, thereby establishing potential influence or control.