Related Party Transaction (Section 188) - A Significant Amendment By ACS Prem Munjal

Dear Professional Colleagues,

I hope you're aware that most of the Companies which exist in India have been either closely held or shareholding lies in the hands of Promoters consequently, with this less scattered form of shareholding, the number of Independent members also reduced to very few.

Therefore; in this kind of shareholding structure; the members which exist either belongs to the promoter group or related party.

It's a pleasure to share with you all that in the recent move by the Central Government notified by the MCA on 9th February 2018 with a purpose to kick ahead to the Indian government movement 'Ease of Doing Business' has allowed participating at the General Meeting to cast votes while passing an ordinary resolution for the purposes to enter into contracts or arrangements with any related party upon satisfaction either of the following conditions:

  1. Not less than 90 % of the members, in numbers, of the Company relatives of the promoters.
  2. Not less than 90 % of the members, in numbers, of the Company's related parties.
With this significant amendment, it will enable the companies to clear their backlogs of contracts or arrangements u/s 188 of the Companies Act, 2013 and also enable them to plan the road ahead in the smoother manner.

We hope we have added value to your knowledge.

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