Govt eases related party norms for corporates

New Delhi: Making it easier for companies, the government said that corporate restructuring activities, including amalgamations, will be excluded from the ambit of related party transactions. Further, only ‘interested related parties’ with regard to a particular transaction would be precluded from voting on the same deal. There are strict norms for related party transactions under Section 188 of the new Companies Act, which is being implemented by the Corporate Affairs Ministry. As per second proviso to Section (1) of Section 188 a member of the company, who is a related party, is not allowed to vote on a special resolution to approve a contract or arrangement. “It is clarified that ‘related party’ referred to in the second proviso has to be construed with reference only to the contract or arrangement for which the said special resolution is passed,” the Corporate Affairs Ministry said.