March 1, 2024

Related party transactions

Business / /

A related party transaction is a two-party contract which is accompanied by a pre-existing business relationship or mutual interest. For example, it would be a related party agreement to have a contract between a major shareholder of a company and the company if such shareholder agrees to renovate the offices of the company. Companies also aim to establish business relationships with parties they are familiar with or have common interests. While these kinds of transactions are legal, they may pose a conflict of interest or lead to another illegal situation. Therefore, related party transactions have to be approved by agreement of management or board of directors of the company. If unchecked, the misuse of related party transactions could result in fraud and financial ruin for all parties involved. Who is a Related Party? Following are the related parties with respect to Company LMN Ltd (LMN Ltd is taken as an example for explaining purposes). Let’s say, Mr L, M, and N are directors in this company. The related parties for the company, in general, are as under: Sl no Related Parties Examples 1. A director or his relative (Relative means a member of the same HUF, husband, wife, father, stepfather, mother, stepmother, son, stepson, son’s wife, daughter, daughter’s husband, brother, stepbrother, sister, step-sister) Mr L, Mr M and Mr N are directors and the relatives of these Directors are considered as related parties. 2. Key managerial personnel or his relative Say, Mr O is a Company secretary, his relatives will be considered related parties 3. A firm in which a director, manager, or relative is a partner Mr L is a partner at RST. Pvt. Ltd, another firm. This firm will also be considered as a related party. 4. A private company in which a director, manager, or relative is a member or director Mr. M is a director in M Pvt Ltd – In this case M Pvt. ltd becomes a related party. Even when Mr. M’s relative is a member or director in M Pvt ltd, this company will be considered as a related party. 5. A public company in which a director or manager is a director and holds along with his relatives more than 2% of its paid-up capital Mr. N along with his relatives holds more than 2% of the paid-up capital of N ltd. In this case, N Ltd will be considered as a related party. 6. Any body corporate whose board of directors, MD or manager is required to act in accordance with the advice, directions or instructions of a director or manager (NA in cases when these directions are followed in a professional capacity) When P Ltd acts on the directions of Mr. L, P Ltd will be a related party. 7. Any person on whose advice, directions or instructions a director or manager is required to act (NA when this is done  in a professional capacity) Mr A holding 51% in LMN Ltd on whose advice Mr L has to act will be considered as a related party. 8. Holding, Subsidiary or Associate of such company These all will be considered as related parties:– ABC Ltd holding 51% in LMN Ltd (Holding Company)– LMN Ltd holding 51% in XYZ Ltd (Subsidiary Company)– DEF Ltd holding 30% in LMN Ltd (Associate Company) 9. Any company which is a subsidiary of a holding company to which it is also a subsidiary PQR & LMN are both subsidiaries of ABC ltd. Thus, PQR also becomes a related party Meaning of Related Party Transactions Since we are acquainted with the term related party let us dive into the transactions covered. The broad categories are mentioned hereby: Sl no Transactions as per Companies Act requiring approval of the Board by resolution Transactions as per The Companies (Meetings of Board and its Powers) Rules 2014 requiring approval by the company by resolution 1. Goods and Material: Sale, purchase or supply Sale/Purchase/Supply of goods/material directly or through an agent covering 10% or more of turnover OR one hundred Crores (whichever is lower). 2. Property: Selling or buying or leasing Sale/Purchase of property directly or through an agent that is 10% or more of net worth OR one hundred Crores (whichever is lower). In case of leasing of property directly covering 10% or more of turnover OR one hundred Crores (whichever is lower). 3. Agent for (1) and (2) above Availing or rendering of services directly or through an agent which is 10% or more of turnover OR fifty Crores (whichever is lower). (All the above limits are to be taken on all transactions done on a financial year basis.) Sl no Transactions as per Companies Act requiring approval of the Board by resolution Transactions as per The Companies (Meetings of Board and its Powers) Rules 2014 requiring approval by the company by resolution 4. Others:– Availing of or the rendering of services– Underwriting of securities or derivatives– Related partys’ appointment to a place of profit or office* in the company/subsidiary/associate– If the Director or individual other than director/firm/private company/body corporate receive from the company an amount over and above the remuneration (In the case of directors) and anything by way of remuneration for others will need the approval of the Board by a resolution. – Related party’s appointment to the place of profit or office* in the company/subsidiary/associate where the remuneration exceeds two and a half lakh.– Underwriting of securities or derivatives when remuneration exceeds 1% of the net worth. Related Party Transactions in India In India, various regulations clearly outline the definition of a related party transaction. It helps to ensure that they are conflict-free. In the case of a company, it helps to ensure that it does not negatively affect the shareholders’ value or its profits. The Institute of Chartered Accountants of India (ICAI) introduced Accounting Standard 18- ‘Related Party Disclosures’ and made it mandatory for businesses to report related party transactions in the financial statements. Apart from this, various laws refer to these transactions. SEBI Governs Related Parties and Related Party Transactions The SEBI Clause 49 also states certain regulatory requirements for related party

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Company Information Published by MCA

Companies Act 2013 / /

The Ministry of Corporate Affairs (MCA) is a government portal containing details of all the companies incorporated in India. It has details of all the types of companies and Limited Liability Partnership (LLP). One can check the Company registration number, type of company, date of incorporation, charges of a company, directors of the company, etc. from the site. The balance sheets and other documents of a company along with annual returns are also available on the website for payment of appropriate fees. On incorporation of a company or LLP, many of the information about the company and its Directors are made publicly available on the MCA website. This information including email addresses of company is used by marketers to contact newly incorporated companies. In this article, we look at the rules relating to the publishing of company information on the internet. The Central Government may perhaps by order companies usually or any company or class of company to furnish any information or statistic with reference to constitution or working of the company within a time that is specified in the order. Free Information Published on MCA Portal The Ministry of Corporate Affairs publishes the following information pertaining to a company on the MCA Master Data website on the incorporation of a company: Company / LLP Information CIN – Corporate Identification Number Company Name ROC Code Registration Number Company Category Company SubCategory Class of Company Authorised Capital Paid-up Capital Number of Members Date of Incorporation Registered Address Address other than Registered Office where all or any books of account and papers are maintained Email Whether Listed or not Suspended at the stock exchange Date of last Annual General Meeting Date of the Balance Sheet Company Status(for efiling) Charges Data- Charges data consists of charges created by lenders of the Company on its assets against the money lent. The following charges information is published: Assets undercharge Charge Amount Date of Creation Date of Modification Status Director Details DIN of the Director or LLP Partner Name of the Director or LLP Partner Date of Appointment Date of Resignation, if applicable Related Company Details- Additional details about the Directors of the Company like related company and related LLP can also be gleaned. The following additional information are available: List of Related Companies List of Related LLPs Paid Information Available on MCA Portal Incorporation certificate Documents filed during incorporation Extracts of certain board meetings Extract of the AGM and Annual Report Any other information filed by the company with the MCA and allowed to be published to the public Power of Central Government In addition to the above, the Central Government enjoys certain powers to request a company to publish certain information or statistics as follows: Every government order for information and statistics will be published in Official Gazette and may perhaps be addressed to the companies generally or any class of companies. The date of publication will be deemed to be the date on which necessity for information or statistics is imposed on companies. The Central Government may possibly by the order have need of a company or companies to produce records or documents in its possession or permit inspection thereof by officers or furnish additional information. If a company fails to furnish to meet the terms with an order or intentionally furnish any information or statistics incorrect or unfinished in any material respect, the company will be punishable with fine which may expand to Rs. 25,000 and every officer of the company who is in default, will be punishable with imprisonment for a term which may perhaps extend to six months or with fine which will not be less than Rs. 25,000 but which may perhaps extend to Rs. 3 lakhs or with both. Where a foreign company performs business in India, all references to a company in this segment shall be deemed to comprise references to the foreign company in relation, and only with reference to such business. FAQs What is CIN? The Corporate Identification Number (CIN) is a 21 digits alpha-numeric code issued to companies on being registered by the Registrar of Companies (ROCs) situated in different states across India under the Ministry of Corporate Affairs (MCA). The CIN is the unique identification number of a company and must be entered in all the forms required to be filed by the company on the MCA portal. What is ROC? The Registrar of Companies ( ROC ) is an office under the MCA, which deals with the administration of companies in India. The  Registrar of Companies (ROCs) is operating in all the major states/UT’s. The ROCs register companies across the states and the UTs, maintain a registry of records concerning companies that are registered with them and allow the general public to access this information on payment of a stipulated fee. What are assets under charge? A charge means a right or interest obtained by a creditor or lender in the property of the company by way of security that the company will pay back the debt. A company’s borrowings are backed by securities, on the strength of which loans are given to them by the banks and financial institutions. Assets under charge are the assets of the company upon which a charge is created for the company’s borrowing. Every company creating or modifying a charge on its property or assets should register the particulars of charge with the ROC within 30 days of such creation. The company registration search provides the details of the assets under the charge of the company registered with the ROC. Practice area’s of B K Goyal & Co LLP Income Tax Return Filing | Income Tax Appeal | Income Tax Notice | GST Registration | GST Return Filing | FSSAI Registration | Company Registration | Company Audit | Company Annual Compliance | Income Tax Audit | Nidhi Company Registration| LLP Registration | Accounting in India | NGO Registration | NGO Audit | ESG | BRSR | Private Security Agency | Udyam Registration | Trademark Registration | Copyright Registration | Patent Registration | Import Export

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Specimen of minutes of board meeting

Companies Act 2013 / /

The minute of the general meeting is an integral document of the Company, which must be drawn up and kept in the same way as accounting books. The minutes are a summary of the distilled wisdom of the board, their views, thoughts, and aspirations, providing strategic guidance and a blueprint for setting it on a growth trajectory. Writing good minutes is just as important as preparing deeds and contracts. The topic should be precise and in simple language so that the reader can understand it even years later. Therefore, registration has its meaning in the provisions of the Companies Act, 2013 and the Secretarial Standards issued by ICSI as a statutory requirement for companies. What are the minutes of the meeting? Minutes are the official record of the meeting. They help to understand the proceedings and decisions taken at the meeting. There is no restrictive language for recording meeting minutes or a format to adhere to.Records kept under the provisions of the Companies Act can serve as evidence in court. For example, the only way to prove that a board resolution was passed at a board meeting is to submit the minutes in which the relevant resolution was entered before the court. Minute book- The minutes of the meetings should be kept in a book of minutes kept for this purpose at the registered office of the company or a place approved by the board of directors. The law prohibits entries in a record book, so entries cannot be typed and then written in a bound record book or loose sheets. Also, the entry should not be printed on a piece of paper, whether on letterhead or any other paper, and inserted in the record book to preserve the integrity and probative value of the record. Courts in the past invalidated board meetings due to the failure of recording minutes in a proper book under the Companies Act 2013. Therefore, a minute book should be kept and segregated for different proceedings such as board meetings and meetings of various board committees. Format of the minutes of the meeting Details of participants: In the case of minutes of company meetings, the name(s) of the members of the board of directors present and the manner of their participation must be stated. If all directors are physically present, the minutes need not specifically record the manner of attendance. However, the minutes should record the method of participation if any director participates by video conference or other electronic methods, along with the location from which he participates.If a company secretary is involved, details of the company secretary must be provided. The minutes must include details of any other person who is present and those invited. Finally, the minutes of the meeting must include the names of the directors who applied for and were granted leave. Elections and quorum: The minutes of the meeting must contain a record of the election of the chairman of the meeting. Furthermore, it should also include details of the presence of the Quorum. If a Resolution is present at the commencement of a Meeting, but subsequently any Director leaves before the adjournment of the Meeting, as a result of which the requirement for a Resolution for business taken thereafter is not met, the Meeting should be adjourned and a declaration to that effect should be recorded in the minutes. Resolution details passed: The minutes of the meeting should contain the text of resolutions (resolutions) adopted in circulation since the last meeting, including any disagreement or abstention from voting. If any director on the board of directors dissents or abstains from voting on any resolution passed by circulation, such dissent or abstention should be recorded in the minutes of the meeting. Details of Dissent and Opinions of Independent Directors: The views of the Director or Independent Director must be recorded in the minutes of the meeting, especially if the Director or any other person at the meeting insists on them. Furthermore, the minutes of the meeting must state the disagreement and the name of the director who disagreed with the resolution or abstained from voting on the resolution. Related Party Transactions: In the case of a limited liability company, the minutes of the meeting should record the fact that the interested director participated in the discussion and voted after disclosing his interest. If the executive did not participate in the meeting and did not vote on the item he was interested in, and in the case of a transaction with a related person, this information must also be recorded in the minutes. Miscellaneous items: The discussion of any item other than that contained in the meeting agenda with the consent of the majority of the members of the board of directors present at the general meeting and the approval of the decision taken on this item by the majority of the members of the board of directors of the company should be indicated in the minutes. Acknowledgment and closing of the meeting: If any acknowledgments need to be mentioned, they can be given before the deadline. Finally, the start and end time of the Meeting should be recorded in the minutes. Sample Minutes for the first Board Meeting Minutes of the first Board Meeting of ………………….. (Company Name), held on ………………….. (Day)… (Date, Month and Year) at ………………….. (Venue) from ………………….. (Time of Commencement). Present: ……………. (in the Chair) ……………. ……………. ……………. In attendance: …………… Company Secretary …………… Chairman for the Meeting Mr.………….. ………..was elected as the Chairman for the Meeting. Quorum The business before the Meeting was taken up after having established that the requisite Quorum was present. Leave of Absence Leave of absence was granted to Mr. / Ms. X who expressed his inability to attend the Meeting owing to his pre-occupation. Certificate of Incorporation The Board was informed that the company has been incorporated on… and the Directors noted the Certificate of Incorporation No……………. of …….…, dated ……….. Issued by the Registrar of Companies… Memorandum and Articles of Association A printed copy of

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Airport Authority Clearance

Government Schemes / /

No height clearance objection certificate (NOC) is issued by India’s Airports Authority according to the Govt. The aim of India’s Ministry of Civil Aviation was to safeguard airspace in and around aerodromes in order to allow safe and regular aircraft activities and to avoid aerodromes to become unusable as a result of the growth of obstruction surrounding the airports. NOC relating to civil aerodromes is provided on behalf of the Central Government by the Appointed Officer (DO) of the Airports Authority of India (AAI). In the situation of State-owned and private aerodromes authorized by the Directorate-General for Civil Aviation, AAI’s appointed officers shall also grant a NOC. This ATMC is intended to standardize the process for granting NOC for height approvals to safeguard airspace around the aerodromes. This Air Traffic Management Circular (ATMC) also outlines the processes for review, revalidation, and appeal cases to be handled. Applicability This ATMC applies to all AAI staff who are responsible for the height clearance procedure and problem of NOC. This ATMC also extends to all Joint Venture Airports, Approved State Government, and Private Airports staff for whom AAI issues NOC for height clearance. Authority Airport Authority of India is the authority responsible for giving height clearances to the construction and expansion activities around the airport. Provisions AAI has set up 9 NOC offices headed by Designated Officer. They look after NOC applications for height clearance in respective of structures. NOC Committee is formed at regional and state levels which compromises of 5 members as per mentioned under para 5.1 of the circular. The application for obtaining NOC can be made to the designates officer through No Objection Certificate Application System (NOCAS), in respect of civil aerodromes. It is complete paperless process which is another achievement for AAI. Since all the work is paperless there is no need for hard copy instead scanned documents and undertakings are required to be uploaded and the grant of NOC letter and updates are sent to the applicant via e-mail and SMS. All other details can be viewed on the dashboard of the applicant and NOCAS has a mapping system which is available to both applicant and officer which is used to analyze the proposed sites. The application is available on the site of NOCAS. After an application is received in NOCAS, it is checked through auto settle criteria in para 6.1.8 of the circular. Various documents are required to be uploaded with the application of NOC, though different documents are mentioned for different NOCs- For buildings, chimneys, flyovers, structures etc. Certified co-ordinates of the site in WGS 84 (Refer NOCAS site). Certified elevation of site in meters Above Mean Sea Level (AMSL). Undertaking in 1A. In case application is filed by person other than owner or lessee, then authorization letter from them. Note: The scanned documents/copies are to be uploaded only in pdf. or jpg. Form with file not exceeding 500 kb/each. For Power Transmission lines Certified co-ordinates of the site in WGS 84 (Refer NOCAS site). Certified elevation of site in metres Above Mean Sea Level (AMSL). Undertaking in 1B. In case application is filed by person other than owner or lessee, then authorization letter from them. Note: The scanned documents/copies are to be uploaded only in pdf. or jpg. Form with file not exceeding 500 kb/each. In both cases, if proposed structure lies within the premises of airport, them permission letter is required from concerned airport operator. Co-ordinates under WGS 84 and elevation in AMSL is mandatory for applicant to upload. If plot size is less than 300 mtrs, then a single WGS 84 co-ordinate is required which is closest to airport and if it is more than 300 mtrs, then co-ordinates of all corners are required including nearest point from the airport. In case of triangular plot there are minimum 4 co-ordinates required for which 4th co-ordinate will be the side of the plot towards the airport different from rest 3 co-ordinates. Validity and Review of Application The validity of NOC letter is of 8 years and in between for re-validation (one time) without any assessment is allowed provided that the construction work has commenced by submitting an undertaking in Form 1C along with re-validation application. In case of Transfer of property to a new owner or lessee, the terms and conditions of the NOC applies to him too. An application for review may be filed by an applicant by an undertaking under Form 1D only when applicant des not get proposed height as he asked for in the application initially or when NOC has been issued to him but he wants to apply for more height. This review is carried out by NOC Committee. Appeals An appeal shall lie to the Appellate committee subject to following conditions and circumstances- If applicant is not satisfied with the height in NOC provided and wishes for greater height clearance under the validity of NOC. The application should be filed by owner and shall be addressed to Chairman, Appellate Committee mentioning the site. Fees for filing an appeal shall be made through payment gateway on NOCAS of Rs. 2 lakhs + GST. In case of Aeronautical study, after its approved by competent authority, fees shall be payable to AAI of Rs. 20 lakhs + GST and study shall be made as per Aeronautical Study Guidelines available on AAI website. Applicant has to file undertaking in Form 1E for such study. After the study has been done by AAI, the report shall be made available to the NOC committee who shall then communicate decision to Designated Officer and accordingly a revised NOC will be issued to the applicant. FAQs What is the jurisdiction of the regional offices? Regional offices at Delhi, Mumbai, Kolkata, Chennai and Guwahati have jurisdiction at Airports for which provide NOCs under administrative control of AAI. For regional offices at Ahmedabad, Bengaluru, Hyderabad and Nagpur the jurisdiction shall be at 56 kms within each respective airport and any other airport that falls in those 56 kms. Whether

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Due diligence

Business / /

Due diligence is a relatively common term. Used in business, it broadly refers to the process of investigating and verifying information about a company or investment opportunity. Specifically for compliance teams, it comes up when you consider relationships with new vendors and third parties. Yet it can be difficult to understand what due diligence really is and how best to incorporate it into your procedures. The dictionary gives the term ‘due diligence’ a basic meaning. Depending on the context in which the term is used, it can hold other meanings — especially for corporations, nonprofits and educational institutions. Due diligence as it pertains to business. The definition cites ‘research and analysis of a company or organization done in preparation for a business transaction (such as a corporate merger or purchase of securities).’ What Is Due Diligence? Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party. Due diligence became common practice (and a common term) in the United States with the passage of the Securities Act of 1933. With that law, securities dealers and brokers became responsible for fully disclosing material information about the instruments they were selling. Failing to disclose this information to potential investors made dealers and brokers liable for criminal prosecution.1 The writers of the act recognized that requiring full disclosure left dealers and brokers vulnerable to unfair prosecution for failing to disclose a material fact they did not possess or could not have known at the time of sale. Thus, the act included a legal defense: as long as the dealers and brokers exercised “due diligence” when investigating the companies whose equities they were selling, and fully disclosed the results, they could not be held liable for information that was not discovered during the investigation. Due diligence is performed by equity research analysts, fund managers, broker-dealers, individual investors, and companies that are considering acquiring other companies. Due diligence by individual investors is voluntary. However, broker-dealers are legally obligated to conduct due diligence on a security before selling it. Types of Due Diligence Commercial due diligence considers a company’s market share and competitive positioning, including its future prospects and growth opportunities. This will consider the company’s supply chain from vendors to customers, market analysis, sales pipeline, and R&D pipeline. This can also encompass a firm’s overall operations, including management, human resources, and IT. Legal due diligence makes sure that a company has all of its legal, regulatory, and compliance eggs in a row. This includes everything from pending litigation to intellectual property rights to being sure the company was properly incorporated Financial due diligence audits a company’s financial statements and books to make sure that there are no irregularities and that the company is on solid financial footing. Tax due diligence looks at the company’s tax exposure, whether it may owe any back taxes, and where it can reduce its tax burden going forward. Hard vs. Soft Due Diligence Due diligence can be categorized as “hard” or “soft” based on the approach used. Hard due diligence is concerned with the numbers and data found on the financial statements like the balance sheet and income statement. This can entail fundamental analysis and the use of financial ratios to get a grasp on a company’s financial position and make projections into the future. This type of due diligence can also identify red flags or accounting inconsistencies however, Hard due diligence, which is driven by mathematics and legalities, is susceptible to rosy interpretations by eager salespeople. Soft due diligence acts as a counterbalance when the numbers are being manipulated or overemphasized. Soft due diligence is a more qualitative approach that looks at aspects such as the quality of the management, the people within the company, and the loyalty of its customer base. There are indeed many drivers of business success that numbers cannot fully capture, such as employee relationships, corporate culture, and leadership. When M&A deals fail, as an estimated 70%-90% of them do, it is often because the human element is ignored How to Perform Due Diligence for Stocks Step 1: Analyze the Capitalization of the Company – A company’s market capitalization, or total value, indicates how volatile the stock price is, how broad its ownership is, and the potential size of the company’s target markets.Large-cap and mega-cap companies tend to have stable revenue streams and a large, diverse investor base, which tends to lead to less volatility. Mid-cap and small-cap companies typically have greater fluctuations in their stock prices and earnings than large corporations. Step 2: Revenue, Profit, and Margin Trends- The company’s income statement will list its revenue or its net income or profit. That’s the bottom line. It’s important to monitor trends over time in a company’s revenue, operating expenses, profit margins, and return on equity. The company’s profit margin is calculated by dividing its net income by its revenue. It’s best to analyze profit margin over several quarters or years and compare those results to companies within the same industry to gain some perspective. Step 3: Competitors and Industries- Now that you have a feel for how big the company is and how much it earns, it’s time to size up the industry in which it operates and its competition. Every company is defined in part by its competition. Due diligence involves comparing the profit margins of a company with two or three of its competitors. For example, questions to ask are: Is the company a leader in its industry or its specific target markets? Is the company’s industry growing?Performing due diligence on several companies in the same industry can give an investor significant insight into how the industry is performing and which companies have the leading edge in that industry. Step 4: Valuation Multiples- Many ratios and financial metrics are used to evaluate companies, but three of the most useful are the price-to-earnings (P/E) ratio, the price/earnings to growth (PEGs) ratio, and price-to-sales (P/S) ratio. These ratios are already calculated for you on websites such as Yahoo! Finance.As you research ratios for a company,

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