||Nature of Difference
||Companies Act, 2013
||Companies Act, 1956
||Approval from Board
- sale, purchase or supply of any goods or materials;
- selling or otherwise disposing of, or buying, property of any kind;
- leasing of property of any kind;
- availing or rendering of any services;
- appointment of any agent for purchase or sale of goods, materials, services or property;
- such related party's appointment to any office or place of profit in the company, its subsidiary company or associate company; and
- underwriting the subscription of any securities or derivatives thereof, of the company
- Sale, purchase or supply of any goods, materials or services.
- underwriting the subscription of any shares in, or debentures of, the company :
||Transactions exceeding the prescribed amount
||Prior approval of company by way of special resolution is required.
||Prior approval of Central Government.
||Directors/Member (along with their relatives) shall not vote at any such resolution for approving any contract, if he is a related party.
General Circular No. 30/2014 Dated: 17th July, 2014
||Ordinary course of business
||The transactions entered into in ordinary course of business are exempted from taking Board’s approval except the transactions which are not on arm’s length basis.
||Only in case of a banking/insurance company any transaction in the ordinary course of business are exempted from taking Board’s approval except the transactions which are not on arm’s length basis.
|(The term, ‘Arm’s length transaction’ has been defined as a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.)
||Disclosure in Board’s report.
||Disclosure of all such contracts alongwith the justification for entering into such contracts needs to be given under Board’s report.
||Violation of provision
||Companies can proceed against director/employees who had authorized such contract in violation of provision of this section for recovery of any loss sustained by it.
||Penalty structure has been changed.
(i)listed Company, Imprisonment for 1 year or with fine between 25 thousand rupees & 5 lakh rupees, or with both; and
(ii) Non listed Co., Punishable with fine between 25 thousand rupees &5 lakh rupees.
Non compliance with the provision will result in voilance of the transaction.
||The provisions for prior approval of Board for appointment to any office or place of profit in the company or its subsidiary company are clubbed.
||Approval of Central Government is not required for appointment of any director or any other person to any office or place of profit in the company or its subsidiary. These sections are clubbed in one, Section 188 of the Act 2013
||Language is more simplified
||Redundant provisions deleted.