Restriction on Non-cash Transactions Involving Directors

Section 192 of the Companies Act 2013 seek to provide for the manner in respect of regulation of arrangements between a company and its directors in respect of acquisition of assets for consideration other than cash.

The clause provides that such arrangements shall require prior approval by a resolution in general meeting and if the director or connected person is a director of its holding company, approval is required to be obtained by passing of special resolution in general meeting of the holding company.

So according to the section the prior approval by passing the resolution by the shareholders of the company or holding company will be required in the following scenario:

• If, a director of the company, or
• a director of its holding, subsidiary, or
• a director of its associate company, or
• a person connected with him,

acquires or is to acquire assets for consideration other than cash.

• If, company acquires or is to acquire assets for consideration other than cash, from:-

• Such director, or
• person so connected.

Notice of the meeting

According to section192(2), Notice for approval of the resolution by the company or holding company in general meeting shall include the particulars of the arrangement along with the value of the assets involved in such arrangement duly calculated by a registered valuer.

Entered in contravention of the provision

Sub section {3} says that any arrangement entered into by a company or its holding company in contravention of these provisions shall be voidable at the instance of the company.

(a) the restitution of any money or other consideration which is the subject matter of the arrangement is no longer possible and the company has been indemnified by any other person for any loss or damage caused to it; or

(b) any rights are acquired bona fide for value and without notice of the contravention of the provisions of this section by any other person.