Sections 192 and 193 of the Companies Act 2013: Non-Cash Transactions Involving Directors and OPC Contracts
Sections 192 and 193 of the Companies Act, 2013 regulate two distinct corporate governance matters. Section 192 restricts specified non-cash asset transactions involving directors or connected persons, while Section 193 prescribes how certain contracts between a One Person Company and its sole member-director must be documented and reported.
- Section 192 requires prior approval by resolution in general meeting for the specified non-cash arrangements.
- The notice seeking approval must disclose the arrangement and the value of the assets calculated by a registered valuer.
- A contravening arrangement is generally voidable at the instance of the company, subject to the statutory exceptions.
- Section 193 requires specified OPC contracts with the sole member-director to be in writing or properly recorded, subject to the ordinary-course-of-business exception.
- The OPC must inform the Registrar about a contract recorded under Section 193(1) within the statutory period.
Section 192 - Restriction on Non-Cash Transactions Involving Directors
Section 192 is intended to subject certain exchanges of assets between a company and directors or connected persons to shareholder scrutiny. The provision applies where consideration for the acquisition of assets is other than cash.
When prior approval is required
A company cannot enter into an arrangement under which a director of the company, its holding company, subsidiary company or associate company, or a person connected with such director, acquires or is to acquire assets from the company for consideration other than cash, unless the required prior approval is obtained.
The restriction also operates in the reverse direction: where the company acquires or is to acquire assets for consideration other than cash from such a director or connected person, prior approval by a resolution of the company in general meeting is required.
If the relevant director or connected person is a director of the holding company, approval by resolution in the general meeting of the holding company is also required.
Registered valuer and disclosure in notice
Under Section 192(2), the notice for approval must contain particulars of the proposed arrangement together with the value of the assets involved, duly calculated by a registered valuer. A registered valuer is a person registered to undertake valuation in accordance with the Companies Act, 2013 and the applicable valuation framework.
Effect of contravention
Under Section 192(3), an arrangement entered into in contravention of the section is voidable at the instance of the company. The statute, however, protects the arrangement in the specified circumstances where restitution is no longer possible and the company has been indemnified for the loss or damage, or where rights have been acquired by another person bona fide for value and without notice of the contravention.
Section 193 - Contract by One Person Company
A One Person Company, commonly called an OPC, is a company that has only one person as its member. Section 193 deals with a contract between an OPC limited by shares or by guarantee and its sole member where that sole member is also a director of the company.
Writing or recording of the contract
If such a contract is not in writing, the company must ensure that the terms of the contract or offer are contained in a memorandum or are recorded in the minutes of the first meeting of the Board of Directors held after entering into the contract.
Ordinary-course-of-business exception
The documentation requirement in Section 193(1) does not apply to contracts entered into by the company in the ordinary course of its business.
Information to the Registrar
Section 193(2) requires the company to inform the Registrar about every contract entered into by the company and recorded in the minutes under Section 193(1), within fifteen days of the date of approval by the Board of Directors.
Difference Between Sections 192 and 193
Section 192 applies broadly to companies entering into specified non-cash asset arrangements involving directors or connected persons and focuses on prior shareholder approval and valuation. Section 193 is specific to a One Person Company contracting with its sole member who is also its director and focuses on written evidence, Board records and reporting to the Registrar.
Official Legal Resources
Companies Act, 2013 - Ministry of Corporate Affairs
India Code - Central Acts and statutory text
Ministry of Corporate Affairs - official portal
This article is a general legal information resource. For a transaction-specific compliance decision, the current Act, applicable rules, notifications and MCA filing requirements should be checked.