Before entering a covered non-cash asset arrangement with a director or connected person, obtain the section 192 general-meeting approval and give members the required particulars and registered valuation. A journal entry, an ordinary Board approval or a nil net cash movement does not, by itself, complete this requirement.
This Companies Act analysis was checked on 24 October 2026. It addresses acquisition of assets for consideration other than cash, not every reimbursement or ordinary cash purchase from a director. The actual arrangement and consideration must be classified. Separate related-party, share-issue, borrowing, tax and accounting requirements may apply alongside section 192.
Identify both the person and the direction of the transfer
Section 192 in the official Gazette text hosted by WIPO Lex covers a director of the company or its holding, subsidiary or associate company, or a person connected with him, acquiring assets from the company for non-cash consideration. It also covers the company acquiring assets for non-cash consideration from the specified director or connected person. Map the entities and roles rather than examining only the company’s own Board list.
The prior approval is a resolution in the company’s general meeting. If the director or connected person is a director of the company’s holding company, the provision additionally requires a resolution in the holding company’s general meeting. Do not replace that relationship test with an ownership-percentage shortcut.
Explain the full exchange, not only the cash balancing figure
Start with the asset transferred by each side, the nature of the consideration, any cash adjustment and any proposed set-off. A mixed exchange cannot be treated as an ordinary cash transaction merely because one balancing amount moves through the bank. Equally, a purely cash consideration transaction should not be labelled a barter just because the counterparty is a director.
A proposed settlement of an existing payable through transfer of an asset deserves a specific classification review. Entries labelled loan adjustment, capital adjustment or settlement can conceal the actual consideration. Record the contractual obligations and the discharge mechanism before deciding whether the arrangement is within section 192.
Registered valuation belongs in the approval notice
Subsection (2) requires the general-meeting notice to include the arrangement’s particulars and the value of the assets involved, duly calculated by a registered valuer. A carrying amount from the fixed-asset register and the net cash payment are not substitutes for that asset valuation. The ICSI–CCGRT Chapter XII checklist, item 99 separately checks prior shareholder approval, any holding-company approval and the notice’s registered-value information.
The practical file should reconcile the registered-valuer report to each asset description, ownership record and proposed consideration. Explain differences between carrying value, registered value and negotiated consideration. This is a disclosure and approval working, not a claim that section 192 fixes every price or determines the accounting gain.
Approval must precede the arrangement
Build the approval sequence before signing or implementing the covered arrangement. Record when the arrangement is entered into, not just the later physical delivery date. A resolution after execution should not be described as the prior approval required by the text. Where an arrangement has already been entered into, assess the legal consequences and available steps on its facts rather than backdating the record.
Section 192(3) makes a contravening arrangement voidable at the instance of the company, subject to the stated exceptions. One exception concerns restitution no longer being possible together with indemnification of the company for loss or damage. Another concerns rights acquired by another person bona fide for value without notice of the contravention. These are factual legal tests, not automatic cures produced by a subsequent Board minute or an unsupported indemnity letter.
Close the parallel compliance questions separately
The section 192 file should identify any additional approvals, disclosures, valuation or filings under the provisions actually applicable to the transaction. For an issue of shares as consideration, investigate the share-issue route independently. For related-party aspects, perform the relevant separate analysis. Do not invent a universal e-form deadline or assume the section 192 resolution alone satisfies every requirement. Accounting, direct tax, GST and stamp-duty consequences need their own workings before execution.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: A mixed asset exchange
A company transfers a machine valued for the proposed arrangement at ₹4,00,000 and receives a director’s vehicle valued at ₹3,00,000 plus ₹1,00,000 cash. The consideration reconciles to ₹4,00,000, but only ₹1,00,000 is cash. The non-cash exchange still requires the covered-person and section 192 approval analysis; the balancing bank receipt does not make the whole transaction cash consideration.
Illustrative example 2: A proposed asset-for-debt settlement
A company owes a director ₹6,00,000 and proposes to transfer an asset in discharge of that entire payable, with no cash consideration paid for the asset. The planned book entry reduces the liability by ₹6,00,000. It does not establish that the asset was sold for cash. Classify the actual settlement and obtain the appropriate prior approvals if it is a covered arrangement.
Illustrative example 3: Shares rather than money as consideration
A company proposes to acquire a director’s property for 50,000 shares at an assumed issue price of ₹50 each. The stated consideration is ₹25,00,000. If face value is ₹10, the nominal capital component is ₹5,00,000 and the difference ₹20,00,000. Those arithmetic components do not dispense with section 192 or independently establish a compliant share-issue route or valuation.
Illustrative example 4: The net figure does not describe both assets
Company land is valued at ₹50,00,000 and the director’s asset at ₹40,00,000, with a proposed ₹10,00,000 cash balancing receipt by the company. The notice should explain the assets and values, not describe the arrangement merely as a ₹10,00,000 receipt. The net cash difference is not the value of all assets involved.
Illustrative example 5: A ledger value is not the registered-value disclosure
A machine’s carrying amount is ₹2,40,000, its registered valuation for the arrangement ₹4,00,000 and the proposed consideration ₹3,80,000. The differences are ₹1,60,000 between valuation and carrying amount and ₹20,000 between valuation and consideration. Explain these amounts without substituting the carrying amount for the statutory notice valuation or assuming that the arithmetic determines the accounting or tax result.
Illustrative example 6: A later resolution is not prior approval
A covered arrangement is entered into on 1 October 2026; the general-meeting resolution is passed on 5 October. The resolution is four days after the arrangement. This chronology does not establish prior approval, even if delivery occurs later. Assess the contravention and consequences instead of altering the execution date in the file.
Illustrative example 7: Quantify an indemnity gap without assuming a cure
Assume restitution is no longer possible and an evidenced company loss of ₹2,00,000 plus ₹80,000 damage must be considered. Total loss and damage is ₹2,80,000. An indemnity payment of ₹2,00,000 leaves an ₹80,000 gap on those facts. The payment does not by itself establish satisfaction of the section 192(3)(a) exception; the legal and factual conditions need their own assessment.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Identify the asset and each party to the arrangement. | Title documents and proposed transaction terms. |
| 2 | Map director, holding, subsidiary and associate relationships. | Entity chart and directorship evidence. |
| 3 | Identify any connected person and document the conclusion. | Relationship and control assessment. |
| 4 | Classify cash, non-cash and mixed consideration. | Settlement mechanism and consideration reconciliation. |
| 5 | Obtain the required registered valuation. | Asset-specific signed valuer report. |
| 6 | Include the arrangement and asset values in the meeting notice. | Notice, explanatory material and valuation linkage. |
| 7 | Obtain the company’s prior general-meeting approval. | Resolution and execution chronology. |
| 8 | Obtain holding-company approval where the statutory condition applies. | Holding-company meeting and resolution records. |
| 9 | Resolve parallel legal, tax and accounting requirements. | Share issue, related-party and transaction-specific workpapers. |
| 10 | Retain implementation evidence and assess any past contravention. | Transfer trail, approvals and voidability/restoration analysis. |
Sixteen practitioner FAQs
1. Does section 192 concern only the company’s own directors?
No. Read the specified holding, subsidiary and associate-company director relationships and connected-person coverage.
2. Can the arrangement run in either direction?
Yes. The section addresses both acquisition from the company and acquisition by the company in its stated population.
3. Does nil net cash mean no compliance is required?
No. An asset exchange can have no net cash payment and still involve substantial non-cash consideration.
4. Does a cash balancing amount make the transaction wholly cash?
No. Examine the complete consideration rather than only the balancing transfer.
5. Is every payment to a director a section 192 arrangement?
No. First establish a covered asset acquisition for consideration other than cash. Other provisions may govern other payments.
6. Can a payable set-off be assumed to be a cash purchase?
No. Examine the contractual discharge and consideration; a journal label is insufficient.
7. Is Board approval the specified shareholder approval?
No. Section 192 requires the relevant resolution in general meeting before the covered arrangement is entered into.
8. When is an additional holding-company resolution required?
When the director or connected person is a director of the holding company, as specified by the provision.
9. Can the notice show only the net exchange difference?
That would not adequately describe the full arrangement and asset values required by subsection (2).
10. Does the fixed-asset register replace a registered valuer?
No. The section expressly requires the value to be duly calculated by a registered valuer.
11. Does the registered valuation alone settle accounting profit?
No. Financial reporting and tax measurement require their own applicable analysis.
12. Does section 192 itself approve an issue of shares?
No. An issue used as consideration must separately comply with its applicable share-issue framework.
13. Can a later meeting be called prior approval because delivery was later?
Determine when the arrangement was entered into. A later delivery date does not rewrite the arrangement’s chronology.
14. Is a contravening arrangement automatically described as void?
The text says voidable at the company’s instance, subject to its stated exceptions. Use that distinction accurately.
15. Does any indemnity letter cure a contravention?
No. The restitution and indemnification exception requires its factual and legal conditions to be established.
16. Do third-party rights matter?
Section 192(3) expressly addresses rights acquired bona fide for value without notice by another person. Investigate that evidence before deciding consequences.
Conclusion
Evaluate the actual asset and consideration before the arrangement is entered into. A complete section 192 file combines the relationship analysis, registered valuation, properly informed prior approvals and independent review of the transaction’s remaining legal and accounting consequences.