My company in Bokaro needs to pass a board resolution to approve a related party transaction; what are the procedural requirements?

Detailed Legal Analysis

To approve a related party transaction, your company in Bokaro must follow specific procedural requirements outlined under the Companies Act, 2013.

Here are the key steps and requirements to pass a board resolution for a related party transaction:

• Definition of Related Party: According to Section 2(76) of the Companies Act, 2013, a related party includes directors, their relatives, and entities controlled by them.
• Board Meeting Notice: A minimum of 7 days' notice must be given to all directors for the board meeting where the transaction will be discussed, as per Section 173(3). The notice should clearly mention the agenda item regarding the related party transaction.
• Disclosure of Interest: Each director must disclose their interest in the related party transaction. This is mandated under Section 184(1) of the Companies Act, 2013. Directors who are related parties should abstain from voting on the resolution.
• Assessment of Transaction: Before the meeting, ensure that the transaction is fair and reasonable. The board should consider factors such as the pricing, terms, and the potential benefits to the company.
• Voting on the Resolution: The board resolution must be passed with a majority vote, excluding those directors who are related parties. The resolution should clearly specify the nature of the transaction, the parties involved, and the terms of the transaction.
• Minutes of the Meeting: Document the proceedings of the board meeting in the minutes book as per Section 118 of the Act. Ensure the minutes reflect the discussion and the resolution passed regarding the related party transaction.
• Filing with Registrar: If the transaction exceeds the threshold limits specified under Section 188, it may require approval from the shareholders in a general meeting, in addition to the board approval. Relevant forms (e.g., Form MGT-14) must be filed with the Registrar of Companies.
• Compliance with Accounting Standards: Adhere to the applicable accounting standards and ensure the related party transaction is recorded in the financial statements as required by Section 133 and the Companies (Accounting Standards) Rules, 2006.

Following these procedural requirements will ensure compliance with the Companies Act, 2013, and facilitate the approval of the related party transaction in your company.