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

Detailed Legal Analysis

To pass a board resolution for approving a related party transaction in Hubli, your company must adhere to the procedural requirements outlined in the Companies Act, 2013, particularly sections governing related party transactions.

Here are the essential steps and requirements to ensure compliance:

• Identify Related Party: Determine whether the transaction involves a related party as defined under Section 2(76) of the Companies Act, 2013, which includes directors, key managerial personnel, their relatives, and entities in which they have significant influence.
• Disclosure of Interest: The concerned directors or members must disclose their interest in the related party transaction as per Section 184 of the Companies Act, 2013. This disclosure should be made in the meeting where the resolution is to be passed.
• Board Meeting Notice: A notice for the board meeting must be sent to all directors at least seven days prior to the meeting, as stipulated in Section 173 of the Companies Act, 2013.
• Quorum Requirements: Ensure that the meeting has the requisite quorum as per Section 174 of the Companies Act, 2013, which requires at least two directors to be present for a private company.
• Approval of Related Party Transaction: During the board meeting, the directors should discuss and vote on the proposed transaction. A resolution must be passed, either through a show of hands or electronically, if permissible.
• Recording the Resolution: Document the resolution in the minutes of the meeting, detailing the nature of the transaction, the terms and conditions, and the interest of the directors as per Section 118 of the Companies Act, 2013.
• File with the Registrar: If the transaction exceeds the prescribed limits, it may require approval from the shareholders as per Section 188 of the Companies Act, 2013, and subsequently filing with the Registrar of Companies (ROC).
• Compliance with Accounting Standards: Ensure compliance with applicable Accounting Standards (AS 18) regarding related party disclosures in the financial statements.

By following these steps, your company can ensure that the board resolution for the related party transaction is passed legally and efficiently, minimizing the risk of violations under the Companies Act, 2013.