My company in Moradabad 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 approving a related party transaction in your company based in Moradabad, you must adhere to the procedural requirements set forth under the Companies Act, 2013.

According to Section 188 of the Companies Act, 2013, a related party transaction is subject to certain conditions and must be disclosed and approved properly. Here are the steps and requirements to ensure compliance:

• Determine Related Party: Identify if the transaction involves a related party as defined under Section 2(76) of the Companies Act, 2013. Related parties include directors, their relatives, and entities in which the director or their relative is interested.
• Board Meeting Notice: Send a notice to all directors of the company at least 7 days prior to the board meeting, as per Section 173(3) of the Companies Act, 2013. The notice must include details of the proposed related party transaction.
• Quorum Requirements: Ensure that the quorum for the board meeting is present, as specified under Section 174 of the Companies Act, 2013. For public companies, the quorum is two directors, and for private companies, it is two or one-third of the total number of directors (whichever is higher).
• Disclosure of Interest: Directors must declare their interest in the transaction. Section 184 of the Companies Act, 2013 mandates that a director should disclose their interest in a related party transaction before the meeting.
• Voting Process: Conduct the voting at the board meeting. A related party transaction requires the approval of the Board of Directors, and any interested director must abstain from voting, as per Section 188(1) of the Companies Act, 2013.
• Record Keeping: Document the resolution in the minutes of the meeting, including details of the transaction and the voting outcome, as required under Section 118 of the Companies Act, 2013.
• Filing Requirements: If the transaction exceeds the prescribed limits, file the necessary forms with the Registrar of Companies (ROC) as per the rules laid down in the Companies (Meetings of Board and its Powers) Rules, 2014.

Additionally, if the company is a listed entity or a prescribed class of companies, you may also need to comply with the Securities and Exchange Board of India (SEBI) regulations regarding related party transactions.

By following these procedural steps, your company can ensure that the board resolution for the related party transaction is valid and compliant with the legal requirements.