My company in Panipat 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 in your company based in Panipat, a board resolution must be passed in accordance with the provisions set out in the Companies Act, 2013.

Here are the procedural requirements you must follow:

• Define Related Party: According to Section 2(76) of the Companies Act, 2013, a related party includes directors, key managerial personnel (KMP), and their relatives, as well as entities in which these individuals have significant influence or control.
• Disclosure of Interest: As per Section 184 of the Companies Act, 2013, any director who is interested in a related party transaction must disclose the nature of their interest at the meeting of the Board. This is necessary for transparency.
• Notice of Meeting: A notice for the Board meeting must be sent to all directors at least 7 days in advance, as stipulated under Section 173 of the Companies Act, 2013. The notice should specify the agenda of the meeting, including the related party transaction.
• Quorum for Meeting: Ensure that the quorum for the Board meeting is met as per the company’s articles or as per Section 174 of the Companies Act, 2013. For a private company, at least two directors must be present, while for a public company, at least one-third of the total strength of the Board must be present.
• Board Resolution: The Board must pass a resolution approving the related party transaction. This resolution should detail the particulars of the transaction, including the nature of the relationship, the terms and conditions, and the value of the transaction.
• Voting Process: Directors who are interested in the transaction must abstain from voting on the resolution, as mandated by Section 175 of the Companies Act, 2013. Ensure that the resolution is passed by a majority of the remaining directors.
• Recording Minutes: Document the proceedings of the meeting and the resolution passed in the minutes of the board meeting, as required under Section 118 of the Companies Act, 2013.
• Filing Requirements: If the transaction exceeds the threshold limits defined under Rule 15 of the Companies (Meetings of Board and its Powers) Rules, 2014, form MGT-14 must be filed with the Registrar of Companies within 30 days of passing the resolution.

By following these steps, your company can ensure compliance with the legal requirements for approving a related party transaction in India.