My company in Sambalpur 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 located in Sambalpur, you must follow specific procedural requirements as stipulated under the Companies Act, 2013.

The key procedural steps and requirements are as follows:

• Identification of Related Party: Ensure that the transaction involves a related party as defined under Section 2(76) of the Companies Act, 2013. This includes directors, their relatives, and entities controlled by them.
• Disclosure of Interest: The concerned director or key managerial personnel must disclose their interest in the transaction at the meeting of the Board of Directors as per Section 184 of the Companies Act, 2013.
• Board Meeting Notice: Issue a notice for the Board meeting where the resolution will be discussed. The notice should be sent at least 7 days prior to the meeting as specified in the Companies (Management and Administration) Rules, 2014.
• Agenda Setting: Include the related party transaction in the agenda of the Board meeting. Provide sufficient details about the transaction, including the nature of the transaction, value, and any other relevant information.
• Quorum Requirement: Ensure that the meeting has a proper quorum as required under Section 173 of the Companies Act, 2013. For a private company, two members present in person constitute a quorum; for a public company, the quorum is two members personally present.
• Passing the Resolution: The Board must pass a resolution to approve the related party transaction. The resolution can be passed either through a show of hands or through a poll, as per Section 175.
• Recording Minutes: Document the proceedings of the meeting and the resolution passed in the minutes book as per Section 118 of the Companies Act, 2013.
• Filing with the Registrar: If required, file the resolution with the Registrar of Companies (RoC) in Form MGT-14 within 30 days of passing the resolution, as mandated by Section 117.
• Compliance with Related Party Transactions Rules: Ensure compliance with the provisions of the Companies (Meeting of Board and its Powers) Rules, 2014 and the Companies (Related Party Transactions) Rules, 2014. If the transaction exceeds certain thresholds, additional approvals might be required from shareholders.

By adhering to these steps, your company can successfully pass a board resolution to approve a related party transaction while ensuring compliance with the Companies Act, 2013.