Related Party Transactions special resolution requirement revised. Proviso to section 188(1) enlarged making it 10% or more. MCA Notification
Section 188 of the Companies Act, 2013 deals with Related Party Transactions. Sub section (1) provides the type of transactions for which which a company can not enter without the consent of the Board of Directors through resolution passed at a Board meeting.
Proviso to sub-section (1) provides that no companies with paid up share capital of not less than such amount or transactions not exceeding such amount shall not enter into contract or arrangement with related parties except with the prior approval of company by special resolution.
Companies (Meetings of Board and its Powers) Rules, 2014 provides the various percentage of share capital/transactions etc. for the purpose of proviso to section 188(1) as above.
The said rules have been amended by reducing the percentage cap which was in excess of 10% by making it 10% or more. The notification in this regard is as under:
MINISTRY OF CORPORATE AFFAIRS
New Delhi, the 30th March, 2017
G.S.R. 309(E).—In exercise of the powers conferred under sections 173, 175, 177, 178, 179, 184, 185, 186, 187, 188, 189 and section 191 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Meetings of Board and its Powers) Rules, 2014, namely:—
1. (1) These rules may be called the Companies (Meetings of Board and its Powers) Amendment Rules, 2017.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Companies (Meetings of Board and its Powers) Rules, 2014, in rule 15, in sub-rule (3), in clause (a)—
(a) in item (i), item (ii), item (iii) and item (iv), for the words “exceeding ten per cent.” wherever they occur, the words “amounting to ten per cent. or more” shall be substituted; and
(b) in item (iii), for the words “ten per cent. of turnover” the words “ten per cent. or more of turnover” shall be substituted.
[F. No. 1/32/2013-CL-V-Part]
AMARDEEP SINGH BHATIA, Jt. Secy.
Note : The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide number G.S.R. 240(E), dated the 31st March, 2014 and was subsequently amended vide notifications as detailed below:—
Sl. No. Notification Number Date
1 G.S.R. 398(E) 12th June, 2014
2 G.S.R. 590(E) 14th August, 2014
3 G.S.R 206(E) 18th March, 2015
4 G.S.R 971(E) 14th December, 2015