Ministry of Corporate affairs amended the Companies (Meetings of Boards and its powers) Rules, 2014. The Companies (Meetings of Boards and its Powers) Amendments Rules, 2017 was published in official gazette on 30th March 2017 and came into force on that date itself.
Present amendment rules amend clause (a) of sub – rule (3) of rules 15 which was earlier substituted by a new set of rules by notification dated 14th August 2014 and later amended by rules 14th December 2015. Rule 15 as discussed earlier here, relates to provision of sub – section (1) of section 188 as discussed earlier here, which deals with related party transaction defined therein.
After present amendment clause (a) of sub – rule (3) of Rule 15 read as under –
“(3) For the purposes of first proviso to sub-section (1) of section 188, except with the prior approval of the company by a special resolution, a company shall not enter into a transaction or transactions, where the transaction or transactions to be entered into,—
(a) as contracts or arrangements with respect to clauses (a) to (e) of sub-section (1) of section 188, with criteria as mentioned below –
(i) sale, purchase or supply of any goods or materials, directly or through appointment of agent, exceeding ten per cent amounting to ten per cent or more of the turnover of the company or rupees one hundred crore, whichever is lower, as mentioned in clause (a) and clause (e) respectively of sub-section (1) of section 188;
(ii) selling or otherwise disposing of or buying property of any kind, directly or through appointment of agent, exceeding ten per cent amounting to ten per cent or more of net worth of the company or rupees one hundred crore, whichever is lower, as mentioned in clause (b) and clause (e) respectively of sub-section (1) of section 188;
(iii) leasing of property of any kind exceeding ten per cent amounting to ten per cent or more of the net worth of the company or ten per cent. of turnover ten per cent. or more of turnover of the company or rupees one hundred crore, whichever is lower, as mentioned in clause (c) of sub-section (1) of section 188;
(iv) availing or rendering of any services, directly or through appointment of agent, exceeding ten per cent amounting to ten per cent or more of the turnover of the company or rupees fifty crore, whichever is lower, as mentioned in clause (d) and clause (e) respectively of sub-section (1) of section 188:
Explanation.—It is hereby clarified that the limits specified in sub-clauses (i) to (iv) shall apply for transaction or transactions to be entered into either individually or taken together with the previous transactions during a financial year.”
These changes bring more celerity and make provision applicable to cases with exact ten percent.
Just for academic reference, here is remaining part of sub –rule (3) of Rule 15 as under –
“(b) is for appointment to any office or place of profit in the company, its subsidiary company or associate company at a monthly remuneration exceeding two and half lakh rupees as mentioned in clause (f) of subsection (1) of section 188; or
(c) is for remuneration for underwriting the subscription of any securities or derivatives thereof, of the company exceeding one per cent. of the net worth as mentioned in clause (g) of sub-section (1) of section 188.
Explanation.- (1) The Turnover or Net Worth referred in the above sub-rules shall be computed on the basis of the Audited Financial Statement of the preceding Financial year.
(2) In case of a wholly owned subsidiary, the special resolution passed by the holding company shall be sufficient for the purpose of entering into the transactions between the wholly owned subsidiary and the holding company.
(3) The explanatory statement to be annexed to the notice of a general meeting convened pursuant to section 101 shall contain the following particulars, namely:—
(a) name of the related party ;
(b) name of the director or key managerial personnel who is related, if any;
(c) nature of relationship;
(d) nature, material terms, monetary value and particulars of the contract or arrangement;
(e) any other information relevant or important for the members to take a decision on the proposed resolution.”
AishMGhrana 