Analysis of Companies (Meetings of Board and its Powers) Second Amendment Rules, 2015

In the Companies (Meeting of Board and its Powers) Rules, 2014,

After Rule 6 of Companies (Meeting of Board and its Powers) Rules, 2014 the Rule 6A inserted:

Before Amendments:

Rule 6 of Companies (Meeting of Board and its Powers) Rules, 2014 talk about Committee of the Board:

The Board of Directors of every listed Company and;

• All public Companies having Paid up Capital of Rs. 10 crore or more;
• All public Companies having Turnover of Rs. 100 Crore or more;
• All public Companies having in aggregate, outstanding loans or borrowings or Debenture or Deposits exceeding 50 Crore or more.

(The paid up capital or turnover or outstanding loans or borrowings, debenture or deposits as the case may be, as existing on the date of last audited Financial Statements shall be taken into account for the purposes of this rule):

Proviso (inserted vide GSR 398(E), dt. 12-06-2014, w.e.f. 12-06-2014) Public Companies which has no requirement to Constitute Audit Committee under section 292A of the Companies Act, 1956, shall constitute their audit Committee within one Year form the commencement of this rules or appointment of Independent Directors by them whichever is earlier:

Provided further that public Companies covered under this rule shall constitute their Nomination and Remuneration Committee within one year from the Commencement of these rules or appointment of Independent Directors by them, whichever is earlier?

After this, Rule 6A of Companies (Meetings of Board and its Powers) Second Amendment Rules, 2015 inserted vide Notification No.

All related party transactions shall require approval of the Audit Committee and the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to the following conditions,:-

(l) The Audit Committee shall, after obtaining approval of the Board of Directors, specify the criteria for making the omnibus approval which shall include the following, namely:-

• Maximum value of the transactions, in aggregate, which can be allowed under the omnibus route in a year;
• The maximum value per transaction which can be allowed;
• Extent and manner of disclosures to be made to the Audit the time of seeking omnibus approval;
• Review, at such intervals as the Audit Committee may deem fit, related Party Transaction entered into by the company pursuant to each of the omnibus approval made;
• Transactions which cannot be subject to the omnibus approval by the Audit Committee.

(II) The Audit Committee shall consider the following factors while specifying the criteria for making omnibus approval, namely: –

• Repetitiveness of the transactions (in past or in future);
• Justification for the need of omnibus approval.

(III) The Audit Committee shall satisfies itself on the need for omnibus Approval for transaction of repetitive nature and that such approval is in the interest of the Company

(IV) The omnibus approval shall contain the following: –

• name of the related parties:
• Nature and duration of the transaction;
• Maximum amount of transaction that can be entered into;
• The indicative base price or current contracted price and the formula for variation in the price, if any; and
• Any other information relevant or important for the Audit Committee to take a decision on the proposed transaction:

Provided that where the need for related party transaction cannot be foreseen and aforesaid details are not available, audit committee may make omnibus approval for such transactions subject to their value not exceeding rupees one crore per transaction

(V) Omnibus approval shall be valid for a period not exceeding one financial year and shall require fresh approval after the expiry of such financial year.

(VI) Omnibus approval shall not be made for transactions in respect of selling or disposing of the undertaking of the Company.

(VII) Any other conditions as the Audit Committee may deem fit.”

Rule 10 of Companies (Meeting of Board and its Powers) Rules, 2014 shall be omitted:

(It said: – 1). Any loan made by holding Company to its wholly owned subsidiary Company or ant Guarantee give or Security provided by a holding Company in respect of any loan made to its wholly owned subsidiary company is exempted from the requirements under this section; and

2). Any Guarantee given or security provided by a holding Company in respect of loan made by any bank or financial institution to its subsidiary company is exempted from requirements under this section:

Provided that such loans made under sub-rule (1) and (2) are utilized by the subsidiary company for its principal Business activities.)

(Sub Rule 3)* of Rule 15 of Companies (Meeting of Board and its Powers) Rules, 2014 amended

Word “Special Resolution” whenever they occur the word “Resolution” shall be substituted.

Before Amendments

For the purpose of first proviso to sub section 1 of the section 188 of Companies Act, 2013 except with the prior approval of the Company by special resolutions, a company shall not enter into a transaction or transactions as prescribed.

After Amendments

For the purpose of first proviso to sub section 1 of the section 188 of Companies Act, 2013 except with the prior approval of the Company by resolutions, a company shall not enter into a transaction or transactions as prescribed.

(* Substituted by the Companies (Meetings of Board and its Powers) Second Amendments Rules, 2014 w.e.f. 14-08-2014)

 (Prepared by Sanoj Kumar (CS Trainee)-  E-maid [email protected])