Times come when identification and approval of Related Party Transactions becomes onerous.

The file contains the basic Standard Operating Procedure that can be followed for:

1. Identification of Related Parties as per Section 2(76) of the Companies Act, 2013;

2. Approval of proposed Related Party Transactions.

Looking forward for your valuable inputs and updates on the same.

Related Party Transactions process flow
A. Identification of related Parties
B. Identification of Related Party Transactions
C. Approval

A. Identification of Related Parties

Process

I. Relatives Information Source
1 Board of Directors Directors to submit their list of relatives as per Companies Act, 2013 with their Annual Declarations in First Board Meeting Any Change in the relatives shall be intimated to the Company Secretary.
2 List of Relatives of Board of Directors as per Companies Act, 2013
3 PAN of Relatives
4 Submission of the list to the Company Secretary at the beginning of the Financial Year
5 Submission of the list as and when there is any change

II. Other Related Parties as per Companies Act, 2013, Section: 2(76) Information Source
1 List of Firms where Director or their relative is Partner MBP ‐ 1 of Directors and for relatives similar Disclosure can be obtained, the disclosure from relatives shall also contain their shareholding in Private and Public Companies. Data should be Irrespective of the Percentage of holding. Any change to be intimated to the Company Secretary.
2 List of Private Companies where Director or their relatives is Director
3 List of Private Companies where Director or their relatives is Member
4 List of Public Companies where Director along with their relatives hold more than 2 % of Shareholding
5 List of all Body Corporates where Director give instructions / directions for overall Management Annual Declarations can be taken from the Directors in case otherwise applicable
6 List of all persons, the Directors take instruction from

B. Identification of Transactions

Types of Transactions
1 Transactions covered under Section 188 AC Approval/ recommendation is Mandatory in all the cases
2 Transactions not covered under Section 188
3 Transactions specifically covered under any other Provision of Companies Act, 2013

c. Approvals

Type 1 Transactions Covered under Section 188 of the Companies Act, 2013
Approvals

 

i. Audit Committee; if PUC >10 Cr., T/o > 100 Cr.
Ii Board of Directors
iii Shareholders*
No Approval of Board and
Shareholders
Transaction in Ordinary Course of Business + Arm’s length basis

I Board of Directors to approve proposed Related Party Transactions subject to approval of Audit Committee, follow procedure as per Rule 6A for omnibus Approval
The approval shall also be subject to approval of Members of the Company if below mentioned limits prescribed under Section 188 are exceeded: (exemption to transactions between WOS)

Section 188 of the Companies Act, 2013 read with Rule 15 of Companies (Meetings of Board and its Power) Rules, 2014

Limits for Passing Ordinary Resolution by Shareholders under Section 188 of the Companies Act, 2013

Section Rule Transaction Particu-lars Old Limit New Limit w.e.f. 18.11. 2019
188 (1)(a)

188 (1)(e)

15 (3)(a)(i) i. Sale or
ii. Purchase or iii. Supply
Goods or Directly Turnover >/= >/=
Materials or through Agent Prescribed Amount 100 Cr. Om itted
188 (1)(b)
188 (1)(e)
15 (3)(a)(ii) i. Selling or

ii. Disposing

Property of any kind Directly Net worth >/=

10%

>/=

10%

or through Agent Prescribed Amount 100 Cr. Om itted
188 (1)(c) 15(3)(a)(iii) i. Leasing Property of any kind Turnover >/=

10%

No Change
188 (1)(d)
188 (1)(e)
15(3)(a)(iv) i. Availing or

ii. Rendering

Services Directly Turnover >/=

10%

>/=

10%

or through Agent Prescribed Amount 100 Cr. Om itted
188 (1)(f) 15(3)(b) i. Appoint-ment to any office i. In Company or

ii. Subsidiary or

iii. Associates

Monthly Remu-neration INR 2.5 Lakhs No Change
or Place of Profit
188 (1)(g) 15(3)(c) i. Under-writing the Subsc-ription Securities at Remu-neration Net worth > 1% No Change
Derivatives

Type 2 Transactions not Covered under Section 188 of the Companies Act, 2013
Recommendation i. Audit Committee
Approval ii. Board of Directors

 

I

 

Board of Directors to approve proposed Related Party Transactions subject to recommendation of Audit Committee, follow procedure as per Rule 6A for omnibus Approval

Process of approval/ recommendation of Audit Committee, where Company is required to or has constituted Audit Committee
II All proposed Related party Transactions requires approval of Audit Committee
All Related Party Transactions (other than 188) requires recommendation of Audit Committee

Transactions upto One Crore
III entered into by any Director/Officer entered into by relative of Director

Without approval of Audit Committee

Such transaction has to be ratified within 3 months by the Audit Committee and if not ratified shall be voidable at the option of the Audit Committee

Type 3 Transactions specifically covered under any other Provision of Companies Act, 2013
Recommendation i. Audit Committee
Approvals ii. Procedure as required under specific provision shall be followed
Download Process flow for identification & approval of Related Party Transactions

Author Bio

Qualification: CS
Company: G R Infraprojects Limited
Location: Gurugram, Haryana, IN
Member Since: 13 Feb 2020 | Total Posts: 2

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