For a company, in order to enter into any contract or arrangement with a related party for transactions as prescribed under section 188 of the Companies Act, 2013, the consent of the Board of Directors and the approval of the members/shareholders are quite essential.
Related parties, with reference to a company, means — a director/ key managerial personnel or their respective relatives; a firm, in which a director, manager or his relative is a partner; a private company in which a director or manager or his relative is a member or director; and other parties as prescribed under the said section 188.
Related party transactions include the transactions relating to — sale/ purchase/ supply of goods; disposing of/ purchasing of properties; leasing of properties; availing/ rendering of services; etc and other transactions as prescribed under the said section 188 and rules thereunder.
Related parties, with reference to a company, means — a director/ key managerial personnel or their respective relatives; a firm, in which a director, manager or his relative is a partner; a private company in which a director or manager or his relative is a member or director; and other parties as prescribed under the said section 188.Related party transactions include the transactions relating to — sale/ purchase/ supply of goods; disposing of/ purchasing of properties; leasing of properties; availing/ rendering of services; etc and other transactions as prescribed under the said section 188 and rules thereunder.
Templates of such shareholders' resolutions are as follows —
(at first do check whether ordinary or special resolution is required)
SAMPLE #1
Related Party is any of the Directors/ Promoters/ Shareholders
#. Approval for Material Related Party Transactions:
To consider and if thought fit to pass, with or without modifications, the following resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section 188 of the Companies Act, 2013 (the 'Act'), read with Rule 15 of the Companies (Meetings of Board and its Powers) Rules, 2014, Regulation 23(4) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the 'Listing Regulations'), the Company’s policy on Related Party transactions, and any other applicable provisions including any amendments thereto for the time being in force, consent of the members be and is hereby accorded to the Board of Directors of the Company to enter into contract(s)/ arrangement(s)/ transaction(s) with (Name of the Company), a Company in which (Name of the Director), Director of the Company is interested in the capacity as a Director of the said other Company, a related party within the meaning of Section 2(76) of the Act, for the purchase of (details of transactions or contract or business purpose), on such terms and conditions as the Board of Directors may deem fit, up to a maximum aggregate value of INR .............. for the financial year 20XX-XX, provided that the said contract(s)/ arrangement(s)/ transaction(s) so carried out shall be at arm’s length basis and in the ordinary course of business of the Company.
RESOLVED FURTHER THAT Ms. .............., Managing Director and Mr. ..............., Company Secretary of the Company be and are hereby severally authorized to execute the agreement for rendering services to the said Related Party and to do such other acts, things, deeds and matters as may be necessary, expedient and desirable for the purpose of giving effect to this resolution.”
“RESOLVED THAT pursuant to the provisions of Section 188 of the Companies Act, 2013 (the 'Act'), read with Rule 15 of the Companies (Meetings of Board and its Powers) Rules, 2014, Regulation 23(4) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the 'Listing Regulations'), the Company’s policy on Related Party transactions, and any other applicable provisions including any amendments thereto for the time being in force, consent of the members be and is hereby accorded to the Board of Directors of the Company to enter into contract(s)/ arrangement(s)/ transaction(s) with (Name of the Company), a Company in which (Name of the Director), Director of the Company is interested in the capacity as a Director of the said other Company, a related party within the meaning of Section 2(76) of the Act, for the purchase of (details of transactions or contract or business purpose), on such terms and conditions as the Board of Directors may deem fit, up to a maximum aggregate value of INR .............. for the financial year 20XX-XX, provided that the said contract(s)/ arrangement(s)/ transaction(s) so carried out shall be at arm’s length basis and in the ordinary course of business of the Company.
RESOLVED FURTHER THAT Ms. .............., Managing Director and Mr. ..............., Company Secretary of the Company be and are hereby severally authorized to execute the agreement for rendering services to the said Related Party and to do such other acts, things, deeds and matters as may be necessary, expedient and desirable for the purpose of giving effect to this resolution.”
Section 188(1)(e) of the Companies Act, 2013 provides that no Company shall enter into any contract or arrangement with a related party except with the consent of the Board of Directors given by a resolution at a meeting of the Board of Directors.
Such Related Party Transaction also includes appointment of any agent for the purchase or sale of goods, materials, services or property. (Name of the Director), a director of the Company is also a director of ..........................Limited. The said Company is proposed to provide some consultancy services to the Company for .................
The proposed resolution seeks to obtain approval of members of the Company for the payment of consultancy fees to ............... Limited, upto a sum not exceeding INR .................. (Rupees .................... only) for a period commencing from (date) for ...years.
The Board of Directors, in their meeting held on (date), has approved the said transaction with the above mentioned related party for the said limits.
The following disclosure(s) for rendering of any services to the related party is made in accordance with the provisions of Section 188 of the Companies Act, 2013 and Rule 15 of Companies (Meetings of Board and its Powers) Rules, 2014:
(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 arrangements: ........................................
(e) other important information: .............................
Members are hereby informed that pursuant to second proviso of section 188(1) of the 2013 Act, no member of the company shall vote on such resolution to approve any contract or arrangement which may be entered into by the company, if such member is a related party.
The Board commends the resolution as set out in the accompanying Notice for the approval of members of the Company as an Ordinary Resolution.
Memorandum of Interest:
(Name of the Director) is deemed to be concerned or interested in the transaction entered between (Company Name) with (Company Name), being a (Designation) in (Company Name) and a (Designation) in (Company Name) .
Apart from the above, none of the other Directors or Key Managerial Personnel, or their respective relatives are, in any way, concerned or interested, financially or otherwise, in the resolution as set out at Item No. ... of the Notice.
SAMPLE #2
Related Party is a Subsidiary or Holding company
#. Approval for Material Related Party Transactions:
To consider and if thought fit to pass, with or without modifications, the following resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to Section 188 of the Companies Act, 2013 and the rules and regulations made thereunder including the Rule 15 of the Companies (Meetings of Board and its Powers) Rules, 2014 and any other applicable provisions, as amended from time to time, approval of Shareholders of the Company be and is hereby accorded to the Company to enter into an agreement with ................... Limited ("Related Party") for providing (short details of projects/business/services) on such terms and conditions as briefly detailed in the explanatory statement annexed hereto.
RESOLVED FURTHER THAT for the purpose of giving effect to the above, the Board / any Committee thereof be and is hereby authorized to agree, make, accept and finalize all such terms, conditions, modifications and alterations, as the Board may deem fit within the aforesaid limits and to finalize and execute all agreements and any other documents; and to do all acts, deeds, matters and things as necessary or desirable as the Board / Committee in its absolute discretion may deem fit to give effect to the foregoing resolution.”
Statement pursuant to Section 102 of the Companies Act, 2013
Your Company is interested in providing the services of (Name of the Holding/Subsidiary Company) for (short details of the services). (Name of the Holding/Subsidiary Company) has been in the .......industry for last ...years. In order to support their growth and branching out in various locations, they are looking for services from the companies similar to your Company's line of business. Hence, your Board of Directors has proposed to provide the services to the said company on such terms and conditions as mentioned hereunder and as may be mutually agreed between the parties at arms length price.
The disclosures, in relation to the said related party transaction, as required to be given under the provisions of the Companies Act 2013 and rules made thereunder are as under:
(a) name of the related party: (Name of the Company)
(b) name of the director or key managerial personnel who is related, if any: ....................
(c) nature of relationship: Subsidiary / Holding Company
(d) nature, material terms, monetary value and particulars of the contract or arrangements: ........................................
(e) other important information: .............................
(b) name of the director or key managerial personnel who is related, if any: ....................
(c) nature of relationship: Subsidiary / Holding Company
(d) nature, material terms, monetary value and particulars of the contract or arrangements: ........................................
(e) other important information: .............................
None of the Directors & Key Managerial Personnel (KMP) of the Company or their respective relatives are concerned or interested, financially or otherwise, in the resolution.
The Board recommends passing of the proposed Ordinary Resolution at Item No. ...
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NOTE: The resolution sample(s) here is only for reference, to help you with drafting. Do refer the exact provisions of the Act, relevant rules framed thereunder and any other applicable laws to be able to not to miss out anything important while drafting.
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NOTE: The resolution sample(s) here is only for reference, to help you with drafting. Do refer the exact provisions of the Act, relevant rules framed thereunder and any other applicable laws to be able to not to miss out anything important while drafting.
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