CONTRACT OR ARRANGEMENT BY A COMPANY WITH ITS RELATED PARTY

AMENDMENT IN RULES UNDER COMPANIES ACT, 2013 FOR REVISION OF THRESHOLD LIMITS FOR ENTERING INTO RELATED PARTY TRANSACTIONS (RPT) BY A COMPANY 

The Ministry of Corporate Affairs (MCA) has amended the Companies (Meetings of Board and its Powers) Rules, 2014 through the Companies (Meetings of Board and its Powers) Second Amendment Rules, 2019 vide Notification No. G.S.R. 857(E) w.e.f 18th November, 2019 to revise the threshold limits for entering into RPT by a Company. Beyond these threshold limits, approval of shareholders would be required by way of a special resolution.

The Amendments have been made to Rule 15 of Companies (Meeting of Board and its Powers) Rules, 2014 hereafter referred as ‘Principal Rules’ as summarised below:-

 

Rule

Prescribed nature of   transactionsAs per Principal RulesAs per Amended Rules
15(3)(a)(i)Sale, purchase or supply of any goods or material (directly or through an agent)10% or more of the turnover of the Company or INR 100 Crores, whichever is lower10% or more of the turnover of the Company
15(3)(a)(ii)Selling or disposing or buying property of any kind (directly or through an agent)10% or more of net worth of the Company or INR 100 Crores, whichever is lower10% or more of the net worth of the Company
15(3)(a)(iii) 

Leasing of property of any kind

10% or more of the net worth of the Company or 10% or more of turnover of the Company or INR 100 Crores, whichever is lower10% or more of turnover of the Company
15(3)(a)(iv)Availing or rendering of any services (directly or through an agent)10% or more of turnover of the Company or INR 50 Crores, whichever is lower

10% or more of turnover of the Company

 

Source: Ministry of Corporate Affairs (MCA)