Related party Transactions.
As part of its ongoing efforts to improve ease of doing business in the country, the Corporate Affairs Ministry has notified changes that further relax compliance requirements.
As another major step, the Companies Amendment Act, 2015 addresses “problems faced by large stakeholders who are related parties”.
In this new amendment, it replaces “special resolution with ordinary resolution for approval of related party transactions [Section 188] by non-related shareholders”.
Besides, related party transactions between holding companies and wholly owned subsidiaries have been exempted from the requirement of approval of non-related shareholders.
As per the amendment, the requirement of passing special resolution for approving certain related party transactions has been done away with. With this, certain related party transactions can now be approved through ‘ordinary resolution’ instead of ‘special resolution’.
Further, it has also been provided that for related party transactions between a holding company and its wholly owned subsidiary, no resolutions are required to be passed if the accounts of the holding and subsidiary company are consolidated and placed before the shareholders in a general meeting for approval.
