Approval for related
party transactions u/s 188 of the Companies Act, 2013
According to
section 188 of the Companies Act 2013 read with Rule 15 of Companies (Meetings
of Board and its Powers) Rules, 2014, a prior approval of the members of the
company by special resolution is required in case sale, purchase or supply of
any goods or materials exceeds 10% of the turnover or rupees 100 crore,
whichever is lower. Further where the transactions are entered into in the
ordinary course of business and at arm’s length then members’ approval is not
required. According to sub-section 3 of section 188 of the Companies Act, 2013,
the transaction needs to be ratified by the Board or shareholders within three
months of such transaction.
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