Amendment to Threshold Limits for Related Party Transactions by a Public Company Amended

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Dec 30, 2019

Amendment to Threshold Limits for Related Party Transactions by a Public Company Amended

The Ministry of Corporate Affairs (‘MCA’) has, by way of a notification dated November 18, 2019, amended the Companies (Meetings of Board and its Powers) Rules, 2014 (‘Board Meeting Rules’) for revising the threshold limits for entering into related party transactions by a public company, beyond which such transactions will require shareholder approval.[1] The existing and revised thresholds for related party transactions mentioned in Rule 15 of the Board Meeting Rules are as under:

Rule of the Board Meeting Rules	Prescribed Transactions	Earlier Thresholds	Revised Thresholds
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 Rs. 100 Crore (approx. USD 14 million), whichever is lower	10% 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 Rs. 100 Crore (approx. USD 14 million), whichever is lower	10% 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 Rs. 100 Crore (approx. USD 14 million), whichever is lower	10% 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 Rs. 50 Crore (approx. USD 7 million), whichever is lower	10% or more of turnover of the company

[1] Additionally, please note that Companies (Appointment and Managerial Personnel) Rules, 2014 have recently been amended by way of an MCA notification dated January 3, 2020. Every listed company, public company or private company having a paid up share capital of Rs. 10,00,00,000 (approx. USD 1.4 million) or more is required to have a whole time company secretary. Previously, the monetary threshold was Rs. 5,00,00,000 (approx. USD 700,000).

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