Resolution Related Party Appointment to Office or Place of Profit

In accordance with clause (f) of sub-section (1) of section 188 of the Companies Act, 2013, except with the consent of the Board of Directors given by a resolution at a meeting of the Board and subject to such conditions as may be prescribed, no company shall enter into any contract or arrangement with a related party with respect to— such related party's appointment to any office or place of profit in the company, its subsidiary company or associate company.

Further, Rule 15(3)(b) of Companies (Meetings of Board and Its Powers) Rules, 2014, prescribes that:
 Except with the prior approval of the members of the company by a resolution, a company shall not enter into a transaction or transactions, where the transaction(s) to be entered into,- is for appointment to any office or place of profit in the company, its subsidiary company or associate company at a monthly remuneration exceeding two and a half lakh rupees as mentioned in clause (f) of sub-section (1) of section 188.

The requirement of "special resolution" for section 188 was substituted with just "resolution" which can be construed as an "ordinary resolution", through amendments made in Section 188 by the Companies (Amendment) Act, 2015 and in Rule 15(3) by the Companies (Meeting of Board and its Powers) Second Amendment Rules, 2015.

Template of such an ordinary resolution is as follows—

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SAMPLE #1

#. Appointment of (Name of the Related Party) to the office or place of profit in a subsidiary Company:

To consider and if thought fit to pass, with or without modification(s) the following resolution, as an Ordinary Resolution:

“RESOLVED THAT pursuant to the provisions of Section 188(1)(f) of the Companies Act, 2013 read with Rule 15(3)(b) of Companies (Meetings of Board and Its Powers) Rules, 2014 and other applicable provisions, if any, including any statutory modification(s) or re-enactment(s) thereof for the time being in force, the consent of the members of the company be and is hereby accorded for the appointment of .....(Name of the Related Party)....., who is a relative of ..........(Name).........., Chairman & Whole-time Director & ..........(Name).........., Whole-Time Director, in its Subsidiary Company i.e. ................... Private Limited, (that is to hold an office or place of profit under the company), with such designation as may be decided from time to time, on a monthly remuneration of .......(Amount)....... to be paid by the said Subsidiary Company.

FURTHER RESOLVED THAT the Board of Directors of the company, be and is hereby authorized to do all such acts, deeds and things, as may be necessary, proper, expedient or incidental for giving effect to this resolution.”

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SAMPLE #2

#. Appointment of (Name of the Related Party) to office or place of profit

To consider and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:

“RESOLVED THAT in pursuance with the provisions of Section 188(1)(f) of the Companies Act, 2013, read with Companies (Meetings of Board and its powers) Rules, 2014 and any other applicable provisions, including any statutory modifications thereto for the time being in force, consent of the members be and is hereby accorded to the appointment of (Name of the Related Party) (son of Mr. ...................., Director of the Company), holding an office or place of profit, as (Designation) of the company w.e.f. ...................., at a remuneration for an amount not exceeding .................... p.a.

RESOLVED FURTHER THAT the Board of Directors of the company or a committee thereof be and is hereby authorised to finalise and decide the change in designation and/or revisions in the remuneration payable to (Name of the Related Party) from time to time in accordance with the company’s policy on performance measurement and appraisal and such other relevant policies.

RESOLVED FURTHER THAT the Board of Directors of the company or a committee thereof be and is hereby authorised to do all such acts, deeds, and things, as may be deemed necessary to give effect to the foregoing resolutions.”

EXPLANATORY STATEMENT
[Pursuant to Section 102(1) of the Companies Act, 2013 ("the Act")]

Item No. ...

In accordance with the provisions of section 188(1)(f) of the Companies Act, 2013, which govern the related party transactions, it is required for a company to obtain prior approval of the Board of Directors and Shareholders for the related party’s appointment to any office or place of profit.

The Board of Directors of the company on the recommendation of the Nomination and Remuneration Committee, at their meeting held on ..................., had approved the appointment of (Name of the Related Party) as (Designation) of the company, subject to approval of the shareholders by way of an Ordinary Resolution.

The details of the remuneration payable to (Name of the Related Party) is given in the resolution no. ....

(Name of the Related Party) is also holding the position of (Designation) in ........................... Private Limited, a Subsidiary Company.

(Name of the Related Party) & his relatives are interested in this item of business to the extent of their shareholding.

Except this, none of the Directors or KMP or their relatives of Directors and KMP, are in any way concerned with or interested financially or otherwise in the resolution at item no. .... of the accompanying notice.

Your Directors recommend the foregoing resolution for your approval.

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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.